SXSW CLE 2014 - Lommen Abdo€¦ · SXSW CLE 2014 Hardcore Legal Issues for Artist-Owned Labels OR...

SXSW CLE 2014

Susan H. Abramovitch, PartnerGowling Lafleur Henderson LLPGowling Lafleur Henderson LLPPhone: (416) [email protected]

III 360 DEALS

Presented by: Susan Abramovitch 2

III A THE 6 W’S OF 360 DEALS

A. The 6 W’s

1 Who?1. Who?

2. What?

3. Where?

4 Wh ?4. When?

5. Why?

6. How?


III A 1 WHO?

1. Who?

Artists Majors Indies Promoters M Managers Producers


III A 2 WHAT?

2. What?

Granting of exclusive rightsversus income participation

Records Publishing Live M h di Merchandise Management


III A 3 WHERE?

3. Where?

EVERYWHERE!


III A 4 WHEN?

4. When?

Remnant of “bad old days” Resurgence of acceptability in last 5-6 years


III A 5 WHY?

5. Why?

“Money grab”

Versus consolidation of rights in gone place


III A 6 HOW?

6. How?

Granting of exclusive rights versus income participation

Avoid double dipping Can be partial 360°


Thank You

Susan H. Abramovitch, PartnerGowling Lafleur Henderson LLPGowling Lafleur Henderson LLPPhone: (416) [email protected]

CONTRACT CLAUSES BEYOND 360 DEALS

BRANDING AGREEMENT FINDER AUTHORIZATION

(a) You hereby acknowledge that Company may, and is hereby authorized, on a non-exclusive basis, to contact corporate sponsors, advertising agencies, brands and/or any other third parties (individually and collectively, “Brands”), during the Term, throughout the Territory, to inquire as to their interest in entering into Brand Agreements. For these purposes, a “Brand Agreement” means an agreement that grants to the Brand the right to reproduce and otherwise use your name, approved likeness, approved biographical material, approved autograph and other aspects of your personal identity (collectively, the “Artist Identification”) and/or the right to reproduce and otherwise use records, recordings, approved photographs, album artwork and other approved artwork, and other collectibles (e.g., musical instruments signed by you) featuring or related to you, in connection with the sale, advertising and/or promotion of a Brand’s products and/or services, as applicable. (b) Company shall consult with you or your designated advisor on a regular basis (but no less frequently than monthly) with respect to Company’s strategy for contacting Brands and use reasonable efforts to ensure that Company’s strategy in the United States (“U.S.”) with respect to contacting Brands does not unreasonably interfere with your brand partnership strategy in the U.S. For purposes of clarity and avoidance of doubt, only an Artist Party (as defined below) shall have the right to execute any Brand Agreement(s). (c) The authorization granted by you to Company in subparagraph (a) above is granted on a non-exclusive basis. Accordingly, you and any of your authorized representatives (individually and collectively, an “Artist Party”) are free to communicate with Brands directly and to negotiate and enter into Brand Agreements directly with Brands; provided, however, that you shall be required to obtain Company’s prior written approval (which approval shall not be unreasonably withheld, delayed or conditioned) in order to enter into a Brand Agreement that is originated by you and intended to be rolled out during an active album cycle (i.e., the period during which Company is actively marketing and promoting an album that is released under the Recording Agreement). (d) You shall notify Company of any Brand Agreement that you enter into during the Term. Company shall refrain from “pitching” you to Brands whose use of any Artist Identification would conflict under the exclusivity terms of any Brand Agreement entered into by you of which Company has been notified. Company’s inadvertent and non-repetitive failure to comply with the foregoing sentence shall not be deemed a breach hereof.

GRANT OF FAN CLUB RIGHTS

During the Fan Club Term, you hereby grant to Company the exclusive right throughout the Territory to establish, register, maintain, control, administer, promote, monetize and otherwise exploit the Fan Club, including the right to create, update and manage the website(s) relating to the Fan Club, to fulfill orders with respect to goods and services made available on such

website(s), and to sell, advertise, promote and market the Fan Club and the products and services offered for sale by the Fan Club by any means now known or devised during the Fan Club Term, including direct mail, online promotion and sales efforts, and event promotion and marketing efforts) and the right to use Artist Identification Assets in connection therewith (collectively the “Fan Club Rights”). You shall not organize, endorse or authorize official Artist-related “fan clubs” (whether online or otherwise) other than the Fan Club. “Fan Club” means any Artist-based subscription-based or registration-based service that is created, controlled, managed, maintained, promoted and exploited during the Fan Club Term, with varying levels of content and offerings available to Fan Club Members, that is delivered, iterated and/or fulfilled via a website, wireless application protocol site, mobile phones, direct mail and/or any other present or future (during the Fan Club Term) platforms, instruments, methods, media, protocols, devices or technologies. As between you and Company, Company shall be the sole and exclusive owner of any Fan Club websites during the Fan Club Term and the operation and content thereof, and data derived therefrom, shall be owned and controlled by Company (provided that the foregoing shall not limit any otherwise-applicable terms or laws governing the collection, use and disclosure of such data.

GRANT OF FIRST RIGHT FOR TOUR PROMOTION You hereby grant to Company an exclusive first right for Tour Event promoter rights during the Term with respect to each Tour Event in each country or region of the Territory in which Company or its affiliates or subsidiaries owns or has a financial interest in a promotion company located therein. If you and such promotion company designee of Company do not reach agreement with respect to the promotion of the relevant Tour Event in the applicable country or region of the Territory, then you will not have the right to, and you will not, enter into an agreement for promoter rights with respect to the relevant Tour Event in the applicable country or region of the Territory on terms and conditions less favorable to you than those acceptable to the promotion company designee of Company with any other Person with respect to each Tour Event concerned unless you have offered the promotion company designee of Company the right and reasonable opportunity in writing to enter into an agreement with you on the same material terms and conditions as are contained in a bona fide offer for such rights received by you from such other Person, and the promotion company designee of Company does not enter into such agreement with you within 3 business days after the date your offer is submitted thereto. The promotion company designee of Company will not be required, as a condition of accepting any such offer made to it, to agree to any terms or conditions that cannot be fulfilled by it as readily as by any other Person or to waive any of its or Company’s rights under this agreement or any other agreement, and you will not have the right to, and you will not, enter into an agreement with such other Person on terms and conditions less favorable to you than those offered to the promotion company designee of Company). A “Tour Event” is each “live” event at which you perform or otherwise appear (including any corporate or other private show);

Artist Entertainment Deals Beyond 360:

Reality Show Winners as Recording Artists

SXSW 2014

Artist Entertainment Deals Beyond 360

• Record Sales of Top-3 Finalists per Season • Viewership • Top American Idol Contestant Earnings (2013)

2

0

2

4

6

8

10

12

14

16

18

20

1 2 3 4 5 6 7 8 9 10 11 12

Track Equivalent

Albums (TEAs)

Mill

ions

Season

Average = 5.2M

Notes: Season 1 Winner - Kelly Clarkson: 16.4M Season 4 Winner - Carrie Underwood : 17.4M

Record Sales for Top-3 Finalists

3


0

100

200

300

400

500

600

1 2 3 4 5

Track Equivalent

Albums (TEAs)

Thou

sand

s

Season

Average = 310K

4


0

10

20

30

40

50

60

1 2 3

Track Equivalent

Albums (TEAs)

Thou

sand

s

Season

Average = 29K

5

Viewership

6

0

5

10

15

20

25

30

35

1 2 3 4 5 6 7 8 9 10 11 12

Mill

ions

Season

Average = 23.5M

Viewership

7

0

5

10

15

20

25

30

35

1 2 3 4 5

Mill

ions

Season

Average = 14.1M

Viewership

8

05

101520253035

1 2 3

Mill

ions

Season

Average = 8.2M

Top Earning Contestants in 2013

9

$31M

$7M $5M $5M $4M $3M $2.5M $1.5M $1.5M $1M $1M

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

Forbes report - Data from Pollstar Pro, RIAA, Nielsen SoundScan, industry veterans & artists.

SXSW CLE 2014

Hardcore Legal Issues for Artist-Owned Labels

OR

The Perils, Pitfalls, Ups and Downs of Self-Releasing Records

1. Pro’s and Con’s of Self-Releasing/Self Distributing Albums:

a. Traditional Record Company:

i. PROS:

• On a recoupable but not reimbursable basis, company funds recording sessions and artwork, manufactures, distributes and markets product, including advancing funds for touring, videos and websites).

• Label provides artistic direction and counsel

• Label handles accountings as an accommodation to the artist

ii. CONS: • Limited control (creative, financial, timing)

• Smaller Back End/Royalty Based

• Exclusive recording services

• Changes in label team if larger company

• Participation in other streams of income (Touring/ Merch)

• Lack of accountability

b. Self-Distribution

i. PROS:

• Artist retains the lions’ share of income from sales and exploitation of

albums and other assets.

• Creative control over all aspects of the project from recording to

artwork production to marketing and sales of records and release

• Flexibility in releasing outside projects

• Control over team/team accountability

ii. CONS:

• Artist must independently secure all label services (marketing, video

production; press, distribution, etc.) and pay for these services.

• Personal investment / Risk

• Often more difficult and takes longer to get traction on a broad basis

• Radio airplay is more difficult to obtain as an independent artist

2. Start Up Issues

Artist as Business

a. Incorporation:

i. Why Incorporate?

• Corporate shield – protection of personal assets

ii. When is a good time to incorporate?

iii. What does it cost to Incorporate?

b. Tax and Insurance Issues

i. Choice of corporate entity?

ii. Employees, liability

c. Label Name/Logo - Trademark Issues:

i. Why Trademark or conduct search?

• Federal protection

• Reveal potential competitors or possible liability

ii. When is it a good time to trademark your band and/or your label?

iii. What does it cost to trademark?

3. Independent Record Distribution:

a. How to get your music distributed?

i. Physical

• Who to engage? (Majors, indies, regional)

• Where to sell (Big Box, Independent Retailers, Artist Website?)

• What to manufacture? (Configuration Concerns: Vinyl, CD, Both)

ii. Digital (if granted independent of physical)

• Individualized

I. Streaming Services – Pandora, Sirius XM, Rhapsody, Spotify,

YouTube

II. Download Services – Amazon.com, iTunes, eMusic

• Aggregator: I. Tunecore / CD Baby / The Orchard / Ingrooves

iii. Synchronization Representation Agreement

iv. Direct to Consumer

• Live Performances

• Website

• “Insta” Live (e.g., Nuggs, USB)

b. What types of terms are negotiated in distribution agreements?

i. Territory

ii. Product: All titles/Specific Titles/videos

iii. Exclusivity/Reserved Rights

iv. Distributor’s Services

v. Owner’s Obligations

vi. Distribution Fee

vii. Security Interest

viii. Termination Issues: inventory, unrecouped balance, returns

4. Independent Radio Promotion, Press and Publicity: How to get your music heard?

a. Radio Promotion – Indie Promo Issues/Costs

b. Press/Publicity - How to obtain press (online and offline) / Cost Issues

c. Indie Marketing - How to obtain (online and offline) / Cost Issues

5. Business & Legal Issues:

a. Clearances / Agreements/ Accounting (guest artists, musicians, producers, mixers,

etc)

b. Copyright Registration

i. Song

ii. Master

iii. Artwork, compilation.

c. Performing Rights

i. Song: ASCAP/BMI/SESAC

ii. Master: SoundExchange/PPL-VPL

d. Mechanical Royalties

i. US: Harry Fox: statutory. Voluntary: medleys/audio-visual uses

ii. UK: 8.5% PPD (MCPS)

e. Royalty accounting obligations and statements

i. Mechanicals/Producers/Record 1

ii. Cross-collateralization

iii. Semi Annual

f. Codes/Numbering:

i. UPC/Barcodes: Unique numerical markers to track record sales

ii. ISRC Codes (International Standard Recording Codes): unique song recording code.

Issued by RIAA in the US.

iii. Selection Number: Optional; Record label internal catalog codes

iv. Metadata: all album information, including artist name, album and song titles, timing,

genre, UPC and ISRCs. Producer information.

v. RIAA parental advisory “explicit content” labelling

311582712.1

1 ©2014 John Simson. All rights reserved.

Policy Radio!

By John Simson

Music lovers who enjoy Pandora Internet radio may wonder why they can only skip six songs in an hour and then must wait to skip again. For that matter, why they can’t pick a specific song to hear—instead of creating a channel based upon that song? And why they can’t hear more than 4 songs by their favorite artist in a three-hour period?

Congress created all of these limitations and restrictions when it passed legislation in 1995 and 1998 creating the first digital performance rights legislation in the United States.

The legislation was a careful balancing act: Congress trying to balance the rights of creators: recording artists, record labels, songwriters and music publishers, along with a new category of content users “webcasters” and satellite radio services included then new services, like Pandora, that desired to stream music across cable wires, from satellites and over the Internet.

Of course, for years broadcast radio has streamed music to the public from radio towers, and never had to pay recording artists or record labels for the right to play their music. But radio stations did have to pay songwriters and music publishers through ASCAP, BMI and SESAC (three organizations which represent those who own and compose music).

After passage of this historic legislation, “new” services like Sirius and XM satellite radio (now merged as Sirius/XM), Yahoo and AOL Internet radio, and later Pandora and other Internet radio stations, had to pay a royalty to the recording artist as well as the songwriter.

Background Music

In the early 1990’s, recording artists and their record labels lobbied Congress to pass a comprehensive performance rights bill that included terrestrial radio. But the terrestrial broadcast lobby was too strong, and so a compromise was reached: the old guard terrestrial broadcasters would continue with their so-called “free pass,” but new services over cable, Internet or satellite would have to pay. Thus, while Aretha Franklin would still receive no payment from AM/FM broadcasters when they played “Natural Woman” she would now receive payment from internet, satellite and cable streaming services. Carole King, the songwriter, would continue to receive payments from both the AM/FM broadcasters and these new services.

The first issue that Congress had to address had nothing to do with the content users. It was an issue between recording artists and record labels on the one hand and music publishers and songwriters on the other.


The music publishers and songwriters were very concerned that if this new law were passed, one of two things might happen:

1) The record companies and recording artists would siphon off money that was currently being paid to songwriters and music publishers, who already had a right to be paid

2) More importantly, that recording companies and recording artists could simply prevent the use of their recordings by saying no to these new digital services, thus preventing the songwriters and music publishers from receiving any remuneration at all.

The second concern was settled by Congress rather easily. The new right for record companies and recording artists was subject to a compulsory license; they must license their recordings—they had no choice! That’s why Pandora and other services licensed under this congressionally-mandated system can play any recording ever commercially released, while services like Spotify, which aren’t under this system, may be restricted from playing certain content.

Enter the ‘Net

Having settled the main bone of contention between music publishers and songwriters and recording artists and labels, Congress carved out a new compulsory license. for webstreaming.

Long before Napster and P2P services sprang up, the artists and labels wanted to ensure that their music wasn’t stolen over these new digital outlets. Restrictions were made part of the license.

While a new online radio service could play any recording ever released, they could only play four songs in a three-hour period by the same artist, thus preventing the creation of “all artist channels”. Online, the bandwidth was available to have as many channels as a service wanted to provide. If there was an all-Madonna channel or an all-Daft Punk channel, a listener could tune in to that channel any time they wanted to hear that artist, lessening the impulse to purchase that artist’s music (so the logic went…)

So when you hear an all-artist channel, like “Siriusly Frank” or “E Street Radio”, both on Sirius/XM, you know that the artist specially licenses them. The playlist restriction,” also restricted the playing of no more than two songs in a row by a particular artist (unless it was from a box set, in which case you could play three songs in a row).

John Lennon could only Imagine how much time the lobbyists representing the content owner side spent creating the language that became known as the “performance complement” in section 114 of the Copyright Act, which governs these playlist restrictions.


But their work was not without complications. I’m sure they simply weren’t thinking about classical music when they created the playlist restrictions and the definitions in the statute. By their definitions, it was impossible for a classical internet radio service to play four movements in a row from the same symphony because each movement was deemed a separate track!. Imagine if you had to play the first two movements from one version of Beethoven’s Fifth and then additional movements from a different version! Classical stations cried foul and needed help to resolve this issue.

Section 114 of the U.S. Copyright Act does not specifically mention skips. Why can a listener only skip six recordings in an hour? In the early days of Internet radio, the Recording Association Industry of America, (“RIAA”), acting on behalf of content owners, took the position that any skips made a service “interactive” and thus ineligible for the Congressional license. If they were interactive, like Spotify or Deezer, they’d need to get licenses from thousands of content owners and not simply take the statutory license given to them by Congress.

But the RIAA entered into an agreement with a fledgling internet radio service, and for a premium price, allowed that service to offer their listeners the ability to skip up to six recordings per hour. Eventually, this became the de facto standard: six skips per hour was allowable within a non-interactive service.

We don’t often think that Congressional regulations and statute may actually impact the music we hear, or the method by which we hear it, but that is certainly the case today for listeners of Sirius/XM, Pandora and other non-interactive internet webcasters.

~ ~

Case 2:13-cv-05693-PSG-RZ Document 1-1 Filed 08/06/13 Page 1 of 23 Page ID #:14

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GRADSTEIN & MARZANO, P.C. HENRY GRADSTEIN (State Bar No. 89747)

2 haradstein uiastein.cam MARYANN. R.: MARZANO (State Bar No. 96867) F I LED

3 mmarzanof(dstcin . com Los Angeles Superfar;court ROBERT E. 'ALLEN (State'BarNo. 166589)

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5c Los Angeles, California 90048 Ob T: 323776-3100 - F: 323931-4990. Jahn A. , FWcerIGler4t

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• 1 180 South Beverly Drive, Suite 510 8 Los Angeles , `California 90035

9. T: 310-556-9860: F: 310-556-9801

Attorneys for'Plaintif -~-~ 10 FLO'&EDDIE, INC.

a m' p 12 ' SUPERIOR COURT OF'THE- STATE OF CAE IF'ORN1A

`" .. 13 FO1 THE COUNTY-OF LOS ANGELES, CENTRAL -DISTRICT' .

14 FLO' & EDDIE INC., a California , Case No. corporation , individually and on behalf of all

1 •5: .others similarly situated, CLASS- ACTION

16 Plaintiff, COMPLAINT FOR:

17Q v. 1. MISAPPROPRIATION (Cal Clio. Code '§ 980(a)(2) enid Common

18 STRIPS : M RADIO, 'INC., a Delaware Law]; - corpiration; and DOES I through 100, 2. UNFAIR COMPETITION

19 [Cal Bus. & Piro#. Code § 17200 and Defendants. Common Law]; AND

20 3. CONVERSION

21 • DEMAND FOR Jli1RYJRIAL

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L 'CLASS ACTION COMPLAINT


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Plaintiff FLO & EDDIE, INC. ("Plaintiff` or "Flo & Eddie") files this class action

21 Complaint on behalf of itself and on behalf of all other similarly situated owners of sound

recordings of musical performances that initially were "fixed" (€.e., recorded) prior to February 15,

4 1972 (the "Pre -1972 Recordings") against Defendants SIRIUS XM RADIO, INC. ("Defendant" or

5 "SiriusXM") and DOES 1-100, and alleges as follows:

6

NATURE OF THE ACTION

7

California Civil Code Section 980 (a)(2) provides that "[t]he author of an original

work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has

an exclusive ownership therein until February 15, 2047, as against all persons except one who

independently makes or duplicates another sound recording that does not directly or indirectly

recapture the actual sounds fixed in such prior sound recording, but consists entirely of an

independent fixation of other sounds, even though such sounds imitate or simulate the sounds

contained in the prior sound recording." The unauthorized duplication and exploitation of Pre-

1972 Recordings in California constitutes misappropriation, unfair competition and conversion.

2. The principals of Flo & Eddie, Mark Volman and Howard Kaylan, have been

performing together as The Turtles since 1965 and have recorded numerous iconic hits including

"Happy Together," "It Ain't Me Babe," "She'd Rather Be With Me," "You Baby," "She's My

Girl," "Elenore," and many others. Since approximately 1971, Flo & Eddie has owned the entire

catalog of 100 original master recordings by The Turtles, all of which were recorded prior to

February 15, 1972. Notwithstanding the absence of any license or authorization from Plaintiff,

The Turtles recordings can be heard every hour of every day by subscribers in California to the

satellite and Internet services owned by Defendant known as "Sirius Satellite Radio," "XM

Satellite Radio" and "SiriusXM Satellite Radio" (individually and collectively, the "Service").

Plaintiff Flo & Eddie brings this class action on its own behalf and on behalf of all other similarly

situated owners of Pre- 1972 Recordings (the "Class" or "Class Members") to put an end to

SiriusXM's wholesale misappropriation of their Pre-1972 Recordings and to obtain damages,

including punitive damages.

3. The Service is a highly profitable business which engages in the large-scale

I CLASS ACTION COMPLAINT

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distribution and public performance of sound recordings to over 24 million subscribers. The

2 1 Service is distributed in California to its subscribers through (a) satellite digital transmission

directly to subscribers via digital radios manufactured or licensed by SiriusXM; (b) satellite digital

transmission to subscribers of other services, such as DIRECTV Satellite Television Service and

Dish Network Satellite Television Service via digital set top boxes manufactured or licensed by

DIRECTV or Dish; and (c) the Internet, by way of (i) digital media streaming devices, such as

Roku, digital radios and home audio systems, such as Sonos; (ii) its website at

www.Siri XM.com; or (iii) computer, smart phone and other mobile applications for various

operating systems, including Apple iOS, Android, Windows, Blackberry and HP webOS. In

furtherance of the Service, SiriusXM, without any license or authority, has copied Plaintiffs and

each Class Members' Pre-1972 Recordings onto the Service's central server(s) and makes such

copies available to its subscribers in California. SiriusXM publicly performs these recordings in

California via streaming audio transmission through the Service for a fee as part of a subscription

plan that currently includes up to 72 different music channels. As part of the Service, many

subscribers in California are also able to: (A) download the stream of a selected channel on the

Service, allowing later or multiple listenings of the sound recordings previously streamed during

the selected time period; (B) download particular sound recordings, allowing later or multiple

listenings of such sound recordings; (C) download particular programs incorporating sound

recordings as part of the Service's "On Demand" feature, allowing later or multiple listenings of

such sound recordings; and (D) allow subscribers to pause, rewind and replay sound recordings

using the Service's "Replay" feature.

4. Simply stated, SiriusXM has disregarded the Plaintiff's and other Class Members'

"exclusive ownership" of their Pre-1972 Recordings in California, impaired their ability to sell,

lawfully exploit, or otherwise control their Pre-1972 Recordings as permitted under California law

and misappropriated same for its own financial gain. SiriusXM's conduct is causing, and will

continue to cause, enormous and irreparable harm to Plaintiff and the other Class Members unless

compensatory and punitive damages are awarded against SiriusXM and it is enjoined and

restrained from engaging in further misappropriation of the Pre-1972 Recordings,

2 CLASS ACTtON COMPLAINT

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THE PARTIES, 3URISDIC]'ION AND VENUE

2

5. Plaintiff Flo & Eddie is a corporation duly organized and existing under the laws of

3 California, with its principal place of business in Los Angeles, California. Plaintiff is engaged in

4 the business of distributing, selling, and/or licensing the reproduction, distribution, sale, and

5 performance of its Pre-1972 Recordings in phonorccords, in audiovisual works, and for streaming

6 (i.e., performing) and downloading over the Internet. Plaintiff invests substantial money, time,

7 effort, and creative talent in creating, advertising, promoting, selling, and licensing its unique and

8 valuable sound recordings.

9

6. Plairitiffpossesses exclusive ownership rights in The Turtles Pre-1972 Recordings,

10 the titles of which are specified on the schedule attached hereto as Exhibit A and incorporated

herein by reference ("Plaintiff's Recordings"). The United States Congress expressly has

12 recognized that the states provide exclusive protection through various state law doctrines to

13 1

recordings "fixed" before February 15, 1972, and that the federal Copyright Act does not "annul[]

14 or limitJthose rights until February 15, 2067." 17 U.S.C. § 301(c). Accordingly, as quoted

15' above, California Civil Code § 980(a)(2) protects the exclusive ownership of Plaintiff and the

16 I

other Class Members to their Pre-1972 Recordings in California.

I7

7. Upon information and belief, Defendant SitiusXM is a corporation duly organized

18' and existing under the laws of Delaware, with its principal place of business in New York, New

19. York, with offices throughout California, including, without limitation, in Glendale, California

20 and Long Beach, California. The Court has personal jurisdiction over Defendant in that Defendant

21, has multiple offices in Los Angeles County, Defendant is engaged in tortious conduct in

22 California, and Defendant's conduct causes injury to Plaintiff and the other Class Members in

23 California. Venue of this action is proper in Los Angeles County in that Defendant maintains

24 offices in Los Angeles County.

25

8. The true names and capacities, whether individual, corporate, associate or otherwise,

of defendants named herein as Does I through 100, inclusive, are unknown to Plaintiff who

27 11 therefore sues said defendants by such fictitious names (the "Doe Defendants"). Plaintiff wilt

28 amend this Complaint to allege their true names and capacities when such have been ascertained,

3 CLASS ACTION COMPLAINT

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Upon information and belief, each of the Doe Defendants herein is responsible in some manner for

2 the occurrences herein alleged , and Plaintiffs injuries and those of the other Class Members as

3 herein alleged were proximately caused by such defendants ' acts or omissions . (All of the

4 Defendants , including the Doe Defendants , collectively are referred to as "Defendants").

51 CLASS ACTION ALLEGATIONS

9. Plaintiff brings this action as a class action pursuant to Section 382 of the California

Code of Civil Procedure on behalf of itself and the other Class Members defined as the owners of

Pre-1972 Recordings reproduced, perforated , distributed or otherwise exploited by Defendants in

California without a license or authorization to do so during the period from August 1, 2009 to the

present . Plaintiff reserves the right to modify this definition of the Class after further discovery;

the Court may also be requested to utilize and certify subclasses in the interests of aseertainability,

manageability , justice and/or judicial economy.

10. This action may be properly brought and maintained as a class action because there

I is a well-defined community of interest in the litigation and the Class Members are readily

ascertainable from Defendant SiriusXM ' s database Files and records. Plaintiffis informed and

believes, and on that basis alleges , that Defendants have engaged Rovi Corporation to supply the

l7 metadata, including the metadata relating to Pre-1972 Recordings unlawfully streamed to

18 subscribers in California , and that such metadata contains the name and location of the owners

19 thereof . The Class members are further ascertainable through methods typical of class action

20 practice and procedure.

21

11. Plaintiff is informed and believes , and alleges thereon , that the Pre - 1972 Recordings

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misappropriated in California by Defendants number in the millions and are owned by many

thousands of Class Members. It is therefore impractical to join all of the Class Members as named

Plaintiff 's. Further, the claims of the Class Members may range from smaller starts to larger sums.

Accordingly, using the class action mechanism is the most economically feasible means of

determining and adjudicating the merits of this litigation.

12. The claims of Plaintiff ' are typical of the claims of the Class Members , and Plaintiff's

I interests arc consistent with and not antagonistic to those of the other Class Members it seeks to



1, 'represerii., Plaintiff and the - other Class Members have all been subject'tomisappropriation of their

2 Pre 972 Recordings-in California, have sustained,actual pecuniary loss and face;irieparable harm

3, from Defendants' continued misappropriation of their Pre. 1972 Recordings.

4,, 13. Plaintiff has no interests that are adverse to, or which conflict with',.the.interests of

5 the.othec.Class Members and is ready and"ablc.to fairly and adequately represent aiid'protect the

6. interests of the other Class Members. Plaintiffrbelieves strongly in•the'protection - dfartists' rights

7 in 'connection with ,their creative work. Plaintiff has raised viable claims for mi appropriation,

8 unfair competition and conversion of the type well established-in California'and reasonably_

9 expected to.be raised by Class Members. Plaintiff will-diligently pursue those:claims. If

.10 necessary, Plaintiff may seek leave of the Court to amend this Complaint to1nclude additional' .

11 class representatives to represent the Class'or additional claims as may be appropriate.' Plaintiff is

12 represented by experienced, qualified and competent counsel who arecommitted to'prosecuting

13 this action.

14 14. Common questions of fact and law exist,as-to all Class.Members that plainly

15 ptcdominate.over any questions affecting only individual Class Members. These:common legal

16 and , factual questions, which do not vary from Class Member to Class mcnilier ;.and'Which may be

17 deter°mined:without reference to the individual circumstances of any Class Member include,

18 without limitation, the following:

I j' (A) Whether Defendant SiriusXM reproduced, performed', distributed or '20 otherwise exploited Pre-1972 Recordings in the California;

21 . i (B) Whether Defendant SiriusXM's reproduction ,,performance,-; distribution or

•22 other exploitation of Pre-1972 Recordings in California•constitutes misappropriation under

23 California Civil Code Section 980(a)(2);

24 (C) Whether Defendant SiriusXM's reproduction, performance, distribution or

• 25 other exploitation of Pre»1972 Recordings in the California constitutes unlawful or unfair

26 business acts or practices in violation of California Business & Professions Code Section

c : 27 ' r

1.7200;

28 . (D) Whether Defendant - SiriusXM's reproduction, performance, distribution or 5

I n

CLASS.ACTION COMPLAINT .'. .. .. . _ e ms • r..


1 other exploitation of Pre-1972 Recordings in California constitutes conversion under

2 California common law;

3 (E) The basis on which restitution and/or damages to all injured members of the

4 Class can be computed;

5 (F) Whether Defendant SiriusXM's violation of California Civil Code Section

6 980(a)(2) entitles the Class Members to recover punitive damages;

7 (G) Whether Defendant SiriusXM's violation of California Civil Code Section

8 980(a)(2) is continuing, thereby entitling Class Members to injunctive or other equitable

9 relief;

10 (14) Whether Defendant SiriusXM's violation of California Business &

I I Professions Code § 17200 entitles the Class Members to recover punitive damages;

12 ot

(1) Whether Defendant SiriusXM's violation of California Business & Professions

13 Code § 17200 is continuing, thereby entitling Class Members to injunctive or other relief,

14 (J) Whether Defendant SiriusXM's violation of California's common law of

15 conversion entitles Class Members to recover punitive damages; and c a

16 (K) Whether Defendant SiriusXM's violation of California's common law of

17 conversion is continuing, thereby entitling Class Members to injunctive or other relief.

18 15. A class action is superior to all other available methods for the fair and efficient

19 adjudication of this controversy, since individual litigation of the claims of all Class Members is

20 highly impractical. Even if every Class Member could afford to pursue individual litigation, the

21 Court system could not, it would be unduly burdensome to the courts in which individual

22 ' litigation of numerous cases would proceed. Individualized litigation would also present the

23 potential for varying, inconsistent or contradictory judgments and would magnify the delay and

24 expense to all parties and to the court system resulting from multiple trials of the same factual

25 issues. By contrast, maintenance of this action as a class action, with respect to some or all of the

26 issues presented herein, presents few management difficulties, conserves the resources of the ti 27 parties and of the court system, and protects the rights of each Class Member. Plaintiff anticipates

28 no difficulty in the management of this action as: 01855 action.



1 16. Additionally, the prosecution of separate actions by individual Class Members may

2 create a risk of adjudications with respect to them that would, as a practical matter, be dispositive

of the interests of the other Class Members not parties to such adjudications or that would

substantially impair or impede the ability of such nonparty Class Members to protect their

interests. The prosecution of individual actions by Class Members could establish inconsistent

results and incompatible standards of conduct for Defendant SiriusXM.

17. Defendants have engaged in misappropriation, unfair competition and conversion

which has affected all of the Class Members such that final and injunctive relief on behalf of the

Class as a whole is efficient and appropriate.

10

FIRST CAUSE OF ACTION

(For Violation of California Civil Code § 980(a)(2) and Common Law Misappropriation)

12

18. Plaintiff hereby incorporates the allegations set forth in paragraphs I through 17,

13 I above, as though set forth in full herein.

14

19. Plaintiff and the other Class Members have exclusive ownership of their Pre -1972

15 Recordings in California pursuant to California Civil Code § 980(a)(2) quoted above and under

r 16 California common law. By their conduct alleged above, Defendants have violated Plaintiffs and

17 each Class Members' right to exclusive ownership of their Pre-1972 Recordings. The Plaintiff

18 and Class Members have invested substantial time and money in the development of their Pre-

19 1972 Recordings.

20

20. The Defendants have misappropriated the Pre-1972 Recordings at little or no cost

21 and without license or authority. They have copied the Pre-1972 Recordings owned by Plaintiff

22 and the other Class Members and publicly perform these recordings in California for their

23 subscribers as set forth in paragraph 3, above. Defendants have disregarded the Plaintiffs and

24 other Class Members' "exclusive ownership" of their Pre-1972 Recordings, impaired their ability

to sell, lawfully exploit, or otherwise control their Pre-1972 Recordings and misappropriated these

26 Pre- 1972 Recordings for their own financial gain.

27

21. As a direct and proximate consequence of Defendants' misappropriation of the Pre-

28 1972 Recordings owned by Plaintiff and the Class Members in violation of Civil Code § 980(a)(2)

7 COMPLA


C) o

za, a

b ft G1 o p

12

13

14

15

16~

17

18

19

20

21

22

24

25

26

27

I as alleged above, Plaintiff and the Class Members have been damaged in an amount that is not as

I yet fully ascertained but which Plaintiff is informed and believes, and alleges thereon, exceeds

3 11 $100,000,000, according to proof.

22. Plaintiff is informed and believes, and alleges thereon, that in engaging in the

5 conduct described above, the Defendants acted with oppression, fraud and/or malice. The conduct

6 of the Defendants has been despicable and undertaken in conscious disregard of the Plaintiff's and

7 each Class Member's rights. Accordingly, Plaintiff and the Class members are entitled to an

8 award of punitive damages against Defendants in an amount sufficient to punish and make an

9 example of them according to proof.

10

23. Defendants' conduct is causing, and unless enjoined and restrained by this Court,

will continue to cause, Plaintiff and each Class Member great and irreparable injury that cannot

fully be compensated or measured in money. Plaintiff and the other Class Members are entitled to

temporary, preliminary and permanent injunctions, prohibiting farther violation of Plaintiff's and

Class Members' exclusive ownership of their Pre-1972 Recordings in California.

SECOND CAUSE OF ACTION

(For Statutory and Common Law Unfair Competition)

24. Plaintiff hereby incorporates the allegations set forth in paragraphs 1 through 23,

I above, as though set forth herein.

25. The acts and conduct of Defendants alleged above constitute an appropriation and

invasion of the property rights of Plaintiff and each Class Member to their Pre-1972 Recordings in

California, and constitute unfair competition under California Business & Professions Code §

17200 and common law. Defendants have engaged in unfair competitive business practices

forbidden by law.

26. As a direct and proximate result of Defendants' conduct, Plaintiff and the Class

1 Members are entitled to recover all proceeds and other compensation received or to be received by

Defendants from their misappropriation of the Pre-1972 Recordings. Plaintiff and the members of

the Class have been damaged, and Defendants have been unjustly enriched, in an amount that is

not as yet fully ascertained but which Plaintiff is informed and believes, and alleges thereon,



exceeds S 100,000 ,000, according to proof at trial . Such damages and/or restitution and

disgorgement should include a declaration by this Court that Defendants arc constructive trustees

for the benefit of Plaintiff and the other Class Members, and an order that Defendants convey to

Plaintiff and Class Members the gross receipts received or to be received that are attributable to

Defendants misappropriation of the Pre - 1972 Recordings.

27. Plaintiff is informed and believes , and alleges thereon, that in engaging in the

conduct as described above , the Defendants acted with oppression , fraud and/or malice. The

conduct of the Defendants has been despicable and undertaken in conscious disregard of

Plaintiff's rights . Accordingly, Plaintiff and the Class Members are entitled to an award of

punitive damages against Defendants , and each of them, in an amount sufficient to punish and

make an example of them according to proof at trial.

28. Defendants' conduct is causing, and unless enjoined and restrained by this Court,

will continue to cause , Plaintiff and the Class Members great and irreparable injury that cannot

fully be compensated or measured in money. Plaintiffand the other Class Members are entitled to

temporary , preliminary and permanent injunctions , prohibiting further violation of Plaintiffs and

the other Class Members right to exclusive ownership of their Pre-1972 Recordings and further

acts of unfair competition pursuant to California Business & Professions Code § 17203.

THIRD CAUSE OF ACTION

(For Conversion)

29. Plaintiff hereby incorporates the allegations set forth in paragraphs I through 28,

above , as though set forth in full herein.

30, Plaintiff and each Class Member are, and at relevant times were , the exclusive

I owner of all right , We and interest in and to their Pre-1972 Recordings and possession thereof in

I California.

3I I. By their acts and conduct alleged above , Defendants have converted Plaintiff's and

the Class Members' property rights in their Pre - 1972 Recordings for Defendants' own use and

wrongful disposition for financial gain.

32. As a direct and proximate result of Defendants ' conversion , Plaintiff and the

9

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1141


1 members of the Class have been damaged, and Defendants have been unjustly'enriched, in an

2 amount that is not as yet fully ascertained but•which Plaintiff is infonned.arid.believes, and alleges

3, thcreori,-cxceeds $100,000,000 according to proof at trial. Defendants are'consttuctive trustees for

4 the +benef t of Plaintiff and Class Members, and the Court should order Defendants to convey to

5 Plaintiff .and the Class Members the gross receipts received or to be recdived from,.Defendaths

6 misappropriation of the Pre-1972 Recordings.

7 i 33. Plaintiff is informed and believes, and based thereon alleges,,that in engaging 'iii the

8 conduct: as described: above, the Defendants acted with oppression, fraud and/or malice. The

9 conduct,'of the.Defendants has been despicable and undertaken in•conscious disregardof

10 Plaintiffs rights. Accordingly, Plaintiff and each member of the Classils entitled tb an award of

11 puniiiye damages against defendants, and each of them, in an amount sufficient to'- punish and

H a 12 make an exaniple,ofthern.according to proof at trial,

13 34. Defendants' conduct is causing, and unless enjoined and"restrained'by this Court will

14 continue to -cause, Plaintiff and the Class Members , great and irreparable injury that cannot fully be

15 compensated or. measured in money. Plaintiff and each Class Member arc entitled 'to temporary,

:t6 preliminary and permanent injunctions prohibiting further acts of conversion of theii 1 Pre-1 972

17 Recordings.

18 PRAYER FOR RELIEF

19 WHEREFORE, Plaintiff, on behalf of itself and the other Class: Members,, prays for 20 Judgment against Defendants, and each of them, as follows:

21 Rcgardi•>ng the Class Action:

22, L That this is a proper class action maintainable pursuant to the applicable; provisions of the

23 1 California Code of Civil Procedure; and

e 24 2: That the 'named Plaintiff is appropriate to be appointed represents ti e:of the respective

25 Class,

26 On The'Fiest Cause of Action ForMisappropriation against , all'Defenda'ats: a ,

27 1•! For compensatory damages in excess of $100,000,000 according to.proof at trial';

28• 2! Punitive and'exemplary damages according to proof trial; and

to ,

CLASS ACTION COMPLAINT


1 " 3. A temporary, preliminary , and permanent injunction enjoining and restraining Defendants,

2 and their respective agents , servants , directors, officers , principals , employees,

3 representatives , subsidiaries and affiliated companies , successors , assigns , and those acting

4 in concert with them or at their direction, from directly or indirectly misappropriating in

5 any mariner the Pre-1972 Recordings in California, including without limitation by directly

6 or indirectly copying, reproducing, downloading , distributing , communicating to the

7 public, uploading, linking to, transmitting, publicly performing, or otherwise exploiting in

8 any manner any of the Pre-1972 Recordings.

9 On The Second Cause of Action For Unfair Compelitionaaaanst all Defendants:

10 1. For compensatory damages in excess of $ 100,000 ,000 according to proof at trial;

11 2. Punitive and exemplary damages according to proof at trial;

12 3. Imposition of a constructive trust; g ~

ki

13 4. Restitution of Defendants' unlawful proceeds, including Defendants' gross profits; and

14 5 . A temporary , preliminary , and permanent injunction enjoining and restraining Defendants,

15 and their respective agents, servants, directors , officers, principals, employees, C o

16 representatives , subsidiaries and affiliated companies, successors , assigns, and those acting

17 in concert with them or at their direction, from directly or indirectly misappropriating in

18 any manner the Pre-1972 Recordings, including without limitation by directly or indirectly

19 copying , reproducing , downloading , distributing , communicating to the public, uploading,

20 linking to, transmitting, publicly performing, or otherwise exploiting in any manner any of

21 the Pre-1972 Recordings.

22 On The Third Cause of Action For Conversion against all Defendants:

23 1. For compensatory damages in excess of $100,000,000 according to proof at trial;

24 2. Punitive and exemplary damages according to proof at trial;

25 3. Imposition of a constructive trust;

26 4. Restitution of Defendants' unlawful proceeds, including Defendants' gross profits; and

27 5, A temporary , preliminary , and permanent injunction enjoining and restraining Defendants, rt? :r.

28 and their respective agents, servants, directors, officers, principals, employees,

li CLASS ACTION COMPLAINT


representatives, subsidiaries and affiliated companies, successors, assigns, and those acting

2 in concert with them or at their direction, from directly or indirectly infringing in any

3 manner any right in any and all of the Pre-1972 Recordings, including without limitation

4 by directly or indirectly copying, reproducing, downloading, distributing, communicating

5 to the public, uploading, linking to, transmitting, publicly performing, or otherwise

6 exploiting in any manner any of the Pre-1972 Recordings.

7 On All Causes of Action:

8 I. For reasonable attorneys' fees and costs as permitted by law;

9 2. For prejudgement interest at the legal rate; and

10 3. For such other and further relief as the Court deems just and proper.

11 DATED: July 31, 2013 GRADSTEIN & MARZANO, P.C. ~? o m

12 HENRY GRADSTEIN MARYANN R. MARZANO

1 3 ROBERT E. ALLEN 11 5 1 U -and-

z d 14

is

EVAN S. COHEN

____________________________ m 16 By: H radstein

17 Attorneys for Plaintiff 18 FLO & EDDIE, INC.

19

20

21

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24

25

r,. Ai

26

27

~I S

28 12

CLASS

INT


Cin

Pu ~ r

DEMAND FOR JURY TRIAL

Plaintiff, individually and on behalf of the Class Members, demands a trial by jury of the

causes of action alleged in this Complaint,

GRADSTEIN & MARZANO, P.C. HENRY GRADSTEIN MARYANN R. MARZANO ROBERT E. ALLEN

-and- EVAN S. COHEN

L UU111r.ph 1R7 4por 11111111

FLO & EDDIE, INC.

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DATED: July 31, 2013

13 CLASS CLASS ACTION COMPLAINT


11

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(1) Al]. My Problems (56) Love In The City (8 Ahnst There (57) Lave minus Zero ( Bachelor Rather a ( 58 Makin' My Hind up () Ball be krinx , Pall Bearing (59) Xe About You

t Oh, D.ddy Battle of The Hands (61 On A Summer' s Day :

( ) i () has eat (62 Person Without A Cars

T) Can I Oo On ' 63 Rues or wows i Plovers s 8) Can't I Get To mow You (64 Say Girl

Better 65 Seattteb Song '(9) Can't You Hur The can 66 Sh! Always Leaves He 3 10 Cat In The Vineler Laughing

s

12 f677 Proe The Start

114

Late Right hieifeZ

A 13 Ohristmas Ii My Tyre Or Tear 68 She ' d Rather ee with No Cams Back 69 She'll Came Back

15 come Over TO She 's My Girl 16 Dance This lane With No (Ti) 80 does Love IT Down In Suburbia (T2) So You Want To On A 18 Earth Anthem Women

(t19 Elerrare (7 3) Somerrhara Friday Bight (20 Eve Of Destruction (T) Sans For You (((21 Plyin' High ' (TS) Sound Asleep (22 Foggy water -(T6

) (' at roth ery Are our Bers

Are Our f Food Strangers Friends 8 Money (Tb) Mary Or Rook A Roll

25 Get Away (T9) Surfer Dan 26 (live Lo ►a A Trial (S0) 'Deardrops

Glittslr and Oaid ' (81)))) 'Rank I'll Run Away 28 ) Good Bye Surprise 82) There Tau Sit Lonely

fie No (29) The Ori Reaper of Love 83) 84 ))

Dorn ''uab Peelin' '(30) Guide Par A Married Nan Too Neartaiek

(31 Happy Together '(85) Tao Young 3o Be One (32 got Little Rats (8) Turn Between 'leaptatians (33 Hausa Of Pain " (81) 4sbessa AM The Dragon (34 House On the Hill (88) Walk In The Sun (39 law You Loved Me • (89 walk n ' Song 36 I Can't Stay (90) Wur Or Gores." 37 I oat out of Breath (91) We Ain't Gonna Party 38 I Xnov That You'll Be Thera No Bare 39 1 Need Sa scan 92) we Both Were Young 40 It Only I mad The Time 9 ) Weil Root Aptin 81 1421 I'm 'Rte Nan 98 ) Who would Ever Think

Is It Any Vander That I would NarrY (8) It Ain't ma orbs Margaret (U It was A Very Good Year 95) Wrong Pzoe The Start ( 45 John A Julie 96) 197) You Baby (( dust A Roam You Don't Have To Walk

(U ) last '(9$ ) Y ~ What I mean i (49) Last '!RIng I Remember a (99) You 9humid Ate

50 Lot Me • Be (100) Your Maw Said You Let The Coal winds Blow Cried 1551)

52 ) Let's Peat A Beat It 51) Like A Rolling Stone

(5) Like It Or Not (55) Like The Seasons

$CRULg A

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17 3. J1

11

CM-010 ATTORNEY OR PARTY wmrour M' C1ORNEY (Nam•, S lua,pt, an7adi•si#

GMDSTEIN & MARZANO , P.C. ,lenry Gradstel n (SBN 89747) Maryann R . Mariano (SBN 96867); Robert E. Allen (SBN 166589) 6310 San Vicente Boulevard, Suite 510 Los Angeles, California 90048

TELEFHONENO .: (323) 776-3100 FAX NO:

ATTORNEY FOR Plaintiff t' LO & EDDIE, INC. IUPERiOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES

sTRELTAConse 111 North Hill Street rauUNO ADORE54: crtYANO ZICODE: Los Angeles, 90012

CASE NAME: FLO & EDDIE , INC. v, SIRIUS XM RADIO , INC. at al.

FOR CD4. TUSEONL r

FILED Los Angeles Superior Court

AUG 0 1 2013

Jahn R. , ~xect~ive ~~icerlCd~ttk , , C]eput<j

BY KA ~S

CIVIL CASE COVER SHEET Unlimited ❑ Limited (Amount (Amount demanded demanded is

Complex Case Designation

❑ Counter ❑ Joinder

Filed with first appearance by defendant DEPT:

t. Check one box below for the case type that best describes this case: Auto Tort Contract Provisionally Complex Civil Llttgatlon ❑ Auto (22) ❑ breach of contred/warranty (06) (Cat. Rules of Court = rater 3 .40o4,4031

❑ Uninsured motorist (45) 0 Rule 3 .740 collection (05) ❑ AntltrustlTrada regulation (03) Other Pi/POIWD (Personal lniurylPmperty ❑ Other collections (09) ❑ Construction dated (10) DamageiWrongful Death ) Tort ❑ Insurance coverage (1 B) ❑ Mass tort (40) ❑ Asbestos (04)

❑ our oantraCt (37) ❑ Securities litigation (26) ❑ Product liab lity (24) Real Property Envimnmentalfrordc tort (30) ❑ Medical malpractice (45) ❑ Eminent domaiMnverse U Insurance coverage claims arising from the ❑ Other PI/PDN D (23) condemnation (14) above listed provisionally complex case Mon•PUPDWD (Other) Tort ❑ Wrongful eviction (33) types (41)

Bosir(Sss tort/unfair business practice (07) [J Other real prtiperty (26) Enforcement of Judgment J❑

Ctvii rights (08) Unlawful Detainer p, 3 Enforcement of judgment (20)

❑ ❑ Defamation (13) 8 Commercial (31) Miscaitaneous ChM Complaint RICO (27) Fraud (1 B) Residentia l (32) a Other complaint (not specified above) (42)

❑ intellectual property (10) [J Drugs (38) ❑ Professional negligence (25) J—

uldlclal Review Miscellaneous Civil Petition

❑ other non -PVPDAND tan (35 ) k.. Asset forfielture (05) k_,,,u Partnership and corporate governance (21)

Employment [J Petition to: arbitration award ( 11) ❑ Other petition (not spectied above) (43)

❑ Wro ngful termination (36) ❑ Writ of mandate (02)

n Other nmplavment ( 15) ❑ Other judicial review (39)

2. This case IZ9 is U is not complex under rule 3,400 of the California Rules of Court. If the case is complex, mark the factors requiring exceptional judicial management: a. 0 Large number of separately represented parties d . ® Large number of witnesses b. ® Extensive motion pract ice raising ditticuit or novel e. ❑ Coordination with related actions pending in one or more courts

issues that will be time-consuming to resolve In other counties , states , or countries , or in a federal court c. ® Substantial amount of documentary evidence f. ❑ Substantial postjudgment Judicial supervision

3. Remedies sought (check all that apply): a. 0 monetary b . ® nonmonelary : declaratory or injunctive relief c. ® punitive 4. Number of causes of action (specify); 5. This case ® is ❑ is not a class action suit.

5. If there are any known related cases , the and serve a notice of related terse . (You may use form CM-015.) Date: August 1, 2013 MARYANN R. MARZANO ►

rrvPS nR PRWT MAYF1 ."T2JRVf P ATTORNPV PA• PA 1Y,

NOTICE V • Plaintiff mjrst file this cover sheet with the first paper filed in the action or proceeding (except small claims cases or cases filed

under Use Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220,) Failure to file may result in sanctions.

• File this cover sheet in addition to any cover sheet required by local court rule. 'If this case Is complex under rule 3 .400 at seq . of the California Rules of Court . you must serve a copy of this cover sheet on all

other parties to the action or proceeding. • Unless this is a collections case under rule 3 .740 or a complex case , this cover sheet will be used for statistical purposes only. _ _

FarmAdmw1cwLUr40 ryua~ CIVIL. CASE COYER f3HEllT ",RA dOft^ng"EX . 3.xxl,3xaa .s403 , 3?40; Judiil Camel u caumq rd, 3tw vd71 d hreor Adrrer:* tY i. tht. 3. t0 CAW10 IR.v..lur 1.20071 curaxnrdodDov


CM-010 • INSTR~wT1ONS ON HOW TO COMPLETE THE COVER SHEET

To Plaintiffs and Others Filing First Papers . If you are filing a first paper (fat example , a complaint) in a civic case, you must complete and file, along with your first paper, the CMI Case Cover Shoot contained on page 1. This informalion will be used to compile statistics about the types and numbers of cases tiled , You must complete items I through 0 on the sheet . In item 1 , you must check one box for the case type that best describes the case . If the case fits both a general and a more specific type of case listed In item 1, check the more specific one. If the case has multiple causes of action , check the box that best indicates the primary cause of action. To assist you In completing the sheet , examples of the cases that bebng under each case type In Item 1 are provided below. A cover sheet must be filed only with your initial paper . Failure to file a cover sheet with the first paper teed In a civil case may subject a party. its counsel, or both to sanctions under rules 2.30 and 3.220 of the California Rules of Court. To Parties In Rule 3 .740 Collections Cases. A "collections case" under rule 3.740 Is defined as an action for recovery of money owed in a sum stated to be certain that is not more than $25.000. exclusive of Interest and attorneys fees, "rising from a transaction in which properly , services , or money was acquired on credit . A collections case does not Include an action seeking the following : ( 1) tort damages , (2) punitive damages , (3) recovery of real property , (4) recovery of personal property , or (5) a prejudgment writ of attachment . The Identification of a case as a rule 3 .740 collections case on this form means that it will be exempt from the general time-for-service requirements and case management rules , unless a defendant tiles a responsive pleading . A rule 3.740 collections case will be subject to the requirements for service and obtaining a judgment in rule 3.740, To Parties In Complex Cases . In complex cases only , parties must also use the Civil Case Cover Sheet to designate whether the case Is complex _ It a plaintiff believes the case Is complex under rule 3 .400 of the California Rules of Court , this must be Indicated by completing the appropriate boxes in items I and 2. If a plaintiff designates a case as complex, the cover sheet must be served with the complaint on all parties to the action . A defendant may file and serve no later than the time of Its first appearance a joinder In the plaintiff's designation , a counter-designation that the case is not complex . or, It the pl:IIntlft has made no designation , a designation that the case is complex.

CASE TYPES AND EXAMPLES Auto Tort Contract Provisionally Complex Civil Litigation (Cal.

Auto (22)-Personal lrrurylProperty Breach of ConirataIWarranty (06) Rules of Court Rules 3.400-3.453) DamageNVrongful Death Breach of Rentauteass Ant'rtrusttrrade Regulation (03)

Uninsured Motorist (48) (N the Contract (not unlawful detainer Construction Oefect (10) case !evolves an unlnswed or wrorrgtt+f eviction) Cults Involving Mass Tort (40) r ofodsl claim subject to ContracWarranty Breach-Seller Securities Litigation (28) arbitration , Chick this item Plaintiff (not fraud or negliperx :e) Env€ronmentatlTo lc Tort (30) instead of Auto) Negligent Breach of Contract) Insurance Coverage Claims

Other PUPD1WD (Personal injury! Warranty (erising from provltifonefy complex Property Damag +elWrongful Death ) Other Breach of ConiracWlarranty case type Haled above) (41) Tort Collections (e.g., money owed , open Enforcement of Judgment

Asbestos (04) book accounts) (09) Enforcement of Judgment (2D) Asbestos Property Damage Collection Case-Seller Plaintiff Abstract of Judgment (Out of Asbestos Personal Injury! Other Promissory NotelColle tlons County)

Wrongful Death Case Confession of Judgment (non- Ptcxtuct Uat oy (not asbestos or tnsur'amoe Coverage (not pmvisbnaRY domestic relations)

loxiclenvlronmental) (24) complex) ( 18) Sister State Judgment Medical Malpractice (45) Auto Subrogation Administrative Agency Award

Medicitl Malpractice- Other Coverage (not unpaid taxes) Physicians 8 Surgeons Other Contract (37) PetitionlCertiflc atton of Entry of

Other Professional Health Care Contractual Fraud Judgment on Unpaid Taxes Malpractice Other Contract Dispute Other Enforcement of Judgment

Other PI/PDM/D (23) Real Property Case Premises Liability (e , g., slip Eminent Domainllnverse Miscellaneous Civil Complaint and fall) Condemnation (14) RICO (27) Intentional Bodily lnjuryJPDANO Wrongful Eviction (33) Other Complaint (cwt specJf>ed

(e.g.. assault, vandalism ) Other Real Property (e.g,. quiet title) (26 ) above) (42) Intentional Infliction of WOE of Possession of Real Property Declaratory Relief Only

Emotional Distress Mortgage Foreclosure Injunctive Relief Only (non- Negligent Infliction of Quiet Tole harassment)

Emotional Distress Other Real Property (not eminent Mechanics Uen Other PIIPOIWO domain, landlonttenant . or Other Commercial Complaint

Non4'IIPDMWD (Other) Tort faecosum) Case (non-fortrton-complex) Business Teri/Unfair Business Unlawful Detainer Other Civil Complaint

Practice (07) Commercial (31) (non-foilmon.ccrplax) Civil Rights (e.g,, discrimination . Residential (32) Miscellaneous Civil Petition

raise arrest ) (Trot clot! Drugs (38) (if the case ihvolvis !ldepal Partnership and Corporate harassment) (05) drugs, check this !tern; otherwise. Governance (21)

Defamation (e.g., slander , libel) report as Ccmmerriaf or Residential) Other Petition (not specified (13) Judicial Review above) (43)

Fraud (16) Asset Forfeiture f05) Civil Harassment Intellectual Property (19) Petition Re : Arbitration Award ( 11) Workplace Violence Professional Negligence (25) Writ Of Mandate (02) Eider/Dependent Adult

Legal Malpractice Writ-Administrative Mandamus Abuse Other Professional Malpractice Writ-Mandamus on Limited Court Election Contest

(not rnedkaaf or iepaq Case Matter Petition for Name Change Other Non-PI/PDAND Tort (35 ) Writ-Other Limited Court Case Petition for Relief From Late

Employment Review Clain Wrongful Termination (38) Other Other Judicial Review (39) Other Civil Petition

Employment ( 15) Rw+ew of Health OAicar Ord.r Notice of Appeal-Labor

Commissioner Appeals

craa tom -r t. i CIVIL CASE COVER SHEET z at 7

Amsea n 1..prriI I, ire wit,, r'crsruWbrkAa. c+xn


1 srrt)n1t WIE7 . M MER PLO & EDDIE, INC, V. SIRIUS XM RADIO, INC., et at.

EASE WC 51 7fl 2

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION

(CERTIFICATE OF GROUNDS FOR ASSIGNMENT TO COURTHOUSE LOCATION)

This form Is required pursuant to Local Rule 2.0 In all new civil case filings In the Los Angeles Superior Court.

Item 1. Check the types of hearing and fill in the estimated length of hearing expected for this case:

JURY TRIAL? (K YES CLASS ACTION? 19 YES LIMITED CASE? ❑ YES TIME ESTIMATED FOR TRIAL, 15 0 HOURS! DAYS

Item U. indicate the correct district and courthouse location (4 steps - If you checked "Limited Case". skip to Item III, Pg. 4):

Stop 1: After first completing the Civil Case Cover Sheet form, find the main Civil Case Cover Sheet heading for your case in the left margin below, and, to the right in Column A. the Civil Case Cover Sheet case type you selected.

Step 2: Check Superior Court type of action in Column B below which best describes the nature of this case.

Step 3: in Column C, circle the reason for the court location choice that applies to the type of action you have checked. For any exception to the court location, see Local Rule 2.0.

Appiicabte Reasons for Choosing Courthouse Location (see Column C below)

1. Claris adlons must be tiled in the Stanley Mosk Courthouse, central district. 8. Location of property or permanently garaged vehicle. 2. May be filed In central (other county, of no bodily Injury!property damage). 7. Location where petitioner resides. 3. Location where cause of action arose. 8. Location wherein detendarWrespondent functions wholly. 4, Location where bodily inlury, death or dama9e occurred. 9. Location whom one or more of the parties reside. 5. Location where perrormanoe required or defendant resides, 10. Location of Labor Commissioner Office

Step 4: Fill in the information requested on page 4 In Item III; complete Item IV. Sign the declaration.

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A B C Civil case Cover Sheet Type of Action APplible Reasons -

Category No, (Check only one) See Step 3 Above

Auto (22) O A7100 Motor Vehicle - Personal lnjurylProperty Damege/Wmngrut Death 1., 2., 4.

Uninsured Motorist (46) ❑ A7110 Personal InjurylPfoperty DamagetWrongtul Death — Uninsured Motorist 1.. 2.. 4.

O A6070 Asbestos Property Damage 2. ASbestas (04)

❑ A7221 Asbestos - Personal lnjuryWrongful Death 2.

Prodict Liability (24) ❑ A7280 Product LiabHrty (not asbestos or Ioxic!environmentat) 1., 2., 3., 4, 8.

❑ AT210 Medical Malpractice - Physicians & Surgeons L4. Medical Malpractice (45)

O A7240 Other Professional Health Cars Malpractice 1., 4.

Other ❑ A7250 Premises liability (e.g., slip and fail) 1.

•

4. Personal Injury 0 A7230 Intentional Bodily Injury/Property Dania geP !rongfuI Death (e.g., 1 4 Property Damage assault, vandalism, sic.) Wronmi death

(23) ❑ A7270 Intentional Infliction of Emotional Distress t., 3.

0 A7220 Other Personal Injury/Property Dama e/Wron l Death "4,

LACIV 109 (Rev. 03111) CIVIL CASE COVER SHEET ADDENDUM LASC Approved 03-04 AND STATEMENT OF LOCATION

Local Rule 2.0 Page 1 of 4

Ass UaWr . rya, wwyF WzdFwcw


SHORT Tm.E: I CASE NUMBER

FLO & EDDIE , INC. v. SIRIUS XM RADIO , INC.. et al,

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A B C Civil Case Cover Sheet Type of Action Applicable Reasons -

Category No. (Chem only one) See Stop 3 Above

Business Tort (07) ®A6029 Other CommerctaYBusiness Tort (not fraudlbreach of contract) 0 3.

Civil Rights (08) [} A6005 Civil RightsfDiscrimination 1., 2., 3.

Defamation (13) ❑ A6010 Defamation (slanderilibel) 1., 2.. 3.

Fraud (16) ❑ A6013 Fraud (no contract)

Professional Negligence (25) ❑ A6017 Legal Malpractice 1 .. 2., 3.

❑ A6050 Other Professional Malpractice (not medical or legal) 1 ., 2., 3.

Other (35) ❑ A6025 Other Non-Personal Injury/Property Damage tort 2..3.

Wrongful Termination (36) ❑ A6037 Wrongful Termination 1., 2.. 3.

A8024 Other Employment Complaint Cast 1.. 2.. 3. Other Employment ( 15)

a A8109 Labor Commissioner Appeals 10.

❑ A6004 Breach of Rentats.ease Contract (not unlawful detainer or wrongful 2.. S. eviction)

Breach of Contract) Warranty (06) ❑ A6008 ContractiWarranty Breach .Seller Plaintiff (no fraud/negligence) 2.. 5.

(not Insurance) ❑ A6019 Negligent Breach of CorthactNvarranty Ino fraud)

0 A6026 Other Breath of Contracilvvarranty (not fraud Or negligenC,) 1 " 2 .5.

❑ A6002 Collections Case -Seller Plaintiff 2 ., 5., 6. Coll eWans (09)

A6012 Other Promissory Note1COBecttons Case 2., 5,

Insurance Coverage (18) ❑ A6015 Insurance Coverage (not complex) i. 2•. 5„ B.

❑ A6009 Contractual Fraud 1., 2 , 3., 5.

Other Contract (37) ❑AS031 TOrtlous Interference 1.,

❑ AW27 Other Contract Dlspute (not breachlinsurancelfraudlrtegligence ) 1., 2., 3., 8.

Erttinent Domairtlinverse Condemnation (14) ❑ A7300 Eminent OornalnlCondemnetion Number of parcels 2.

Wrongful Eviction (33) (0 AW23 Wrongful Eviction Case

❑ A6018 Mortgage Foreclosure 2.. 6.

Other Real Property (Z6) D A6032 Quiet We 2.• 6,

o A8060 Other Real Property (not eminent domain , landlordltenant . foreclosure) 2., 6,

Unlawful Detainer-Commerclat (31)

❑ A6021 Unlawful Detainer-Commercial (not drugs or wrongful eviction) 2 , 6.

Unlawful Detainer-Residential 0 A6020 Unlawful Dt takxlr -Residential (not drugs or wrongful cvlcllon) 2.6,

Unlawful Detainer- r^t A6020F Unlawful petalr+ar-iat Feraclosure 2., 6. Post-Forecloeure 3+!

unlawful Detainer -Drugs (38) ❑ A8022 Unlawful Detainer.Drugs 2.6.

LACIV 109 (Rev. 03 1 1 1) CIVIL CASE COVER SHEET ADDENDUM Local Rule 2.0

fASC Approved 03-04 AND STATEMENT OF LOCATION Pa e 2 of 4

,a_ . tNrr, t_ w.v ts+wnau' F'Iwv.e~n


❑ Ml 70 Petition for Relief from Late Claim Law 2., 3., 4., 8.

O P6100 Other Civil Petition 2.. 9, yS

LACIV 109 (Rev. 03111) CIVIL CASE COVER SHEET ADDENDUM Local Rule 2.0

LASC Approved 03.04 AND STATEMENT OF LOCATION Pa e 3 of 4

A:P.nru r,ep.Lrer. Inc. ~~+' E71~CE1 .,,,,,Flmy turn

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A B C ~vit Case Cover Sheet Type of Action Applicable Reasons.

Category No, (Check only one) See Step 3 Above

Asset Forfeiture (05) ❑ A6108 Asset Forfeiture Case 2.. 6.

Petition re Arbitration ( 11) ❑ A8115 PaWon to ContpellConfirmNacate Arbitration 2-. 5.

❑ A6151 Writ. - Adrninbtrative Mandamus 2., 8.

Writ of Mandate (02) ❑ A6152 Writ • Mandamus on Limited Court Case Matter 2.

❑ A8153 Writ - Other Limited Court Case Review 2.

Other Judicial Review (39) ❑ A6150 Other Wr WJudicial Review 2-, 8.

Antitrust/Trade Regulation (03) ❑ A6003 AntilrustlTrade Regulation 1 .. 2., 8.

Construction Defect (10) ❑ AB007 Construction Defect 1., 2., 3.

Clams Involving Mass Tort ❑ AM Claims Involving Mass Tort i., 2, 6.

(40)

Securities Litigation (28) ❑ A6035 Securities Litigation Case I., 2.. 8.

Toxic Tan Environmental (30) ❑ A6038 Toxic Tort/Environmental 1., 2., 3.. 6.

Insurance Coverage Claims ham Complex Case (41 ) ❑

r-t A6014 insurance CraetSubttion (complex case onl ne ovegogep y) 1., 2., 5.. 8.

❑ A6141 Sister State Judgment 2.9.

❑ A5160 Abstract of Judgment 2.. 0,

❑ A6107 Confession of Judgment (non domestic relations) 2.. 0. Enforcement of Judgment (20) Q A6140 Adminiskattvu Agency Award (not unpaid tams) 2., 8.

❑ A6114 Petitton/CerSficate for Entry of Judgment an Unpaid Tax 2., 6.

❑ AM112 Other Enforcement of Judgment Case 2.. 8., 9.

RICO (27) ❑ A6033 Racketeering (RICO) Case 1., 2., 8.

❑ A6030 Declaratory Relief Only 1., 2., 8.

Other Complaints ❑ A6040 Injunctive Relief Only (not domesllCMarassrnent) 2., 8.

(Not Specified Above ) (42) ❑ A6011 Other Commercial Complaint Case (non-toi lnon-cumplex) 1., 2.. 8.

❑ A6000 Other Civil Complaint (non-tod/non -complex) 1.. Z., B.

Partnership Corporation Goveniance (21) d A6113 Partnership and Corporate Governance Case 2.. 8.

❑ A6121 Ckri Harassment 2.. 3., 9.

A6123 Workplace Harassment r0 2., 3., 9.

Other Petitions ❑ A6124 ElderlDependent Aduti Abus e Case 2., a, 9.

(Not Specified Above) ❑ A619D Election Contest 2. tj (43)

❑ A6110 PetHlan foe Change of Name 2., 7.

SHa 1r1LE. . CASE NUMAEA FLO & EDDIE, INC. V. SIRIUS XM RADI©, INC., et al.


FHaRT~rlTLE : CA$E MUMBER

FLO & EDDIE, INC. V. SIRIUS XM RADIO. INC., et al.

Item Ill. Statement of Location : Enter the address of the accident, party's residence or place of business , performance , or other circumstance indicated i n item II., Step 3 on Page 1. as the proper reason for filing in the court location you selected.

AO0RESS:

REASON : Check the appr opriate boxes for the numbers Shown Flo & Eddie, Inc. under Columi C for the type of action that you have selected for 1180 South Beverly Drive this case . Suite 510

1. 02.0 3. 04.05.06. 07 . 08.09.010.

Crrv;

STATE: ZIP CODE:

Los Angeles

CA 90035

Item IV. Oeclaratian of Assignment I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that the above -entitled matter Is property tiled for assignment to the STANLEY MOSK courthouse in the CENTRAL

_ District of the Superior Court of California , County of Los Angeles [Code Civ. Proc ., § 392 et seq ., and Local

Rule 2 .0. subds . (b), (c) and (d)).

oaten; August 1, 2013 (SIGMA ATTOR'LEYIFi PARrI) MARY NN R. MA 0

PLEASE HAVE THE FOLLOWING ITEMS COMPLETED AND READY TO BE FILED IN ORDER TO PROPERLY COMMENCE YOUR NEW COURT CASE»

1, Original Complaint or Petition.

2. If filing a Complaint , a Completed Summons form for issuance by the Clerk.

3, Civil Case Cover Sheet. Judicial Council form CM-010,

4. Civil Case Cover Sheet Addendum and Statement of Location form, LACIV 109, LASC Approved 03-04 (Rev, 0311 1).

50 Payment in full of the filing fee , unless fees have been waived.

6. A signed order appointing the Guardian ad Litem , Judicial Council form CIV-010, if the plaintiff or petitioner is a minor under 18 years of age will be required by Court in order to Issue a summons,

7. Additional copies of documents to be conformed by the Clerk. Copies of the cover sheet and this addendum must be served along with the summons and complaint , or other initiating pleading in the case.

4 M

LACIV ttlg (Rev. 03111 ) CIVIL CASE COVER SHEET ADDENDUM Local Rule 2.0 LASC Approved 03'{!4 AND STATEMENT OF LOCATION Pa e 4 of 4

AWAMN LMAVOL k8c.


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SMRH:413328098.2 SIRIUS XM’S ANSWER

WEIL, GOTSHAL & MANGES LLP R. BRUCE RICH (admitted pro hac vice) [email protected] BRUCE S. MEYER (admitted pro hac vice) [email protected] BENJAMIN E. MARKS (admitted pro hac vice) [email protected] TODD LARSON (admitted pro hac vice) [email protected] 767 Fifth Avenue New York, New York 10153 Telephone: 212.310.8000 Facsimile: 212.310.8007 KRAMER LEVIN NAFTALIS & FRANKEL LLP MICHAEL S. OBERMAN, Cal. Bar. No. 101857 [email protected] 1177 Avenue of the Americas New York, New York 10036 Telephone: 212.715.9294 Facsimile: 212.715.8294 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

A Limited Liability Partnership Including Professional Corporations

FRED R. PUGLISI, Cal. Bar No. 121822 [email protected] 1901 Avenue of the Stars, Suite 1600 Los Angeles, California 90067-6055 Telephone: 310.228.3700 Facsimile: 310.228.3701 Attorneys for Defendant SIRIUS XM RADIO INC.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

FLO & EDDIE, INC., individually and on behalf of all others similarly situated,

Plaintiff,

v. SIRIUS XM RADIO INC., and DOES 1 through 100,

Defendants.

Case No. 13-CV-5693 PSG (RZx) CLASS ACTION

DEFENDANT’S: (1) ANSWER AND AFFIRMATIVE

DEFENSES; AND (2) DEMAND FOR JURY TRIAL

Case 2:13-cv-05693-PSG-RZ Document 38 Filed 11/18/13 Page 1 of 10 Page ID #:469

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-1- SMRH:413328098.2 SIRIUS XM’S ANSWER

Defendant Sirius XM Radio Inc. (“Sirius XM” or “Defendant”), by its attorneys,

Weil, Gotshal & Manges LLP, for its Answer to the Complaint (“Complaint”) of

plaintiff Flo & Eddie, Inc. (“Plaintiff”) states as follows:

1. The allegations contained in paragraph 1 of the Complaint call for legal

conclusions to which no responsive pleading is required. To the extent a response is

required, Sirius XM denies the allegations.

2. Sirius XM denies knowledge or information sufficient to respond to the

allegations of the first two sentences of paragraph 2 of the Complaint, and denies the

remaining allegations of paragraph 2.

3. Sirius XM denies the allegations of paragraph 3 of the Complaint,

except it admits (a) that Sirius XM has over 24 million subscribers to its satellite

radio service; (b) that Sirius XM’s nationwide broadcasts can be received: (i) via

satellite radio by subscribers who receive the satellite broadcast on authorized Sirius

XM receivers; (ii) via the Internet by subscribers who may receive the transmission

on computers (at www.siriusxm.com), smart phones and tablets (via the Sirius XM

mobile applications), and/or home audio devices/systems such as Roku and Sonos;

and (iii) via satellite television channels on Dish Network; (c) that Sirius XM’s

central servers contain copies of certain recordings by the Turtles; and (d) that

recordings by the Turtles are among the thousands of recordings transmitted as part

of Sirius XM’s nationwide broadcasts through the above-described outlets.

4. The allegations contained in paragraph 4 of the Complaint call for legal

conclusions to which no responsive pleading is required. To the extent a response is



allegations of paragraph 5 of the Complaint.


allegations in the first sentence of paragraph 6 of the Complaint. The remaining


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allegations of paragraph 6 of the Complaint call for legal conclusions to which no

responsive pleading is required. To the extent a response is required, Sirius XM

denies the allegations.

7. Sirius XM denies the allegations of paragraph 7 of the Complaint,

except admits that Sirius XM is a Delaware corporation with its principal place of

business in New York, New York, that Sirius XM has facilities in Glendale and

Long Beach, California, and in Los Angeles County, and that this Court has

personal jurisdiction over Sirius XM.

8. Sirius XM does not respond to paragraph 8 of the Complaint, which

contains no factual allegations about Sirius XM.

9. The allegations contained in paragraph 9 of the Complaint are not

factual in nature; they merely characterize the basis on which Plaintiff purports to

bring this action and purport to reserve certain rights to the Plaintiff. Accordingly,

no responsive pleading is required. To the extent a response is required, Sirius XM


10. The allegations contained in paragraph 10 of the Complaint call for

legal conclusions to which no responsive pleading is required. To the extent a

response is required, Sirius XM denies the allegations.











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With Respect to the First Cause of Action

18. Sirius XM repeats and incorporates by reference its responses to

paragraph 1-17 of the Complaint.

19. The allegations contained in the first two sentences of paragraph 19 of

the Complaint call for legal conclusions to which no responsive pleading is required.

To the extent a response is required, Sirius XM denies the allegations. Sirius XM

denies knowledge or information sufficient to respond to the allegations in the third

sentence of paragraph 19 of the Complaint.








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With Respect to the Second Cause of Action


paragraphs 1-23 of the Complaint.













With Respect to the Third Cause of Action


paragraphs 1-28 of the Complaint.


allegations in paragraph 30 of the Complaint.


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AFFIRMATIVE DEFENSES

35. Without assuming the burden of proof where such burden properly

rests with Plaintiff, and expressly reserving and not waiving the right to assert any

and all such defenses at such time and to such extent as discovery and factual

developments establish a basis therefor, Sirius XM hereby asserts the following

defenses to the claims asserted in the Complaint.

First Affirmative Defense

(Failure to State A Claim)

36. The Complaint fails to state any claim upon which relief can be

granted.

Second Affirmative Defense

(Laches)

37. Plaintiff’s claims are barred, in whole or in part, by the doctrine of

laches.


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Third Affirmative Defense

(Waiver)


waiver.

Fourth Affirmative Defense

(Estoppel)


estoppel.

Fifth Affirmative Defense

(License)

40. Plaintiff’s claims are barred, in whole or in part, by an implied license

conveyed by Plaintiff to Sirius XM or because Plaintiff otherwise licensed,

authorized, or consented to Sirius XM’s alleged conduct.

Sixth Affirmative Defense

(Fair Use)

41. Plaintiff’s claims are barred, in whole or in part, by the doctrine of fair

use.

Seventh Affirmative Defense

(Statute of Limitations)

42. Plaintiff’s claims are barred, in whole or in part, by applicable statutes

of limitations, including Cal. Code Civ. Proc. § 338 and Cal. Bus. & Profs. Code §

17208.

Eighth Affirmative Defense

(Lack of Harm)

43. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has

not suffered any harm from Sirius XM’s alleged conduct.


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Ninth Affirmative Defense

(Failure to Mitigate Damages)

44. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has

failed to take appropriate and necessary steps to mitigate its alleged damages, if any.

Tenth Affirmative Defense

(Lack of Ownership)

45. Plaintiff’s claims are barred, in whole or in part, because Plaintiff does

not own the purported rights at issue.

Eleventh Affirmative Defense

(Adequate Remedy At Law)

46. The injunctive relief sought by Plaintiff is barred, in whole or in part,

because Plaintiff has available an adequate remedy at law.

PRAYER FOR RELIEF

For the reasons set forth above, Sirius XM respectfully requests that the Court:

1. Dismiss Plaintiff’s Complaint in its entirety with prejudice;

2. Enter judgment in favor of Defendant Sirius XM and against Plaintiff

on each and every cause of action set forth in the Complaint;

3. Award attorneys’ fees and costs in favor of Defendant Sirius XM

against Plaintiff as permitted by applicable law; and

4. Award such other and further relief as the Court deems just and proper


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Dated: November 18, 2013

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

By /s/ Fred R. Puglisi

FRED R. PUGLISI

WEIL, GOTSHAL & MANGES LLP R. BRUCE RICH (admitted pro hac vice) BRUCE S. MEYER (admitted pro hac vice) BENJAMIN E. MARKS (admitted pro hac vice) TODD LARSON (admitted pro hac vice)

KRAMER LEVIN NAFTALIS & FRANKEL LLP

MICHAEL S. OBERMAN

Attorneys for Defendant SIRIUS XM RADIO INC.

[List of additional counsel for Defendant SIRIUS XM RADIO INC.]

WEIL, GOTSHAL & MANGES LLP JOHN R. GERBA (admitted pro hac vice) [email protected] 767 Fifth Avenue New York, New York 10153 Telephone: 212-310-8000 Facsimile: 212-310-8007 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

A Limited Liability Partnership Including Professional Corporations

KENT R. RAYGOR, Cal. Bar No. 117224 [email protected] VALERIE E. ALTER, Cal. Bar No. 239905 [email protected] 1901 Avenue of the Stars, Suite 1600 Los Angeles, California 90067-6055 Telephone: 310.228.3700 Facsimile: 310.228.3701


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Defendant Sirius XM Radio Inc. hereby demands a jury trial on all issues

triable as of right to a jury. FED. R. CIV. P. 38(b).

Dated: November 18, 2013

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

By /s/ Fred R. Puglisi

FRED R. PUGLISI

WEIL, GOTSHAL & MANGES LLP R. BRUCE RICH (admitted pro hac vice) BRUCE S. MEYER (admitted pro hac vice) BENJAMIN E. MARKS (admitted pro hac vice) TODD LARSON (admitted pro hac vice)

KRAMER LEVIN NAFTALIS & FRANKEL LLP

MICHAEL S. OBERMAN



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COPY CHRISTOPHER J. COX (Bar No. 151650) Email: chris,cox weil.cnm WEIL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway Redwood Shores CA 94065-1134 Telephone: +1 630 802 3000 Facsimile: +1 650 802 3 100

R. BRUCE RICH Pro Hac Vice Application to be filed) Email: bruce.rich weil.com BRUCE S. MEYE Fro Hac Vice Application to be filed) Email: bruce.meyer weil.corn BENJAMIN E. M (S (Pro Hac Vice Application to be filed) Email: ben amin.marlcss weil.com TODD LARSON (Pro ac Vice Application to be filed) Email: todd.larson(~weil.com E WEIL, GOTSHAL -& MANGES LLP CLERK, U.S. D ICrCOUAT 767 Fifth Avenue New York, NY 10153 Telephone: +1 212 310 8000 6 2013 Facsimile: +1 212 310 8007

CENti3Ai. ~SMICT aF CR,I.iFoRNl.4 Attorney ss for Defendant 13Y o>;PUr~ SIRIUS~XM RADIO INC.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

evi3 5 6 93~ t FLO & EDDIE INC. a California Case No. corporation, individually and an behalf of all others similarly situated, [L~ os Angeles County Superior y

Court Case No. BC517032) Plaintiff,

DEFENDANT SIRIUS XM vs. RADIO INC.'S NOTICE OF

REMOVAL SIRIUS XM RADIO INC., a Delaware corporation; and DOES I through 100,

Defendants.

Nunci, Or RE OVAL.


1

PLEASE TAKE NOTICE THAT, pursuant to 28 U.S.C. §§ 1441 and 1446,

2 I Defendant Sirius X.M. Radio Inc. ("Defendant") hereby removes this action from the

3 Superior Court of California, County of Los Angeles, to this Court, on the grounds

4 that this Court has original jurisdiction over this action under 28 U.S.C. §

5 1332(d)(2)(A).

6

1. On August 1, 2013, Plaintiff Flo & Eddie, Inc. ("Plaintiff'), individually

7 and on behalf of all others similarly situated, filed a complaint entitled Flo & Eddie,

8 Inc. v. Sirius XMRadio, Inc.; and Does 1 through 100, Case No. BC517032 (the

9 "Complaint"), in the Superior Court for the State of California, County of Los

10 Angeles (the "Superior Court"). A copy of the Complaint is attached as Exhibit A to

11 the Declaration of Christopher J. Cox in Support of this notice.

12

2. Defendant became aware of and received the Complaint on or about

13 August 1, 2013. Neither the Complaint, nor any other papers or pleadings in this

14 action, have been served on Defendant as of the date hereof. Thus, Defendant is

15 informed and believes that the document attached to this Notice as Exhibit A

16 constitutes the entirety of the state court file in this Action, as these were the papers

17 filed with the Superior Court.

18

3. This Notice is timely in that it is filed within thirty days of Defendant's

19 receipt of the Complaint. See 28 U.S.C. § 1446(b).

20

4. Defendant will serve written notice of the filing of this Notice of

21 Removal to Plaintiff, and will file a copy of the Notice of Removal with the clerk of

22 the Superior Court of the State of California in and for the County of Los Angeles, as

23 required by 28 U.S.C. § 1446(d).

24

5. Venue lies in the United States District Court for the Central District of

25 California because this Court's territorial jurisdiction includes Los Angeles County,

26 where the state court action was filed and is pending. See 28 U.S.C. § 1441(a).

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NOTICE OF RE MoVAL, 1


GROUNDS FOR REMOVAL

6. At the time of the filing of the Complaint, Plaintiff was a corporation

organized under the laws of California with its principal place of business in Los

Angeles, California. Complaint at ¶ 5. Plaintiff therefore was, and on information

and belief continues to be, a citizen of California for purposes of diversity jurisdiction.

See 28 U.S.C. § 1332(c)(1).

7. At the time of the filing of the Complaint, Defendant was a corporation

organized under the laws of Delaware, with its principal place of business in New

York, New York. See Complaint at ¶ 7; Declaration of Patrick L. Donnelly in support

of Defendant's Notice of Removal at ¶ 2. Defendant therefore was, and continues to

be, a citizen of Delaware and New York for purposes of diversity jurisdiction. See

28 U.S.C. § 1332(c)(1).

8. The defendants designated as DOES 1 through 100 in the Complaint are

fictitious defendants. Pursuant to 28 U.S.C. § 1441(b)(1), for diversity purposes, "the

citizenship of defendants sued under fictitious names shall be disregarded."

9. Plaintiff purports to bring a "class action," as defined in 28 U.S.C.

1 1332(d)(1 )(B), under California state law. See Complaint at ¶¶ 9-17.

10. The Complaint defines the purported class as consisting of "the owners

of Pre-1972 Recordings reproduced, performed, distributed or otherwise exploited by

Defendants in California without a license or authorization to do so during the period

from August 1, 2009 to the present." Id. at ¶ 9.

11. Plaintiff alleges that the putative class contains "many thousands of Class

Members." Id. at ¶ 11.

12. Plaintiff brings three causes of action on behalf of itself and the putative

class, all of which are based on allegations that Defendant has used pre-1972 sound

recordings without authorization.

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Code § 908(a)(2) and common law misappropriation. See id. at ¶¶ 18-23. For this

claim, Plaintiff alleges that it and the putative class members have been damaged in an

amount that is not yet fully ascertained but which exceeds $100 million. See id. at

IT, 21.

14. The Second Cause of Action alleges a claim for statutory and common

law unfair competition. See id. at ¶¶ 24-28. Plaintiff alleges that it and the putative

class members have been damaged in an amount that is not yet fully ascertained but

which exceeds $100 million on this claim. See id. at ¶ 26.

15. The Third Cause of Action alleges a claim for conversion. See id. at ¶

29-34. For this claim, Plaintiff also alleges that it and the putative class members

have been damaged in an amount that is not yet fully ascertained but which exceeds

$100 million. See id. at ¶ 32.

16. In addition, Plaintiff claims entitlement to punitive damages and

attorneys' fees on each of these claims. See id. at ¶ 22.

17. The Class Action Fairness Act of 2005 "provides the federal district

courts with `original jurisdiction' to hear a `class action' if the class has more than 100

members, the parties are minimally diverse, and the `matter in controversy exceeds the

sum or value of $5,000,000." Std. Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1348

(2013) (citing 28 U.S.C. §§1332(d)(2), (5)(B)). In determining the amount in

controversy, "'the claims of the individual class members shall be aggregated." Id.

(quoting 28 U.S.G. §1332(d)(6)).

18. As noted above, Plaintiff is a citizen of California and Defendant is a

citizen of Delaware and New York. Thus, minimal diversity, if not complete

diversity, exists. The requirement that the class contain more than 100 members is

also satisfied because Plaintiff alleges that the putative class contains "many

thousands" of members.

NoTIcE OF REMOVAL

3


19. With respect to the amount in controversy , "[ i]n determining the amount,

I I we first look to the complaint." Lewis v. Verizon Communs., Inc., 627 F . 3d 395, 399

(9th Cir . 2010). "[I]f the complaint alleges damages in excess of the federal amount-

in-controversy requirement , then the amount-in-controversy requirement is

presumptively satisfied unless ` it appears to a legal certainty that the claim is actually

for less than the jurisdictional minimum ."' Lowdermilk v. U.S. Bank Nat'l Ass'n,

479 F.3d 994, 998 (9th Cir. 2007) (emphasis in original).

20. Here , the Complaint alleges compensatory damages in excess of $100

~ I million plus punitive damages and a request for attorneys ' fees . This is well in excess

of the $5 million jurisdictional requirement.

21. Accordingly , this Court has original jurisdiction over this matter pursuant

to 28 U.S . C. 1332 (d)(2)(A), and the matter may be removed to this Court pursuant to

28 U.S.C. § 1441(b).

22. Defendant denies that Plaintiff is entitled to any recovery in this action,

and by filing this Notice of Removal , Defendant specifically preserves and does not

waive any and all defenses that may be available to it, including , without limitation,

any defenses contained in Rule 12 of the Federal Rules of Civil Procedure.

BASED ON THE FOREGOING , Defendant hereby removes the Action from

the Superior Court of the State of California, for the County of Los Angeles, to the

United States District Court for the Central District of California.

Dated: August 6, 2013

Respectfully submitted,

WEIL, GOT 8 M1 S LLP } .

By: ri stop er ox


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NoTIcr or R.EMoval_ 4


c©rr

UNITED STATES DISTRICT COURT , CENTRAL DISTRICT OF CALIFORNIA CIVIL COVER SHEET

I. (a) PLAINTIFFS { Check box If you are representing yourself r l DEFENDANTS ( Check box if you are representing yourself )

FLO & EDDIE. INC, Individually and on behalf of all others similarly situated 51RIUS XM RADIO INC.

(b) Attorneys ( Firm Name, Address and Telephone Number . Ifyau {b) Attorneys ( Firm Name, Address and Telephone Number. If you are representing yourself, provide same .) are representing yourself , provide same.) GRADSTEIN & MARAZANO, P.C., Henry Gradstoin , Maryann R . Marzano, and Robert E. WEIL. GOTSHAL& MANGES LLP, Christopher J. Cox , 201 Redwood Shores Parkway,

Allen. 6310 San Vicente Blvd_ Suite 510 , Los Angeles, California 90048 , Tel: Redwood Shores, CA 94065.Teh 650.802-3000 ; and R. Bruce Rich, Bruce S. Meyer,

323-776-3100 Benjamin E. Marks , and Todd Larson , 767 Filth Avenue , New York, NY 10153, Tel:

212-310.8000

I1. BASIS OF JURISDICTION (Place an X In one box only,) Ill. CITIZENSHIP OF PRINCIPAL PARTIES- For Diversity Cases Only (Place an X In one box for plaintiff and one for defendant)

1. U.S. Government 3. Federal Question U , S, ( PTF DEF PTF DEF

tEl I 1 Incorporated or Principal Place tEl 4

❑

4 C itizen of This State © © o f Business In this State

Plaintiff Government Not a Party) Citizen of Another State 9 2 ❑x 2 incorporated and Principal Place

❑ S i 2. U.S. Government 4, Divers ity (Indicate Citizenship

or Business in Another State Citizen or Subject of a 3 ❑ 3 Foreign Nation Q 6 © 6 Defendant of Parties In Item III) Foreign Country

IV. ORIGIN (Place an X in one b ©x Only .) a. Itinsic rr earremAno : ncr o.wuru• ❑ District ISpaci.'y) ❑ District

1 Orlginal X 2. Removed from 3. Remanded from 4 . Reinstated or Litigation ❑

, Proceeding ❑ State Caurt ❑ Appellate Court ❑ Reopened

V. REQUESTED IN COMPLAINT : JURY DEMAND : [x Yes ❑ No (Check "Yes " only If demanded in complaint.)

CLASS ACTION under F . R.Ctr.P. 23 : x[~' Yes ❑ No ❑x MONEY DEMANDED IN COMPLAINT ,, $ over Si DO million

Vi. CAUSE OF ACTION ( Cite the U.S. Civil Stature under which you are filing and write a brief statement of cause. Do not citejurlsdtctionaI statutes unless diversity.) Defendant removed this action pursuant to 28 U.S .C. §§ 1441 and 1446 because the District Court has original Jurisdiction under 28 U.S.C . § 1332 (d)(2)(AI.

VII. NATURE OF SUIT ( Place an X In one box only).

OTHER STATUTES CONTRACT RALPFIOPERTVCONTJ IMMIGRA ON PRISONERPE1ITION5 PROPERTVRIGHTS

❑ 375 False Claims Act

© 400 State Reapport ionment

410 Antitrust

Li 430 Banks and Banking

450 Commerce/ ICC RatesrEtc .

[) 460 Deportation

470 Racketeer Influ- enced & Corrupt Otg.

© 480 CansumerCtedlt

o 490 Cable/SatTV

850 Securities /Com modifies /Exchange

890 Other Statutory Actions

© 891 Agricultural Acts

MattersEnvironmental

895 Freedom of info. Act

© a96 Arbitration

899 Adm Procedures © Act/Review

w of Appeal of

Agency Decision

950 Constitutionality or © State Statutes

❑ 110 insurance

❑ 120 Marine

❑ 130 Miller Act

140 Negotiah5ie ❑ Instrument

15 11 Recovery of Overpayment & Enforcement of Judgment

© 151 Medicare Act

152flecaveryof © Loan

( Bad. Student

Loan ( Excl, Vet.)

153 Recovery oI Overpayment of

Vet. Benefits

❑ Suitstackh alders'

❑ 190 Otht r 195 Contract

© ProductUebility

146 Franchise

© 240 Torts to Land

245 Tort Product ❑ Liability

290 All Other Real

❑ Property

462 Naturalization ❑ Application

465 Other ❑ immigration Actions

Habeas Carpus :

© 463 Allen Delainee

❑ 510 Motions to Vacate Sentence

❑ S30Genaral

❑ 535 Death Penalty Other :

❑ 540Mandamus/Other

❑ 550 Civil Rights

555 Prison Condition ❑

560 Civil Dotalnee

❑ Confnement

❑ 620 Copyrights

830 Patent

❑ 840 Trademark

TORTS SOCIAL SECURITY

TORTS PSRSONALPROPERTY ❑ 861 NIA (139510

❑ 862 Black Lung (923)

0 863 DIWC/DIWW (405 (g))

❑ 1164 SSIDTILle XVI

❑ 865 R51 (405 (g)I

R ONA J ❑ 378 Other Fraud

❑ 371 Truth in Lending

380 Other Personal Property Damage

© PrroductUablIllty age

❑ 310 Airplane

315 Airplane © Product Liability

320 Assault, Libel & o Slander 330 fed. Employers

❑ Liability

❑ 340 Marine 345Maiine Product

❑ Liability

© 350 Motor Vehicle

355 Motor Vehicle © Product liability

© 360rOther Personal

362 Personal injury- MadMalpralice 365 Personal injury-

© product Liability 367 Health Care! Pharmaceutical

❑ Persona€Injury Product Liability 36a Asbestos

❑ Persona€ Injury

FEDERALTAXSUITS BANxRUPTCY FORFEITURE/PENALTY 870Taxes (US, Plaintiff or

❑ Defendant)

❑ 8 71 7809

i RS-ThlrdParty2&USC 7609

ft5•ThlrtiParty26USC 422 Appeal 28 U5C 158 423 WI thdrawal 28 USC 157

625 Drug Related Scloure

© USC881orPtopeny Tl

❑ 690 Other CitrlLRIGHTS

❑ 440 Other Civil Rights

❑ 441 Voting

Q 442 Employment

© 443 Housing/ Accomodatlons

445 American with ©DlsabUlties

Employment 446 American with Cl Olsabliltles-Other

❑ 448 Education

LABOR

❑

710Falr Labor Standards Act

❑ 720Labor/Mgmt, Relations

❑ 740Pallway Labor Act

751 Family and Medical Leave Act 790 Other Labor

❑ Litigation

❑ 791

plotttOe Ref, Inc.

y

REAL P OPERTV 710 Land Condemnation

© 220 Foreclosure

© 230 Rent Lease & E ectment

FOR OFFICE USE ONLY: Case Number : C V-i 3 5 6 9 AFTER COMPLETING PAGE 1 OF FORM CV-71, COMPLETE THE INFORMATION REQUESTED ON PAGE 2.

CV•71 102/13) CIVIL COVER SHEET Page 1 o12


t4

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA CIVIL COVER SHEET

VIII(a}. IDENTICAL CASES: Has this action been previously filed in this court and dismissed, remanded or closed? ® NO [j YES

If yes, list case number(s):

VIII(b). RELATED CASES : Have any cases been previously filed in this court that are related to the present case ? J NO ❑ YES

if yes, list case number(s):

Civil cases are deemed related if a previously filed case and the present case:

(Check all boxes that apply) ❑ A. Arise from the same or closely related transactions, happenings, or events; or

B. Call for determination of the same or substantially related or similar questions of law and fact; or

® C. For other reasons would entail substantial duplication of labor if heard by different judges; or

Q D. Involve the same patent, trademark or copyright,,,gnt .one of the factors identified above in a, b or c also is present.

IX, VENUE: (When completing the following information, use an additional sheet if necessary.)

(a) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named plaintiff resides.

® Check here if the government, its agencies or employees is a named plaintiff. If this box is checked, go to item (b).

County In this District :* California County outside of this Distr ict; State, if other than California; or Foreign C unt

Fla & Eddie, Inc. e. Los Angeles County

(b) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named defendant resides,

® Check here if the government, its agencies or employees is a named defendant. If this box is checked, go to item (c).

County In this District :* California County outside of this District; State, if other than California; or Foreign Count

Sirius XM Radio Inc., principal place of business in New York; incorporated in Delaware

(c) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH claim arose. NOTE : In land condemnation cases, use the location of the tract of land involved.

County in this District ;" California County outside of this District; State, if other than California; or Foreign Countr

Plaintiff has alleged claims that are state-wide.

"Los Angeles , Orange , San Bernardino , Riverside , Ventura , Santa Barbara , or San L is Obispo Coun es Note : In land condemnation cases. use the location of the tract of land involved

X. SIGNATURE OF ATTORNEY (OR SELFREPRESENTED LITIGANT): ( ~"°® DATE: ~~„~;~

Notice to Counsel/Parties. The CV-71 (JS-44) Civil Cover Sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law. This form, approved by the Judicial Conference of the United States in September 1974, is required pursuant to Local Rule 3.1 Is not filed but is used by the Clerk of the Court for the purpose of statistics, venue and initiating the civil docket sheet, (For more detailed instructions, see separate instructions sheet), Key to Statistical codes relating to Social Security Cases:

Nature of Suit Code Abbreviation Substantive Statement of Cause of Action

861 HIA All claims for health insurance benefits (Medicare) underTitle 18, Part A, of the Social Security Act, as amended. Also, include claims by hospitals, skilled nursing facilities, etc., for certification as providers of services under the program. (42 U.S.C. 1935FF(b))

862 Bt All claims for "Black Lung" benefits under Title 4, Part B, of the Federal Coal Mine Health and Safety Act of 1969. (30 U.S.C, 923)

863 DIWC All claims filed by insured workers for disability insurance benefits under Title 2 of the Social Security Act, as amended; plus all claims filed for child's insurance benefits based on disability. (42 U.S.C. 405 (g))

863 DlWW All claims filed for widows or widowers insurance benefits based on disability under Title 2 of the Social Security Act, as amended. (42 U.S.C. 405(g))

864 SSID All claims for supplemental security income payments based upon disability filed under Title 16 of the Social Security Act, as amended.

865 RSI All claims for retirement (old age) and survivors benefits under Title 2 of the Social Security Act, as amended. (42 U.S.C. 405 (g))

CV-71 (02113) CIVIL COVER SHEET Page 2 of 2


UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

#30/31CIVIL MINUTES - GENERAL

Case No. CV 13-5693 PSG (RZx) Date December 3, 2013

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

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

Wendy K. Hernandez Not Present n/aDeputy Clerk Court Reporter Tape No.

Attorneys Present for Plaintiff(s):

Not Present

Attorneys Present for Defendant(s):

Not Present

Proceedings: (In Chambers) Order DENYING Motion to Transfer Venue

Before the Court is Defendant Sirius XM Radio Inc.’s (“Sirius XM”) motion to transfervenue to the Southern District of New York, pursuant to 28 U.S.C. § 1404(a). Dkt. # 30. TheCourt held a hearing on this matter on December 2, 2013. Having considered the arguments inthe moving, opposing, and reply papers, as well as those raised at oral argument, the CourtDENIES the motion.

I. Background

Plaintiff Flo & Eddie, Inc. (“Plaintiff”) filed this putative class action in state court onAugust 1, 2013, alleging that Sirius XM had unlawfully exploited certain audio recordings madebefore February 15, 1972 (the “Pre-1972 Recordings”) by duplicating and broadcasting thoseaudio recordings through its satellite and internet radio service. Complaint ¶¶ 1-2. Plaintiffclaims that the class members own the rights to the Pre-1972 Recordings under California CivilCode § 980(a)(2) and California common law. Id. ¶ 6. Plaintiff asserts causes of action for: (1) misappropriation, (2) unfair competition, and (3) conversion. Id. ¶¶ 18-34.

Sirius XM removed this case to federal court on August 6, 2013. Dkt. # 1.

On August 16, 2013, and September 3, 2013, Plaintiff filed similar suits in the SouthernDistrict of New York (the “New York action”) and the Southern District of Florida (the “Floridaaction”), respectively, raising corresponding claims under New York and Florida state law. See

CV-90 (06/04) CIVIL MINUTES - GENERAL Page 1 of 11






Flo & Eddie, Inc. v. Sirius XM Radio, Inc., et al., No. CV 13-5784 CM (S.D.N.Y.); Flo & Eddie,Inc. v. Sirius XM Radio, Inc., et al., No. CV 13-23182 KMM (S.D. Fla.).

Two other related cases have been filed by different plaintiffs. Capitol Records LLC, etal. v. Sirius XM Radio Inc., et al., BC 520981 (Cal. Super. Ct.) (the “Capitol Records action”)was filed on September 11, 2013 in California state court by five major recording companies,and is essentially identical to this case.

SoundExchange, Inc. v. Sirius XM Radio Inc., No. CV 13-1290 RJL (D.D.C.) (the“SoundExchange action”) was filed on August 26, 2013 in the District of the District ofColumbia. That case is somewhat related to the three Flo & Eddie cases and the CapitolRecords action, but is based on a different theory of liability arising out of the federal CopyrightAct and Copyright Royalty Board regulations.

Sirius XM has moved to transfer this case to the Southern District of New York, pursuantto 28 U.S.C. § 1404(a). Dkt. # 30. II. Legal Standard

Under 28 U.S.C. § 1404(a), a district court has the discretion to transfer a civil action toany other district in which the action might have been filed “[f]or the convenience of the partiesand witnesses, [and] in the interest of justice.” Although § 1404(a) only explicitly defines threefactors—the convenience of the parties, the convenience of witnesses, and the interest ofjustice—the Ninth Circuit has explained that district courts may consider factors used in theforum non conveniens context:

(1) the location where the relevant agreements were negotiated and executed, (2) thestate that is most familiar with the governing law, (3) the plaintiff’s choice of forum,(4) the respective parties’ contacts with the forum, (5) the contacts relating to theplaintiff’s cause of action in the chosen forum, (6) the differences in the costs oflitigation in the two forums, (7) the availability of compulsory process to compelattendance of unwilling non-party witnesses, and (8) the ease of access to sources ofproof. . . . [as well as (9)] the relevant public policy of the forum state[.]

Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). The district court mayalso consider factors such as (10) relative court congestion, (11) “the local interest in havinglocalized controversies decided at home,” and (12) “the unfairness of burdening citizens in anCV-90 (06/04) CIVIL MINUTES - GENERAL Page 2 of 11






unrelated forum with jury duty.” Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834,843 (9th Cir. 1986).

The burden is on the moving party to show that transfer is appropriate. See CFTC v.Savage, 622 F.2d 270, 279 (9th Cir. 1979). Overall, § 1404(a) “is intended to place discretion inthe district court to adjudicate motions for transfer according to an individualized, case-by-caseconsideration of convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29(1988) (citation and internal quotation marks omitted).

III. Discussion

A. Jurisdiction and Venue in the Southern District of New York

The parties agree that this case could have been properly filed in the Southern District ofNew York. See Mem. 7:1-7:14; Opp. 6:14-6:20.

B. Convenience of the Parties and Party Witnesses

These factors are neutral. Plaintiff is a California corporation whose day-to-dayoperations are managed in Los Angeles by its employee Evan Cohen. See Opp. 7:23-7:28. Sirius XM is headquartered in New York. See Mem. 8:8:15-8:18. It has identified threeemployees as likely witnesses in this case: Terrence R. Smith, Corporate Vice President &Chief Engineering Officer with responsibility for Broadcast Operations and Engineering; RobertLaw, Senior Vice President & General Manager, Streaming Services and Products; and StevenBlatter, Senior Vice President & General Manager, Music Programming. See id. 8:19-9:2. Allthree likely Sirius XM witnesses are based in New York. See id.

Sirius XM argues that the locations of Plaintiff’s principals should also be considered inthis analysis. See Mem. 9:9-10:5. Plaintiff, on the other hand, argues that the location of itsprincipals is irrelevant. See Opp. 14:27-15:2. Mark Volman resides in Tennessee. See Mem.9:13-9:14. Howard Kaylan resides in Washington state, and tours through the United States. See id. 9:14-10:1. This dispute is not material to the Court’s decision. Both New York andCalifornia are inconvenient from Tennessee, and it would likely be inconvenient for Kaylan tocome to either forum from Washington or during the course of a tour.

In short, whether this case proceeds in California or New York, one of the parties, and itsparty witnesses, will need to travel during the course of the litigation. In fact, it appears thatboth parties will have to travel, notwithstanding the venue of this case, because Plaintiff isCV-90 (06/04) CIVIL MINUTES - GENERAL Page 3 of 11






litigating the New York action in New York and Sirius XM is facing the Capitol Records actionin California. Moreover, the convenience of party witnesses, as opposed to third parties, isaccorded little weight in the transfer analysis. See Allstar Mktg. Grp., LLC v. Your Store Online,LLC, 666 F. Supp. 1109, 1132 (C.D. Cal. 2009). Under the circumstances, the Court finds thatthe party convenience factors are neutral.

C. Convenience of Third Party Witnesses and the Availability of Compulsory Process

These factors weigh in favor of transfer. Sirius XM states that it will likely subpoenathree third party witnesses: the Recording Industry Association of America (“RIAA”) (based inWashington, D.C.); SoundExchange, Inc. (“SoundExchange”) (based in Washington, D.C.); andthe American Association of Independent Music (“AAIM”) (based in New York). Mem. 10:10-10:23. Based on the proximity between New York and Washington, D.C., Sirius XM argues thatthe convenience of third party witnesses favors transfer to New York. Id. Sirius XM also notesthat if this case is transferred, compulsory process will be available against AAIM. Id.

The Court agrees with Sirius XM on these points. The Court is not persuaded byPlaintiff’s arguments that the three identified third party witnesses are not material to the case, ormay be willing to provide documents and depositions without subpoenas. See Opp. 11:25-12:3,12:14-13:2. From the discussion at oral argument, it appears that the discovery from RIAA,SoundExchange, and AAIM may be central to Sirius XM’s affirmative defenses, and even if thethird parties are willing to provide discovery, it appears that it would be more convenient forthem to do so in New York than in California. The Court is also not persuaded that Sirius XMhas not adequately identified the third party witnesses it may call. See Opp. 12:4-12:13.

D. Relevant Agreements

This factor is neutral. The parties agree that there are no relevant agreements in this case. See Mem. 11:5-11:8; Opp. 23:3-23:6.

E. Familiarity with the Governing Law

This factor is neutral. To the extent Plaintiff’s claims relate to federal copyright law, thisCourt and the Southern District of New York are equally capable of resolving the relevant legalissues. And, while this Court may have more experience in dealing with California law, theCourt has no reason to question the ability of the Southern District of New York to correctly







apply the law of foreign jurisdictions. See, e.g., Martin v. Spring Break %2C83 Prods., LLC,No. CV 09-6104 PSG (FMOx), 2009 WL 4673918, at *4 (C.D. Cal. Dec. 3, 2009).

F. Plaintiff’s Choice of Forum

This factor weighs very slightly against transfer.

The plaintiff’s choice of forum is generally accorded substantial weight in the transferanalysis; however, the plaintiff’s choice is entitled to less weight if the plaintiff represents aclass, and is entitled to only “minimal consideration” if the parties have minimal contacts withthe forum and the operative facts did not occur within the forum. See Lou v. Belzberg, 834 F.2d730, 739 (9th Cir. 1987). The plaintiff’s choice of forum is also given less weight where theplaintiff has filed related lawsuits in several fora. See Golden Bridge Tech., Inc. v. Apple Inc.,CV 12-4014 ODW (FFMx), 2012 WL 3999854, at *4 (C.D. Cal. Sept. 11, 2012); Bristol-MyersSquibb Co. v. Andrx Pharm., LLC, 03 CIV 2503 (SHS), 2003 WL 22888804, at *5 (S.D.N.Y.Dec. 5, 2003).

Here, Plaintiff seeks to represent a class. As a result, Plaintiff’s choice of forum isaccorded less weight. See id. The Court is not persuaded by Plaintiff’s argument that Belzbergdoes not apply where a class has not been certified. See Opp. 8:4-8:9; Van Slyke v. Capital OneBank, 503 F. Supp. 2d 1353, 1363 (N.D. Cal. 2007). Motions to transfer are almost alwaysraised early in a case, prior to class certification. Indeed, it is unlikely that a motion to transferwould be seriously entertained after class certification. As a result, Plaintiff’s narrow reading ofBelzberg would essentially nullify the Ninth Circuit’s statement that “when an individual . . .represents a class, the named plaintiff’s choice of forum is given less weight.” Belzberg, 834F.2d 739.

The weight given to Plaintiff’s choice of forum is further reduced by the fact that Plaintiffhas also filed a closely-related suit in New York, and has thus shown that it is willing and able tolitigate in that forum. See Golden Bridge Tech., 2012 WL 3999854, at *4.

That said, the Court is not persuaded by Sirius XM’s argument that Plaintiff’s choiceshould be accorded minimal or no weight. Sirius XM argues that nothing uniquely connects theoperative facts of this lawsuit with California. See Reply 7:19-8:16. As discussed further below,the Court agrees. However, for the purposes of determining whether Plaintiff’s choice of forumcarries any weight in the transfer analysis, the relevant inquiries are whether the parties have







more than minimal contacts with the chosen forum, and whether operative facts—unique ornot—took place in the forum. See Belzberg, 834 F.2d at 739.

Both parties have contacts in California. Plaintiff is a California corporation and managesits day-to-day operations from California. See Opp. 7:23-7:26. Sirius XM has offices andbroadcasting equipment in California, and broadcasts into California. See id. 8:17-8:20. Further, because Plaintiff claims Sirius XM has misappropriated its rights by performing the Pre-1972 Recordings, at least some of the operative facts have taken place in California. See id.

Accordingly, the Court finds that this factor weighs—albeit slightly—against transfer.

G. The Parties’ Contacts with the Chosen Forum

This factor weighs against transfer. As noted above, both Plaintiff and Sirius XM operatein California, Plaintiff is based in California, and Sirius XM has offices in California. See Opp.7:23-7:26, 8:17-8:20. Although Sirius XM is headquartered in New York, it does not appear thatits contacts with California are de minimis; on the other hand, Plaintiff does not appear to haveany meaningful contacts with New York, aside from its litigation activity in the New Yorkaction.

H. Contacts Relating to Plaintiff’s Causes of Action in the Chosen Forum

This factor weighs in favor of transfer.

Plaintiff’s claims are based principally on Sirius XM’s broadcasts of the Pre-1972Recordings into California. See Opp. 17:23-17:25. Although Sirius XM’s transmissionsconstitute contacts with California, they are not particular to California, because Sirius XMbroadcasts nationwide. See Reply 7:23-8:2. As a result, there is nothing that specificallyconnects this case to California.

On the other hand, there are specific connections between this case and New York. Plaintiff alleges Sirius XM has wrongfully duplicated the Pre-1972 Recordings, see Complaint ¶9, and Sirius XM’s central servers—where any such duplication would likely have takenplace—are located in New York. See Reply 8:13-8:15. Plaintiff also alleges Sirius XM haswrongfully broadcasted the Pre-1972 Recordings, see Complaint ¶ 9, and Sirius XM’s broadcastand programming operations, as well as at least some of its song tracking operations, are based







in New York. See Mem. 15:7-15:11; Reply 8:13-8:15. As a result, it appears that the contactsrelated to Plaintiff’s cause of action are stronger in New York than in California.

I. Differences in the Cost of Litigation

This factor weighs slightly in favor of transfer.

The Court sees no reason to believe that this it would be either more or less expensive tolitigate this case in New York, as opposed to Los Angeles. And as discussed above, at least oneside will have to travel regardless of where this case is sited. Accordingly, litigation costs wouldonly be meaningfully reduced by transfer to the extent that transfer would limit duplicativediscovery.

If this case is transferred to New York, this case may be consolidated or otherwiseformally coordinated with the New York action. Ordinarily, the prospect of potentialconsolidation or formal coordination would weigh heavily towards transfer. See Cont’l GrainCo. v. The FBL-585, 364 U.S. 19, 26 (1960) (“To permit a situation in which two casesinvolving precisely the same issues are simultaneously pending in different District Courts leadsto the wastefulness of time, energy and money that § 1404(a) was designed to prevent.”); A.J.Indus., Inc. v. U.S. Dist. Ct. for the Central Dist. of Ca., 503 F.2d 384, 389 (9th Cir. 1974) (“Thefeasibility of consolidation is a significant factor in a transfer decision . . . although even thependency of an action in another district is important because of the positive effects it mighthave in possible consolidation of discovery and convenience to witnesses and parties.”) (citationomitted).

However, in this case, the incremental benefit of that coordination would be minimal,given that Sirius XM will be exposed to discovery in California, regardless of the Court’sdecision, as part of the Capitol Records action. It is also unclear whether the Florida action willbe transferred to New York. In short, transfer might reduce overlapping discovery, but will noteliminate it.

A more weighty issue is the possibility that if this case is not transferred, any discoverydisputes between the parties—particularly regarding the scope of discovery—may be litigated inthree different federal courts. Such repetitious litigation is wasteful and creates a risk ofinconsistent decisions. Yet it is again unclear whether transferring this case would materiallyreduce the fragmentation of discovery disputes, given that the New York action and the Floridaaction may proceed separately. Although the Court would give this factor significant weight ifCV-90 (06/04) CIVIL MINUTES - GENERAL Page 7 of 11






transfer would bring all discovery disputes into one forum, the Court is not persuaded that thereis a substantial difference between two and three proceedings—or between three and fourproceedings, given that similar disputes may arise in the Capitol Records action.

On the other hand, even if this case is not transferred, the Court would expect Plaintiffand Sirius XM to work together to coordinate discovery (and particularly third party discovery)in this case, the New York action, and the Florida action.

Considering the situation as a whole, the Court finds that this factor weighs in favor oftransfer, but only slightly.

J. Access to Sources of Proof

This factor weighs slightly in favor of transfer.

As noted above, it appears that most of the witnesses in this case are based in New Yorkor Washington, D.C. In addition, because Sirius XM is located in New York, it is likely that anyrelevant documents and records are in New York. See Mem. 15:16-15:24. Although these issuesdo not carry any great weight, because the Court has already accounted for the location of thewitnesses and any document production in discovery is likely to be electronic (or convertible toan electronic format), they weigh slightly in favor of transfer.

K. Relevant Policy of the Forum State

This factor is neutral. Although it appears California has expressed an interest inprotecting certain ownership interests in the Pre-1972 Recordings, see Cal. Civ. Code§ 980(a)(2), Plaintiff has not identified anything suggesting that California has a policy ofhaving disputes related to those ownership interests litigated in California. See Opp. 22:12-22:28.

L. Relative Court Congestion

The Central District of California and the Southern District of New York are both busycourts with heavy caseloads. The Court notes that the median time from filing to disposition of acivil matter in the Southern District of New York is 8.3 months, as opposed to 5.6 months in thisCV-90 (06/04) CIVIL MINUTES - GENERAL Page 8 of 11






District. See Opp. 21:21-21:24. The mean time from filing to trial in a civil matter is alsoconsiderably shorter in this District. See Opp. 21:24-21:27. Although these differences are notoverwhelming, they do suggest that this case might proceed more expeditiously in this District. On the other hand, the marginal difference is slight, and “[a]dministrative considerations such asdocket congestion are given little weight in this circuit in assessing the propriety of a § 1404transfer.” See Allstar Mktg. Grp., LLC, 666 F. Supp. 2d at 1134 (citation omitted). All thingsconsidered, this factor is neutral.

M. Local Interest in Having Localized Controversies Decided at Home

This factor weighs against transfer.

Sirius XM notes that “Plaintiff’s position that California law protects a performance rightin Pre-1972 Recordings is a novel claim,” and that this case will be decided in a “precedentialvacuum.” Mem. 11:20-11:22 & n.9; Reply 9:16-9:19. Sirius XM also forcefully argues thatPlaintiff’s claim depends on a “new state-law right that would radically overturn decades ofsettled practice.” Mem. 2:12-2:13.

Although the facts of this case are not localized to California, the fact that this caseappears to present a question of first impression regarding the meaning and scope of Californialaw weighs heavily against transfer. California undoubtedly has a strong interest in having suchan issue “decided at home,” especially if it might “radically overturn decades of settledpractice.”

N. Unfairness of Burdening Citizens in an Unrelated Forum

This factor is neutral. The Court is not persuaded that a jury in New York would beparticularly burdened by this case, even if this case were not consolidated with the New Yorkaction. The factual issues that are likely to arise are not likely to be overly complex. Moreover,if this case were consolidated for trial with the New York action, the Court is not persuaded thata jury would be confused by the need to deal with both New York and California law, given thatPlaintiff has not identified any differences between the applicable laws that would require a juryto make different factual determinations. Finally, it is not at all clear that New York would be an“unrelated forum” for this case, given that Plaintiff seeks to represent a nationwide class.

O. The Interest of Justice







Sirius XM has raised two issues that implicate the interest of justice. The Court is notpersuaded that either weighs in favor of transfer. First, Sirius XM argues that Plaintiff is playingthe “lawsuit lottery” by filing three essentially identical suits, hoping that at least one court willadopt its allegedly novel view of the law. See Mem. 2:12-2:16. If Plaintiff’s suits werematerially identical, such an effort would smack of forum shopping, and give rise to an unfairrisk that the courts would reach inconsistent judgments. However, Sirius XM has not met itsburden of showing that Plaintiff’s three suits are materially identical or that the relevant laws areso closely related that it would be unjust for this Court and the courts hearing the New York andFlorida actions to decide issues differently. Rather, it seems at this point that although the threesuits share a common factual core, they are legally distinct and will turn on the separateinterpretations of California, New York, and Florida law, respectively.

Second, Sirius XM noted at oral argument that the parties will likely disagree about theproper scope of discovery. Specifically, Sirius XM intends to seek discovery regardinghistorical licensing practices in the terrestrial radio industry (and perhaps in the music industry ingeneral) to support its laches and estoppel defenses. Plaintiff argues that those practices areirrelevant because they do not relate to the type of digital and satellite services offered by SiriusXM. Sirius XM expressed a concern that disputes about the discoverability of such evidencemight not be decided consistently if this case, the New York action, and the Florida action arenot heard by the same court.

However, it appears to the Court that the fragmentation of these types of discoverydisputes actually favors Sirius XM: if the three actions remain separate, Sirius XM will havethree chances to obtain the discovery it seeks. Accordingly, the Court is not persuaded that thepossibility of overlapping discovery disputes on this point would be unjust for Sirius XM.

In short, Sirius XM has not shown that a transfer is necessary to serve the interest ofjustice. This factor is neutral.

P. Balancing Analysis

After considering the factors discussed above, the Court concludes that transfer is notwarranted. Many of the transfer factors are neutral. As to the factors that carry weight one wayor the other, several factors related to efficiency and convenience weigh toward transfer. However, California’s interest in having a novel question of state law decided at home, as wellas the slight weight given to Plaintiff’s choice of forum, weighs against transfer.







The parties’ arguments suggest that this case will principally turn on a legal dispute overa matter of first impression in California law, which could have far-reaching effects. Accordingly, California’s interest in having such an issue decided in a California court carriesconsiderable weight.

On the other hand, the factor that weighs most heavily in favor of transfer is theconvenience of the three third party witnesses identified by Sirius XM: RIAA, SoundExchange,and AAIM. All three industry groups are based on the East Coast, and it would likely be moreconvenient for them if this case were litigated in New York. However, Sirius XM has not madeany showing that any of the three industry groups would be substantially burdened if this casewere to remain in California.

The other significant factor that weighs toward transfer is the fact that the contacts relatedto Plaintiff’s cause of action are stronger in New York than in California. However, this factoris counterbalanced by Plaintiff’s choice of California as the forum for its lawsuit and the fact thatboth parties have contacts in California, while only Sirius XM has any meaningful non-litigationcontacts in New York.

Under the circumstances, and considering all of the factors discussed above, the Court isnot persuaded that Sirius XM has met its burden of showing that transfer is warranted.

IV. Conclusion

For the reasons set forth above, Sirius XM’s motion is DENIED.

IT IS SO ORDERED.



(RZx),DISCOVERY,MANADR

UNITED STATES DISTRICT COURT for the CENTRAL DISTRICT OFCALIFORNIA (Western Division − Los Angeles)

CIVIL DOCKET FOR CASE #: 2:13−cv−05693−PSG−RZ

Flo &Eddie Inc v. Sirius XM Radio Inc et alAssigned to: Judge Philip S. GutierrezReferred to: Magistrate Judge Ralph ZarefskyCase in other court: Superior Court of CA for the County of

Los Angeles, BC517032Cause: 28:1441 Notice of Removal

Date Filed: 08/06/2013Jury Demand: BothNature of Suit: 890 Other StatutoryActionsJurisdiction: Federal Question

Plaintiff

Flo &Eddie Inca California corporation, individuallyand on behalf of all others similarlysituated

represented byEvan Seth CohenCohen and Cohen1180 South Beverly Drive Suite 510Beverly Hills, CA 90035−1157310−556−9800Fax: 310−556−9801Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Henry D GradsteinGradstein and Marzano PC6310 San Vicente Boulevard Suite 510Los Angeles, CA 90048323−776−3100Fax: 323−931−4990Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Maryann R MarzanoGradstein and Marzano PC6310 San Vicente Boulevard Suite 510Los Angeles, CA 90048323−776−3100Fax: 323−931−4990Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Robert Edward AllenGradstein and Marzano PC6310 San Vicente Boulevard Suite 510Los Angeles, CA 90048323−776−3100Fax: 323−931−4990Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

V.

Defendant

Sirius XM Radio Inca Delaware corporation

represented byChristopher J CoxWeil Gotshal and Manges LLPSilicon Valley Office201 Redwood Shores ParkwayRedwood Shores, CA 94065−1175

Case: 2:13-cv-05693-PSG-RZ As of: 02/20/2014 12:19 PM PST 1 of 7

mailto:[email protected]




650−802−3000Fax: 650−802−3100Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Benjamin E MarksWeil Gotshal and Manges LLP767 Fifth AvenueNew York, NY 10153−0119212−310−8029Fax: 212−310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Bruce S MeyerWeil Gotshal and Manges LLP767 Fifth AvenueNew York, NY 10153212−310−8013Fax: 212−310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Fred R PuglisiSheppard Mullin Richter and HamptonLLP1901 Avenue of the Stars Suite 1600Los Angeles, CA 90067−6017310−228−3700Fax: 310−228−3701Email: [email protected] TO BE NOTICED

John R GerbaWeil Gotshal and Manges LLP767 Fifth AvenueNew York, NY 10153212−310−8029Fax: 212−310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Michael S ObermanKramer Levin Naftalis &Frankel LLP1177 Avenue of the AmericasNew York, NY 10036−2714212−715−9294Fax: 212−715−8000Email: [email protected] TO BE NOTICED

R Bruce RichWeil Gotshal and Manges LLP767 Fifth AvenueNew York, NY 10153212−310−8170Fax: 212−310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED









Todd LarsonWeil Gotshal and Manges LLP767 Fifth AvenueNew York, NY 10153212−310−8238Fax: 212−310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Defendant

Does1 through 100

Date Filed # Docket Text

08/06/2013 1 NOTICE OF REMOVAL from Superior Court of CA for the County of LosAngeles, Central District, case number BC517032 with CONFORMED FILEDcopy of summons and class action complaint, attached to Exhibit A to Declarationof Christopher J. Cox. Case assigned to Judge Philip S. Gutierrez, Discovery toMagistrate Judge Ralph Zarefsky. (Filing fee $ 400 PAID. ), filed by DefendantSirius XM Radio Inc. (et) (Additional attachment(s) added on 8/9/2013: # 1Exhibit) (mg). (Entered: 08/08/2013)

08/06/2013 2 DECLARATION of CHRISTOPHER J. COX in Support of Notice of Removal 1filed by Defendant Sirius XM Radio Inc. [Conformed Copy of Summons and ClassAction Complaint Submitted Attached to Exhbiit A.] (et) (mg). (Entered:08/08/2013)

08/06/2013 3 DECLARATION of PATRICK L. DONNELLY in Support of Notice of Removal1 filed by Defendant Sirius XM Radio Inc. (et) (mg). (Entered: 08/08/2013)

08/06/2013 4 CORPORATE DISCLOSURE STATEMENT AND NOTICE of Interested Partiesfiled by Defendant Sirius XM Radio Inc, identifying Corporate Parent LibertyMedia Corporation for Sirius XM Radio Inc. (et) (mg). (Entered: 08/08/2013)

08/06/2013 5 PROOF OF SERVICE filed by Defendant Sirius XM Radio Inc, re Notice ofRemoval, 1 , Certificate/Notice of Interested Parties 4 , Declaration of ChristopherJ. Cox 2 , Declaration of Patrick L. Donnelly 3 and civil cover sheet served on8/6/2013. (et) (mg). (Entered: 08/08/2013)

08/06/2013 6 NOTICE TO PARTIES OF COURT−DIRECTED ADR PROGRAM filed. (et)(Entered: 08/08/2013)

08/09/2013 7 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to R. BruceRich for Defendant Sirius XM Radio Inc. Your Pro Hac Vice application has notbeen received by the court. Please return your completed Application ofNon−Resident Attorney to Appear in a Specific Case, form G−64, or a copy of theNotice of Electronic Filing of your application and the $325.00 fee and this noticeimmediately. Out−of−state federal government attorneys who are not employed bythe U.S. Department of Justice are required to file a Pro Hac Vice application; nofiling fee is required. (et) (Entered: 08/09/2013)

08/09/2013 8 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to Bruce S.Meyer for Defendant Sirius XM Radio Inc. Your Pro Hac Vice application has notbeen received by the court. Please return your completed Application ofNon−Resident Attorney to Appear in a Specific Case, form G−64, or a copy of theNotice of Electronic Filing of your application and the $325.00 fee and this noticeimmediately. Out−of−state federal government attorneys who are not employed bythe U.S. Department of Justice are required to file a Pro Hac Vice application; nofiling fee is required. (et) (Entered: 08/09/2013)

08/09/2013 9 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to BenjaminE. Marks for Defendant Sirius XM Radio Inc. Your Pro Hac Vice application hasnot been received by the court. Please return your completed Application ofNon−Resident Attorney to Appear in a Specific Case, form G−64, or a copy of the



https://ecf.cacd.uscourts.gov/doc1/031017318977?caseid=568507&de_seq_num=11&pdf_header=2
















Notice of Electronic Filing of your application and the $325.00 fee and this noticeimmediately. Out−of−state federal government attorneys who are not employed bythe U.S. Department of Justice are required to file a Pro Hac Vice application; nofiling fee is required. (et) (Entered: 08/09/2013)

08/09/2013 10 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to ToddLarson for Defendant Sirius XM Radio Inc. Your Pro Hac Vice application has notbeen received by the court. Please return your completed Application ofNon−Resident Attorney to Appear in a Specific Case, form G−64, or a copy of theNotice of Electronic Filing of your application and the $325.00 fee and this noticeimmediately. Out−of−state federal government attorneys who are not employed bythe U.S. Department of Justice are required to file a Pro Hac Vice application; nofiling fee is required. (et) (Entered: 08/09/2013)

08/09/2013 11 PROOF OF SERVICE filed by Defendant Sirius XM Radio Inc, re Notice toParties of Court−Directed ADR Program (ADR−8) 6 Proof of Service on Notice ofAssignment to United States Judges; Notice to Parties of Court−Directed ADRProgram and New Civil Actions served on August 7, 2013. (Cox, Christopher)(Entered: 08/09/2013)

08/13/2013 12 STANDING ORDER REGARDING NEWLY ASSIGNED CASES by JudgePhilip S. Gutierrez. (ji) (Entered: 08/13/2013)

08/13/2013 13 [DOCUMENT STRICKEN PURSUANT TO ORDER DATED 7/15] PROOF OFSERVICE filed by Defendant Sirius XM Radio Inc, re Initial Order upon Filing ofComplaint 12 Proof of Service on Standing Order Regarding Newly AssignedCases served on August 13, 2013. (Cox, Christopher) Modified on 8/16/2013 (bp).(Entered: 08/13/2013)

08/14/2013 14 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents RE:Proof of Service (subsequent documents) 13 . The following error(s) was found:Title page is missing. Other error(s) with document(s): NOTE: Missing title pagewith caption, "Proof of Service on Standing Order Regarding Newly AssignedCases." "Standing Order...." should be an attachment.. In response to this notice thecourt may order (1) an amended or correct document to be filed (2) the documentstricken or (3) take other action as the court deems appropriate. You need not takeany action in response to this notice unless and until the court directs you to do so.(bp) (Entered: 08/15/2013)

08/15/2013 15 ORDER TO STRIKE ELECTRONICALLY FILED DOCUMENTS by JudgePhilip S. Gutierrez: the following document(s) be STRICKEN for failure to complywith the Local Rules, General Order and/or the Courts Case Management Order:Proof of Service (subsequent documents) 13 , for the following reasons: Title pageis missing; (bp) (Entered: 08/16/2013)

08/16/2013 16 PROOF OF SERVICE filed by Defendant Sirius XM Radio Inc, re Proof ofService (subsequent documents), 13 , Striking Electronically Filed Documents(G−106), 15 , Initial Order upon Filing of Complaint 12 , Notice of Deficiency inElectronically Filed Documents (G−112),, 14 Proof of Service served on August13, 2013. (Cox, Christopher) (Entered: 08/16/2013)

08/16/2013 17 Interested Parties of Interested Parties filed by Plaintiff Flo &Eddie, Inc. Flo&Eddie Inc, (Gradstein, Henry) (Entered: 08/16/2013)

08/22/2013 18 WAIVER OF SERVICE Returned Executed filed by Plaintiff Flo &Eddie Inc.upon Sirius XM Radio Inc waiver sent by Plaintiff on 8/19/2013, answer due10/18/2013. Waiver of Service signed by Benjamin E. Marks, Attorney.(Gradstein, Henry) (Entered: 08/22/2013)

09/20/2013 19 APPLICATION for attorney John R. Gerba to Appear Pro Hac Vice (PHV FEENOT PAID.) filed by Defendant Sirius XM Radio Inc. (Attachments: # 1 ProposedOrder)(Puglisi, Fred) (Entered: 09/20/2013)

09/20/2013 20 APPLICATION for attorney Todd Larson to Appear Pro Hac Vice (PHV FEENOT PAID.) filed by Defendant Sirius XM Radio Inc. (Attachments: # 1 ProposedOrder)(Puglisi, Fred) (Entered: 09/20/2013)























09/20/2013 21 APPLICATION for attorney Bruce S. Meyer to Appear Pro Hac Vice (PHV FEENOT PAID.) filed by Defendant Sirius XM Radio Inc. (Attachments: # 1 ProposedOrder)(Puglisi, Fred) (Entered: 09/20/2013)

09/20/2013 22 APPLICATION for attorney R. Bruce Rich to Appear Pro Hac Vice (PHV FEENOT PAID.) filed by Defendant Sirius XM Radio Inc. (Attachments: # 1 ProposedOrder)(Puglisi, Fred) (Entered: 09/20/2013)

09/20/2013 23 APPLICATION for attorney Benjamin E. Marks to Appear Pro Hac Vice (PHVFEE NOT PAID.) filed by Defendant Sirius XM Radio Inc. (Attachments: # 1Proposed Order)(Puglisi, Fred) (Entered: 09/20/2013)

09/24/2013 24 ORDER by Judge Philip S. Gutierrez: granting 19 Application to Appear Pro HacVice by Attorney John R. Gerba on behalf of Defendant Sirius XM Radio Inc.,designating Fred R. Puglisi as local counsel. (lt) (Entered: 09/25/2013)

09/24/2013 25 ORDER by Judge Philip S. Gutierrez: granting 20 Application to Appear Pro HacVice by Attorney Todd Larson on behalf of Defendant Sirius XM Radio Inc.,designating Fred R. Puglisi as local counsel. (lt) (Entered: 09/25/2013)

09/24/2013 26 ORDER by Judge Philip S. Gutierrez: granting 21 Application to Appear Pro HacVice by Attorney Bruce S. Meyer on behalf of Defendant Sirius XM Radio Inc.,designating Fred R. Puglisi as local counsel. (lt) (Entered: 09/25/2013)

09/24/2013 27 ORDER by Judge Philip S. Gutierrez: granting 22 Application to Appear Pro HacVice by Attorney R. Bruce Rich on behalf of Defendant Sirius XM Radio Inc.,designating Fred R. Puglisi as local counsel. (lt) (Entered: 09/25/2013)

09/24/2013 28 ORDER by Judge Philip S. Gutierrez: granting 23 Application to Appear Pro HacVice by Attorney Benjamin E. Marks on behalf of Defendant Sirius XM RadioInc., designating Fred R. Puglisi as local counsel. (lt) (Entered: 09/25/2013)

10/03/2013 29 Joint STIPULATION Extending Time to Answer the complaint as to Sirius XMRadio Inc answer now due 11/18/2013, filed by Defendant Sirius XM RadioInc.(Puglisi, Fred) (Entered: 10/03/2013)

10/09/2013 30 NOTICE OF MOTION AND MOTION to Change Venue to District Court for theSouthern District of New York filed by Defendant Sirius XM Radio Inc. Motionset for hearing on 12/2/2013 at 01:30 PM before Judge Philip S. Gutierrez.(Attachments: # 1 Declaration Terrence Smith, # 2 Proposed Order)(Puglisi, Fred)(Entered: 10/09/2013)

10/09/2013 31 REQUEST FOR JUDICIAL NOTICE re MOTION to Change Venue to DistrictCourt for the Southern District of New York 30 filed by Defendant Sirius XMRadio Inc. (Attachments: # 1 Declaration Fred R. Puglisi, # 2 Exhibit 1, # 3 Exhibit2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5, # 7 Exhibit 6, # 8 Exhibit 7, # 9Exhibit 8, # 10 Exhibit 9, # 11 Exhibit 10)(Puglisi, Fred) (Entered: 10/09/2013)

10/18/2013 32 NOTICE OF MOTION AND MOTION to Stay Case pending Resolution of itsMotion to Transfer This Action to the Southern District of New York filed byDefendant Sirius XM Radio Inc. Motion set for hearing on 12/16/2013 at 01:30 PMbefore Judge Philip S. Gutierrez. (Attachments: # 1 Proposed Order)(Puglisi, Fred)(Entered: 10/18/2013)

10/21/2013 33 EX PARTE APPLICATION to Shorten Time for Hearing to November 4, 2013filed by Defendant Sirius XM Radio Inc. (Attachments: # 1 Exhibit A, # 2Proposed Order)(Puglisi, Fred) (Entered: 10/21/2013)

10/22/2013 34 OPPOSITION OPPOSITION re: EX PARTE APPLICATION to Shorten Time forHearing to November 4, 2013 33 filed by Plaintiff Flo &Eddie Inc. (Allen, Robert)(Entered: 10/22/2013)

10/23/2013 35 MINUTES (IN CHAMBERS): ORDER DENYING Defendant's Ex Parte Motionto Advance the Hearing on Its Motion to Stay by Judge Philip S. Gutierrez: Beforethe Court is Defendant's ex parte motion to advance the hearing on its motion tostay and shorten the corresponding briefing schedule. Dkt. # 33. The Court findsthis matter appropriate for decision without oral argument. See Fed. R. Civ. P.78(b); L.R. 7−15. After considering Defendant's motion and Plaintiff's opposition,the Court DENIES Defendant's motion. RE: denying 33 Ex Parte Application to












































Shorten Time for Hearing (PLEASE REVIEW DOCUMENT FOR FULL ANDCOMPLETE DETAILS) (lw) (Entered: 10/24/2013)

11/08/2013 36 Opposition To Defendant's Motion To Transfer Venue re: MOTION to ChangeVenue to District Court for the Southern District of New York 30 filed by PlaintiffFlo &Eddie Inc. (Attachments: # 1 Declaration Decl. of R. Allen ISO Plaintiff'sOpposition, # 2 Appendix Appendix of CA Authorities ISO Plaintiff'sOpposition)(Allen, Robert) (Entered: 11/08/2013)

11/15/2013 37 REPLY in Support MOTION to Change Venue to District Court for the SouthernDistrict of New York 30 filed by Defendant Sirius XM Radio Inc. (Attachments: #1 Exhibit A)(Puglisi, Fred) (Entered: 11/15/2013)

11/18/2013 38 ANSWER to Notice of Removal, 1 JURY DEMAND. filed by Defendant SiriusXM Radio Inc.(Puglisi, Fred) (Entered: 11/18/2013)

11/25/2013 39 MEMORANDUM in Opposition to MOTION to Stay Case pending Resolution ofits Motion to Transfer This Action to the Southern District of New York 32 filedby Plaintiff Flo &Eddie Inc. (Allen, Robert) (Entered: 11/25/2013)

11/25/2013 40 DECLARATION of Robert E. Allen In opposition to MOTION to Stay Casepending Resolution of its Motion to Transfer This Action to the Southern Districtof New York 32 filed by Plaintiff Flo &Eddie Inc. (Attachments: # 1 Exhibit 1, # 2Exhibit 2, # 3 Exhibit 3)(Allen, Robert) (Entered: 11/25/2013)

12/02/2013 41 REPLY in support of MOTION to Stay Case pending Resolution of its Motion toTransfer This Action to the Southern District of New York 32 filed by DefendantSirius XM Radio Inc. (Attachments: # 1 Declaration of Fred Puglisi, # 2 Exhibit1)(Puglisi, Fred) (Entered: 12/02/2013)

12/02/2013 42 MINUTES OF DEFENDANT'S MOTION TO TRANSFER VENUE PURSUANTTO 28 USC 1404(a) FILED 10−09−13 (DOC. 30); REQ FOR JUDICIALNOTICE (DOC. 31) taking under submission 30 Motion to Change Venue Hearingheld before Judge Philip S. Gutierrez: Having considered all papers submitted insupport of and in opposition to the Motion referenced above, and the oral argumentpresented today, the Court takes the motion Under Submission. A ruling shall beissued after full consideration of the submitted pleadings. Court Reporter: MiriamBaird. (bm) (Entered: 12/03/2013)

12/03/2013 43 MINUTES (IN CHAMBERS) ORDER DENYING Motion to Transfer Venue byJudge Philip S. Gutierrez denying 30 Motion to Change Venue; denying 32 Motionto Stay Case: Before the Court is Defendant Sirius XM Radio Inc.'s ("Sirius XM")motion to transfer venue to the Southern District of New York, pursuant to 28U.S.C. § 1404(a). Dkt. 30. The Court held a hearing on this matter on December 2,2013. Having considered the arguments in the moving, opposing, and reply papers,as well as those raised at oral argument, the Court DENIES the motion. (seedocument for further details) (bm) (Entered: 12/03/2013)

12/04/2013 44 MINUTE ORDER IN CHAMBERS DENYING Motion to Stay by Judge Philip S.Gutierrez re MOTION to Stay 32 : Sirius XM, as the moving party, has the burdenof showing that a stay is warranted. It has not done so. Accordingly, the motion isDENIED. (see document for further details) (bm) (Entered: 12/05/2013)

01/08/2014 45 ORDER SETTING SCHEDULING CONFERENCE by Judge Philip S. Gutierrez:Scheduling Conference set for 3/24/2014 02:00 PM. (wm) (Entered: 01/08/2014)

01/10/2014 46 Notice of Appearance or Withdrawal of Counsel: for attorney Michael S Obermancounsel for Defendant Sirius XM Radio Inc. Adding Michael S. Oberman asattorney as counsel of record for Sirius XM Radio Inc. for the reason indicated inthe G−123 Notice. Filed by Defendant Sirius XM Radio Inc.. (Attorney Michael SOberman added to party Sirius XM Radio Inc(pty:dft))(Oberman, Michael)(Entered: 01/10/2014)

02/12/2014 47 NOTICE OF MOTION AND MOTION to Strike Class Allegations filed byDefendant Sirius XM Radio Inc. Motion set for hearing on 3/24/2014 at 01:30 PMbefore Judge Philip S. Gutierrez. (Attachments: # 1 Proposed Order)(Puglisi, Fred)(Entered: 02/12/2014)

































02/14/2014 48 NOTICE OF MOTION AND MOTION for Extension of Time to File MOTIONFOR CLASS CERTIFICATION filed by PLAINTIFF Flo &Eddie Inc. Motion setfor hearing on 3/24/2014 at 01:30 PM before Judge Philip S. Gutierrez.(Attachments: # 1 Declaration DECLARATION OF ROBERT E. ALLEN INSUPPORT OF PLAINTIFF FLO &EDDIE, INC.'S MOTION FOR ORDEREXTENDING THE TIME FOR FILING ITS MOTION FOR CLASSCERTIFICATION)(Allen, Robert) (Entered: 02/14/2014)

02/14/2014 49 NOTICE OF LODGING filed re MOTION for Extension of Time to FileMOTION FOR CLASS CERTIFICATION 48 (Attachments: # 1 Proposed OrderPROPOSED ORDER ON MOTION FOR ORDER EXTENDING THE TIMEFOR FILING MOTION FOR CLASS CERTIFICATION)(Allen, Robert) (Entered:02/14/2014)







Case 1:13-cv-05784-CM Document 1 Filed 08/16/13 Page 1 of 18

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


Plaintiff,


Defendants.

CIVIL ACTION No. 13-CV-5784 (CM)

MEMORANDUM OF LAW IN SUPPORT OF SIRIUS XM’S PARTIAL MOTION TO DISMISS PLAINTIFF’S COMPLAINT

R. Bruce Rich Benjamin E. Marks Todd Larson WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 [email protected] [email protected] [email protected] and Michael S. Oberman KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York 10036 Tel: (212) 715-9294 Fax: (212) 715-8294 [email protected] Attorneys for Defendant Sirius XM Radio Inc.


TABLE OF CONTENTS

Page

i

PRELIMINARY STATEMENT .....................................................................................................1

ARGUMENT ...................................................................................................................................7

THERE IS NO PUBLIC PERFORMANCE RIGHT FOR PRE-1972 RECORDINGS UNDER NEW YORK COMMON LAW .................................................7

A. The History of Failed Efforts by the Recording Industry To Obtain a Right of Public Performance for Sound Recordings .....................8

B. New York’s Cause of Action for Common Law Copyright Infringement Does Not Cover Public Performances of Sound Recordings .................................................................................................12

C. Plaintiff Does Not State a Claim for Unfair Competition By Alleging That Sirius XM Publicly Performs Its Sound Recordings Without Permission ................................................................14

1. New York’s Cause of Action for Unfair Competition Does Not Cover Public Performances of Sound Recordings .....................................................................................14

2. Plaintiff Has Failed to Plead Competition Between It and Sirius XM as Needed To State a Common Law Unfair Competition Claim .............................................................15

3. Plaintiff Has Failed To Plead a Competitive Injury Adequate To Support a Common Law Unfair Competition Claim .........................................................................18

CONCLUSION ..............................................................................................................................20


TABLE OF AUTHORITIES

CASES PAGE(S)

ii

Agee v. Paramount Commc’ns, Inc., 59 F.3d 317 (2d Cir. 1995).................................................................................................18, 19

Apple Corps Ltd. v. The Adirondack Grp., 476 N.Y.S.2d 716 (Sup. Ct. 1983) ...........................................................................................15

Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009)...................................................................................................4, 5

Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398 (S.D.N.Y. 2011)................................................................................12, 15

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...........................................................................................................16, 17

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .................................................................................................................16

Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 4 (1979) .......................................................................................................................4

Capitol Records, Inc. v. Greatest Records, Inc., 252 N.Y.S.2d 553 (Sup. Ct. 1964) .....................................................................................12, 15

Capitol Records, Inc. v. Mercury Records Corp., 221 F.2d 657 (2d Cir. 1955).....................................................................................................12

Capitol Records, Inc. v. Naxos of America, Inc., 4 N.Y.3d 540, 830 N.E.2d 250 (2005) ............................................................................. passim

In re DoubleClick Inc. Privacy Litig., 154 F. Supp. 2d 497 (S.D.N.Y. 2001)........................................................................................8

Edelman v. Starwood Capital Grp., LLC, No. 0601077, 2008 WL 2713489 (Sup. Ct. June 27, 2008) ....................................................17

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., et al., No. 1:13-cv-23182 (KMM) (S.D. Fla. Sept. 3, 2013) ...............................................................6

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. BC 517032 (Cal. Super. Ct. L.A. Cnty. Aug. 1, 2013) .......................................................6

Gaughan v. Nelson, No. 94 CIV. 3859(JFK), 1997 WL 80549 (S.D.N.Y. Feb. 26, 1997) ........................................8


TABLE OF AUTHORITIES (continued)

PAGE(S)

iii

Hill v. Opus Corp., 841 F. Supp. 2d 1070 (C.D. Cal. 2011) .................................................................................7, 8

ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467, 880 N.E.2d 852 (2007) .....................................................................................16

Metro. Opera Ass’n v Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (Sup. Ct. 1950), aff’d, 107 N.Y.S.2d 795 (App. Div. 1951) (per curiam) ........................................................................................................................13, 15

Parker v. Time Warner Entm't Co., 98 CV 4265 (ERK), 1999 WL 1132463 (E.D.N.Y. Nov. 8, 1999) ...........................................8

Roy Export Co. v. Columbia Broad. Sys., Inc., 672 F.2d 1095 (2d Cir. 1982)...................................................................................................16

Schuloff v. Queens Coll. Found., Inc., 994 F. Supp. 425 (E.D.N.Y. 1998), aff’d, 165 F.3d 183 (2d Cir. 1999) ....................................8

Tarcher v. Penguin Putnam, Inc., No. 01 CIV 6754 DLC, 2001 WL 1646453 (S.D.N.Y. Dec. 20, 2001) ....................................8

Yantha v. Omni Childhood Ctr., Inc., 13-CV-1948 ARR JMA, 2013 WL 5327516 (E.D.N.Y. Sept. 20, 2013) ....................15, 18, 19

Zinter Handling, Inc. v. Gen. Elec. Co., 956 N.Y.S.2d 626 (App. Div. 2012) ........................................................................................17

Statutes

17 U.S.C. § 102 ................................................................................................................................4

17 U.S.C. § 106 ..................................................................................................................4, 5, 9, 11

17 U.S.C. § 114 ............................................................................................................................5, 9

17 U.S.C. § 301 ............................................................................................................................4, 5

Act of Jan. 6, 1897, 29 Stat. 481 ......................................................................................................4

Pub. L. No. 104-39, 109 Stat. 336 (1995) ..................................................................................5, 11

Pub. L. No. 92-140, 85 Stat. 391 (1971) ......................................................................................4, 9



PAGE(S)

iv

Other Authorities

117 Cong. Rec. 2002 (Feb. 8, 1971) ................................................................................................9

141 Cong. Rec. S945-02 (Jan. 13, 1995) .......................................................................................12

Authorizing A Composer’s Royalty in Revenues from Coin-operated Machines and to Establish a Right of Copyright in Artistic Interpretations: Hearings Before Subcomm. on Patents, Trade-marks, and Copyrights of the Comm. on the Judiciary on H.R. 1269, H.R. 1207, and H.R. 2570, 80th Cong., 1st Sess. 6 (Comm. Print 1947) ......................10

Economic Conditions in the Performing Arts: Hearings Before the Select Subcomm. on Ed. of the Comm. on Ed. and Labor, 87th Cong., 1st 2d Sess. 64-65 (Comm. Print 1962) ..................................................................................................................................10, 11

Fed. R. Civ. P. 12 .........................................................................................................................1, 8

Fed. R. Civ. P. 56 .............................................................................................................................8

H.R. Rep. No. 92-487 (1971) ...........................................................................................................9

H.R. Rep. No. 104-274 (1995) ...................................................................................................5, 10

Revision of Copyright Laws: Hearings Before the Comm. on Patents, 74th Cong., 2d Sess. 622 (Comm. Print 1936) ........................................................................10

S. Rep. No. 92-72 (1971) .................................................................................................................9

Second Supplementary Register’s Report on the General Revision of the U.S. Copyright Law (1975) ...............................................................................................................................11

Statement on S. 227 of ASCAP (Mar. 9, 1995), 1995 WL 552160 (Westlaw) ..............................12

Supplementary Register’s Report on the General Revision of the U.S. Copyright Law, 89th Cong., 1st Sess. (Comm. Print 1965) ...............................................................................11

Testimony of Jason S. Berman Chairman and CEO of RIAA Before the Judiciary Subcomm. on Counts & Intellectual Property: Hearing on H.R. 1506, (June 21, 1995) 1995 WL 371088 (Westlaw) ..........................................................................11

Testimony of the NAB Before the House Judiciary Comm. Subcomm. on Courts & Intellectual Property on H.R. 1506 (June 21, 1995), 1995 WL 371107 (Westlaw) ..........11, 12


Defendant Sirius XM Radio Inc. (“Sirius XM”) respectfully submits this memorandum in

support of its Partial Motion to Dismiss the Complaint of Flo & Eddie, Inc. (“Plaintiff”) under

Rule 12(b)(6) of the Federal Rules of Civil Procedure.

PRELIMINARY STATEMENT

By this action, Plaintiff, the owner of sound recordings made nearly fifty years ago and

publicly performed widely ever since by myriad broadcast and other outlets, asks the Court to

radically transform the scope of protection accorded to sound recordings under New York

common law. Plaintiff asks the Court to recognize a right of public performance for sound

recordings under New York common law in the absence of any supporting precedent—indeed, in

the face of the New York Court of Appeals’ definitive statements of the elements of common

law copyright infringement and unfair competition causes of action in New York, which make

no mention of any such right. See Capitol Records, Inc. v. Naxos of America, Inc., 4 N.Y.3d

540, 830 N.E.2d 250 (2005). The result Plaintiff seeks would dramatically expand New York

law and unravel a century of contrary understandings between the music and broadcasting

industries.

Plaintiff alleges that it has owned some 100 master recordings of songs by the rock group

The Turtles since 1971. Compl. ¶ 2. It concedes that none of these sound recordings is entitled

to protection under federal copyright law, as the Copyright Act only affords protection to sound

recordings made on or after February 15, 1972, and each of the sound recordings at issue here

was made before that date. Id. Deliberately left without rights under federal law, Plaintiff

asserts that Sirius XM’s broadcasts of sound recordings created before February 15, 1972 (“Pre-

1972 Recordings”) infringe a purported performance right under New York common law and

alleges that the performances at issue support a recovery of more than $100 million in damages

supposedly sustained by Plaintiff and members of a putative class of similarly situated owners of


2

Pre-1972 Recordings. Id. ¶¶ 25, 26. Underscoring the lack of legal foundation for Plaintiff’s

performance right claim, the Complaint leaves unanswered why, if a state-law performance right

in Pre-1972 Recordings in fact exists, Plaintiff waited more than four decades to assert it, let

alone why Plaintiff has asserted this supposed right against just one broadcaster out of many

thousands of music users. Nothing about Sirius XM’s scale of operations or its ability to deliver

digital-quality music and other offerings to subscribers nationwide suffices to fill the legal

vacuum in which Plaintiff’s performance right-based claims were fashioned.

As we demonstrate herein, New York common law has afforded relief to owners of Pre-

1972 Recordings solely to combat copying and distribution of sound recordings by record pirates

or other commercial competitors. It has never provided a means for record companies to collect

enormous sums of money from broadcasters or other music users arising out of performances of

Pre-1972 Recordings. A determination by this Court that New York law provides a performance

right in such older recordings would immediately turn every radio and television broadcaster,

webcaster, nightclub, retail establishment, fitness center, and the like that performs such

recordings within the State of New York into a serial copyright infringer. The Court should

reject Plaintiff’s invitation to disrupt industry practices that have prevailed over a century and

informed countless transactions involving sound recordings during that time.

While the Complaint contends that the claimed injury to Plaintiff and the putative class

derives from multiple asserted unauthorized acts on the part of Sirius XM—to wit, the

“unauthorized reproduction, performance, distribution, or other exploitation” of Pre-1972

Recordings (id. ¶ 1)—it is unquestionably the asserted performance right that is central to this

action. See id. ¶ 2 (adverting to Sirius XM’s performances of Turtles recordings “every hour of

every day” to subscribers in New York); id. ¶ 3 (describing the various platforms by which Sirius


3

XM programming allegedly is transmitted). Sirius XM therefore brings this motion for partial

dismissal of the Complaint at the threshold of this action because there is no performance right

for sound recordings under New York common law. A ruling in Sirius XM’s favor would

materially narrow this dispute, resulting in more efficient litigation of the case and conservation

of judicial resources, impacting, among other matters, the propriety of class treatment, the

identity of prospective class members should class treatment be determined appropriate, as well

as the scope of fact and putative damages discovery more generally. What would remain is the

balance of Plaintiff’s claims premised on alleged reproductions made by Sirius XM. Sirius XM

intends to seek disposition of that part of Plaintiff’s claims on a motion for summary judgment

on the basis that Sirius XM only makes non-actionable server copies of sound recordings in aid

of its broadcast transmissions (and not copies for sale or distribution via download as Plaintiff

alleges), but recognizes that limited discovery must first be completed before it addresses those

claims.

BACKGROUND

Terminology and Statutory Background

Plaintiff alleges in the preamble to the Complaint that it owns “sound recordings of

musical performances that initially were ‘fixed’ (i.e., recorded) prior to February 15, 1972,” and

later alleges that it engages in the business of licensing, inter alia, the “performance of its Pre-

1972 Recordings.” Id. ¶ 5. Although the Complaint asserts claims only under New York

common law, the allegations of the Complaint as well as the arguments made below addressing

those allegations are best understood in relation to certain definitions and rights found in the

federal Copyright Act, which we briefly summarize here.

The Copyright Act recognizes two separate copyrights associated with recorded music—

one copyright in the music and lyrics (together, a “musical composition”) and another in a


4

recorded rendition of that song, e.g., when it is recorded by a particular singing group or

orchestra (a “sound recording”). See 17 U.S.C. § 102(a)(2), (7). While musical compositions

have enjoyed copyright protection since 1897, sound recordings—the category of works at issue

in this case—were not covered by the federal Copyright Act until February 15, 1972, the

effective date of the Sound Recording Act of 1971. See Act of Jan. 6, 1897, 29 Stat. 481; Pub. L.

No. 92-140, 85 Stat. 391 (1971) (“Sound Recording Act”). The Sound Recording Act afforded

only prospective protection—only recordings created on or after the effective date would be

protected under federal law—and limited that protection to the right “[t]o reproduce and

distribute” “tangible” copies of sounds recordings. Sound Recording Act, 85 Stat. 391; see also

Naxos, 4 N.Y.3d at 555-56, 830 N.E.2d at 260.

The upshot of the Sound Recording Act was twofold. First, Pre-72 Recordings like those

at issue in this case remained subject to state law and whatever protections such law did (or did

not) provide. See Naxos, 4 N.Y.3d at 555-56, 830 N.E.2d at 260; see also 17 U.S.C. § 301(c)

(preserving unspecified state law remedies for Pre-1972 Recordings). Second, even as to those

post-72 recordings granted federal copyright protection for the first time, the copyright owners

(usually record companies) received no right of public performance, and therefore “no right to

extract licensing fees from radio stations and other broadcasters of recorded music.” Arista

Records, LLC v. Launch Media, Inc., 578 F.3d 148, 152 (2d Cir. 2009). Congress thus put sound

recordings on a distinctly different footing than musical compositions, which had long enjoyed a

public performance right. See 17 U.S.C. § 106(4); Broad. Music, Inc. v. Columbia Broad. Sys.,

Inc., 441 U.S. 4 (1979) (“Since 1897, the copyright laws have vested in the owner of a

copyrighted musical composition the exclusive right to perform the work publicly for profit. . .”)

(citing Act of Jan. 6, 1897, 29 Stat. 481); Arista Records v. Launch Media, 578 F.3d at 152


5

(“Notably, unlike the copyright of musical works, the sound recording copyright created by the

[Sound Recording Act] did not include a right of performance.”).

Finally, effective on February 1, 1996, the Digital Performance Right in Sound

Recordings Act of 1995 granted owners of sound recordings created on or after February 15,

1972 the right “to perform the copyrighted work publicly by means of a digital audio

transmission.” Pub. L. No. 104-39 § 2(3), 109 Stat. 336 (1995) (codified at 17 U.S.C. §§ 106(6),

114); see also Arista Records v. Launch Media, 578 F.3d at 154 (the Act gave “sound recording

copyright holders an exclusive but ‘narrow’ right to perform—play or broadcast—sound

recordings via a digital audio transmission”) (citing H.R. Rep. No. 104-274, at 12, 13-14 (1995)).

Pursuant to section 106(6), Sirius XM is required to pay royalties for its digital audio

transmissions of copyrighted sound recordings protected by federal law. Because Congress has

never afforded copyright protection to Pre-72 Recordings, they remain protected, if at all, under

state law.

The Complaint

Plaintiff’s principals have been performing together as The Turtles since 1965. Compl. ¶

2. Plaintiff has owned the entire catalog of 100 master recordings made by The Turtles since

approximately 1971. Id. Each of these master recordings was made prior to February 15, 1972,

and therefore each falls outside of the scope of federal copyright protection. Id.; 17 U.S.C. §

301(c). While the Complaint includes allegations that Sirius XM has copied Plaintiff’s Pre-1972

Recordings onto central servers and enables subscribers to download streams of sound

recordings for later or multiple listenings, Compl. ¶ 3, the focus of the Complaint is that Sirius

XM performs Turtles recordings “every hour of every day” to subscribers in New York. Id. ¶ 2.

Apart from the bare allegation that Plaintiff “is engaged in the business of distributing, selling,

and/or licensing the reproduction, distribution, sale, and performance of its Pre-1972


6

Recordings,” id. ¶ 5, and notwithstanding its contention that its recordings include “numerous

iconic hits,” id. ¶ 2, Plaintiff fails to allege a single instance in which it has licensed the public

performance of its recordings, that any radio broadcaster, webcaster, bar, restaurant, retail

establishment or other third party that publicly performs music has ever requested such a license

from it, or that any third party has refused to take a license from Plaintiff because of Sirius XM’s

use of the recordings.

Plaintiff also alleges that Sirius XM’s “use of the Pre-1972 Recordings is likely to cause

confusion, mistake or deception as to the source, sponsorship, affiliation or connection between

Plaintiff and the other Class Members, and Defendants.” Id. ¶ 31. Even though Sirius XM

(together with its predecessors) has been offering its service continuously since 2001, Plaintiff

neither identifies a single instance of actual confusion by anyone, nor alleges how Sirius XM’s

inclusion of Plaintiff’s songs among the millions of tracks it performs each year by thousands of

recording artists could possibly deceive or confuse the public into the mistaken belief that

Plaintiffs are somehow sponsoring or affiliated with Sirius XM.

Related Actions

Plaintiff has filed a nearly identical suit against Sirius XM in California, on behalf of the

same putative class, the only meaningful difference being that Plaintiff there seeks relief under

California law rather than New York. Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. BC

517032 (Cal. Super. Ct. L.A. Cnty. Aug. 1, 2013) (subsequently removed to the federal district

court for the Central District of California). Shortly after filing this action, Plaintiff filed a third

action in Florida, again identical save for pressing claims under Florida law. Flo & Eddie, Inc. v.

Sirius XM Radio, Inc., et al., No. 1:13-cv-23182 (KMM) (S.D. Fla. Sept. 3, 2013). Sirius XM

has filed motions to transfer those cases to the Southern District of New York.


7

ARGUMENT

THERE IS NO PUBLIC PERFORMANCE RIGHT FOR PRE-1972 RECORDINGS UNDER NEW YORK COMMON LAW

The Complaint hinges on the mistaken notion that New York common law affords to the

owner of a Pre-1972 Recording the exclusive right of public performance. Because no such right

exists, no liability arises out of Sirius XM’s broadcasting of Pre-1972 Recordings. This

conclusion is compelled by:

(i) Longstanding, consistent customs and practices that for over a century

have recognized the absence of a performance right for sound recordings. This is

reflected in the largely unsuccessful, decades-long efforts of the record industry

(of which Plaintiff and the putative class members are a part) to secure a first-ever

performance right for sound recordings in any venue, which yielded in 1995 only

the limited grant under federal copyright law of such a right, confined to digital

audio transmissions of post-1972 recordings (see Point A infra). This legislative

history confirms the utter absence of pre-existing New York (or any other state)

law conferring upon sound recording owners the right to license public

performances of their sound recordings of any vintage.

(ii) The authoritative construction given to New York’s common law of

copyright infringement and unfair competition by the New York Court of Appeals

and lower court decisions interpreting these bodies of New York common law

(see Points B and C infra).

Those portions of the Complaint premised on a public performance right for Pre-1972

Recordings fail to state a claim upon which relief may be granted, and partial dismissal of the

Complaint is warranted. See, e.g., Hill v. Opus Corp., 841 F. Supp. 2d 1070, 1082 (C.D. Cal.


8

2011) (granting motion to dismiss parts of plaintiff’s claims); Gaughan v. Nelson, No. 94 CIV.

3859(JFK), 1997 WL 80549, at *6 (S.D.N.Y. Feb. 26, 1997) (granting motion to dismiss part of

claim); Tarcher v. Penguin Putnam, Inc., No. 01 CIV 6754 DLC, 2001 WL 1646453, at *3

(S.D.N.Y. Dec. 20, 2001) (denying plaintiff’s motion for reconsideration of the court’s partial

dismissal of breach of contract claim). In the alternative, pursuant to Rules 12(d) and 56(a) of

the Federal Rules of Civil Procedure, the Court could convert this motion to a partial motion for

summary judgment addressed to that part of each claim premised on an exclusive right of public

performance.

A. The History of Failed Efforts by the Recording Industry To Obtain a Right of Public Performance for Sound Recordings

For nearly a century, the recording industry tried, and failed, to obtain a public

performance right for sound recordings. The legislative history of those efforts to amend the

Copyright Act to provide this sought-after right reflects the widespread and uniform

understanding, shared by Congress, the United States Copyright Office, the recording industry,

and broadcasters alike, as to its historic absence under state law, whether in New York or

elsewhere. The Court may consider such legislative history on a motion to dismiss for failure to

state a claim. See, e.g., In re DoubleClick Inc. Privacy Litig., 154 F. Supp. 2d 497 (S.D.N.Y.

2001); Schuloff v. Queens Coll. Found., Inc., 994 F. Supp. 425 (E.D.N.Y. 1998), aff’d, 165 F.3d

183 (2d Cir. 1999); Parker v. Time Warner Entm't Co., 98 CV 4265 (ERK), 1999 WL 1132463

(E.D.N.Y. Nov. 8, 1999).

As introduced above, the words “sound recording” appeared for the first time in the

Copyright Act in 1971, when Congress granted a new copyright for sound recordings previously

left unprotected under federal law. This new grant of rights was limited: Federal copyright

protection was afforded only to recordings created on or after February 15, 1972, and the scope


9

of that protection was circumscribed and much narrower than that already afforded to musical

compositions. See Sound Recording Act §§ 1, 3; 17 U.S.C. § 106(4)-(5) (public performance

and display rights for musical compositions). The limitations on the scope of the right were

intentional. The stated goal of the Sound Recording Act was to address the problem of rampant

record piracy, which had “rapid[ly] increase[d]” in preceding years due to technological

advances. 117 Cong. Rec. 2002 (Feb. 8, 1971); see also H.R. Rep. No. 92-487, at 2 (1971)

(explaining that the Act was intended to combat the problem of “record pirates” and the

“widespread unauthorized reproduction of phonograph records and tapes”); S. Rep. No. 92-72, at

1 (1971) (the Act’s purpose was “protecting against unauthorized duplication and piracy of

sound recordings”); S. Rep. No. 92-72, at 7 (1971) (“Neither the present Federal copyright

statute nor the common law or statutes of the various States are adequate [to combat record

piracy].”). In furtherance of those goals, owners of qualifying sound recordings were granted

exclusive rights of reproduction and commercial distribution of their works. See 17 U.S.C. §

106(1), (3).

At the same time, however, Congress determined not to extend to owners of sound

recordings the right to prevent others from publicly performing those recordings without license

authority. See Sound Recording Act §§ 1(a), 3; 17 U.S.C. § 114(a) (stating that sound recording

rights “do not include any right of performance under section 106(4)”); see also H.R. Rep. No.

92-487, at 14 (1971) (“[T]he exclusive right accorded by this bill does not extend to the

reproduction of the sounds themselves, as, for example, by playing a sound recording over the

radio.”). The record industry’s advocacy for a performance right was viewed by Congress as an

unnecessary augmentation of the rights needed to accomplish the main goal of the legislation.

See H.R. Rep. No. 104-274, at 11 (1995) (explaining that sound recordings “were not granted the


10

rights of public performance, on the presumption that the granted rights would suffice to protect

against record piracy”).

The denial of a federal performance right comported with the uniform understanding that,

unlike for the rights of reproduction and distribution, where a patchwork of state laws had

existed to address record piracy, there was no existing protection for public performance of

sound recordings at the state level. Indeed, it was clearly recognized that the prospect of creating

a performance right for the first time would have been so novel, and so vehemently opposed by

broadcasters (which for the first time ever would have become subject to licensing and

performance royalty obligations in respect of sound recordings) that legislation embodying that

right could not have passed. As early as the 1930s, during congressional hearings on one such

piece of proposed legislation, record producers acknowledged that “the law up to date has not

granted” protection against radio stations’ “indiscriminate use of phonograph records.” Revision

of Copyright Laws: Hearings Before the Comm. on Patents, 74th Cong., 2d Sess. 622 (Comm.

Print 1936). This lament was repeated during 1947 hearings on similar bills, with record

industry representatives noting that “use of records . . . has become standard practice with

hundreds of radio stations,” concerning which the performing artist “has no rights at all beyond

an original agreement with the manufacturer.” Authorizing A Composer’s Royalty in Revenues

from Coin-operated Machines and to Establish a Right of Copyright in Artistic Interpretations:

Hearings Before Subcomm. on Patents, Trade-marks, and Copyrights of the Comm. on the

Judiciary on H.R. 1269, H.R. 1207, and H.R. 2570, 80th Cong., 1st Sess. 6 (Comm. Print 1947).

Similarly, during 1961 and 1962, performing artists complained to Congress as to the absence of

royalties “from repeated use” of “[p]laying [records] on radios.” Economic Conditions in the


11

Performing Arts: Hearings Before the Select Subcomm. on Ed. of the Comm. on Ed. and Labor,

87th Cong., 1st & 2d Sess. 64-65 (Comm. Print 1962).

The Register of Copyrights observed in a 1965 report to Congress that the proposed

addition of a public performance right for sound recordings was “explosively controversial” and

noted the heavy opposition from music users. Supplementary Register’s Report on the General

Revision of the U.S. Copyright Law, 89th Cong., 1st Sess. 51 (Comm. Print 1965). A decade

later, the Register reported to Congress that a sound recording performance right had yet again

been removed from the proposed general revision of federal copyright law because of the

concern that it would “impose severe financial burdens on broadcasters.” Second Supplementary

Register’s Report on the General Revision of the U.S. Copyright Law, 218-21 (1975).

Similar recognition of the absence of a sound recording public performance right under

state law was expressed during the enactment of the Digital Performance Rights in Sound

Recordings Act of 1995. Pub. L. No. 104-39 § 3(3), 109 Stat. 336 (creating limited right in

“digital audio transmissions” of sound recordings at 17 U.S.C. § 106(6)). In the lead-up to the

legislation, the Recording Industry Association of America (“RIAA”) acknowledged that,

“[u]nder existing law, record companies and performers . . . have no rights to authorize or be

compensated for the broadcast or other public performance of their works.” Testimony of Jason

S. Berman Chairman and CEO of RIAA Before the Judiciary Subcomm. on Counts & Intellectual

Property: Hearing on H.R. 1506, (June 21, 1995) 1995 WL 371088 (Westlaw) (emphasis

added). For its part, the broadcast industry’s major trade association, the National Association of

Broadcasters, testified that “public performance rights” in sound recordings are “essentially alien

to ways we have conducted our business for over 60 years” and that their imposition “would be

enormously disruptive and harmful.” Testimony of the NAB Before the House Judiciary Comm.


12

Subcomm. on Courts & Intellectual Property on H.R. 1506, § C (June 21, 1995), 1995 WL

371107 (Westlaw). The American Society of Composers, Authors and Publishers (“ASCAP”)

echoed this recognition, testifying that “established user industries” such as broadcasters “have

fully developed in an economic context which does not call for payment for performing rights in

sound recordings [and] should not incur payments for those rights now.” Statement on S. 227 of

ASCAP, § II(C) (Mar. 9, 1995), 1995 WL 552160 (Westlaw) (emphasis added). The Senate co-

sponsors of the legislation were in accord. See 141 Cong. Rec. S945-02 at S949 (Jan. 13, 1995)

(statement of Sen. Feinstein) (noting that performers and record companies still “ha[d] no legal

right to control or to receive compensation for [a] public performance of their work[s]”); id. at

S947 (statement of Sen. Hatch).

B. New York’s Cause of Action for Common Law Copyright Infringement Does Not Cover Public Performances of Sound Recordings

There is not now, and there never has been, any public performance right for sound

recordings under New York law. No New York court has ever held that unlicensed public

performances of Pre-1972 Recordings constitute copyright infringement. Nothing in the history

or controlling body of New York law in any way cuts against the common understanding that no

such performance right exists. To the contrary, the only common law copyright claims upheld

by New York courts have involved defendants—most often record pirates or digital file-sharing

sites trafficking in pirated song files and, at least, competitors for sale of records—which made

and distributed copies of sound recordings owned or licensed by the plaintiffs. See, e.g., Capitol

Records, Inc. v. Mercury Records Corp., 221 F.2d 657 (2d Cir. 1955); Arista Records LLC v.

Lime Grp. LLC, 784 F. Supp. 2d 398 (S.D.N.Y. 2011); Capitol Records, Inc. v. Greatest

Records, Inc., 252 N.Y.S.2d 553 (Sup. Ct. 1964).


13

New York’s tort of copyright infringement is thus directed at unauthorized reproduction

and not at public performance. This recognition is confirmed by the New York Court of

Appeals’ 2005 opinion in Naxos, a case involving a record company defendant which restored

and sold copies of certain recordings made in the 1930s. Capitol Records sued Naxos in federal

court claiming that Capitol alone owned the exclusive rights to make and distribute the

recordings in New York and elsewhere in the U.S. The Second Circuit certified several

questions to the New York Court of Appeals, including whether “a cause of action for common

law copyright infringement include[s] some or all of the elements of unfair competition?” 4

N.Y.3d at 546, 830 N.E.2d at 254. To answer the questions, the Court of Appeals first engaged

in a comprehensive and scholarly analysis of Anglo-American copyright history dating to the

15th century, culminating in an exhaustive review of the protections afforded to sound

recordings in New York over the past 100 years. 4 N.Y.3d at 546-62, 830 N.E.2d at 254-65.

The court also examined New York sound recording cases asserting claims of unfair competition

rather than common law copyright (which was commonly understood to expire upon publication

and was thus not typically available as a cause of action for sound recordings sold to the public).

See, e.g., Metro. Opera Ass’n v Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483, 492 (Sup.

Ct. 1950), aff’d, 107 N.Y.S.2d 795 (App. Div. 1951) (per curiam) (finding that defendants who

made and sold recordings of Met performances engaged in “piratical conduct” that injured the

Opera’s own sale of records). The court held that a claim for common law copyright

infringement under New York law contains the following elements: “(1) the existence of a valid

copyright; and (2) unauthorized reproduction of the work protected by copyright.” 4 N.Y.3d at

550, 563, 830 N.E.2d at 257, 266 (emphasis added) (citing, inter alia, New York’s original


14

copyright statute, L. 1786, Ch. 54, which had protected the right to “print” and “publish” books).

The court made no mention of a right of public performance.

Thus, as defined by the New York Court of Appeals following its review of hundreds of

years of history, a New York common law copyright claim does not reach unlicensed public

performances of Plaintiff’s Pre-1972 Recordings. Although Plaintiff’s Complaint begins with

the bald assertion that New York “common law” protects its recordings from unauthorized

“performance,” Plaintiff acknowledges just one sentence later that a common law copyright

infringement claim in New York consists of the two elements identified in Naxos: “(1) the

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

copyright.” Compl. ¶ 1 (emphasis added). The conclusion is inescapable: to the extent

Plaintiff’s common law copyright claim is predicated on Sirius XM’s public performances of its

recordings in New York, it should be dismissed.

C. Plaintiff Does Not State a Claim for Unfair Competition By Alleging That Sirius XM Publicly Performs Its Sound Recordings Without Permission

Plaintiff’s unfair competition claim, to the extent directed at Sirius XM’s broadcasts, fails

to state a claim upon which relief may be granted for at least three reasons. First, New York’s

tort of unfair competition does not prohibit the unauthorized public performance of a sound

recording. Second, Plaintiff does not allege the requisite competition in the marketplace between

itself and Sirius XM or any other marketplace activity that could give rise to such a claim. Third,

Plaintiff does not allege any competitive injury, as required to state a claim for unfair

competition under New York law.

1. New York’s Cause of Action for Unfair Competition Does Not Cover Public Performances of Sound Recordings

The New York Court of Appeals made clear in Naxos that a claim under New York law

for unfair competition with the owner of a sound recording requires “unauthorized copying and


15

distribution” of a plaintiff’s work, as well as “competition in the marketplace or similar actions

designed for commercial benefit … or deception of the public.” Naxos, 4 N.Y.3d at 563-64, 830

N.E.2d at 266 (citations omitted); see also Compl. ¶ 1 (acknowledging that unauthorized

reproduction is an element of a claim for unfair competition under New York law). Consistent

with this holding, the cause of action has been applied in the context of record piracy or its

digital file-sharing equivalent. See, e.g., Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d

at 437; Apple Corps Ltd. v. The Adirondack Grp., 476 N.Y.S.2d 716, 719 (Sup. Ct. 1983);

Capitol Records v. Greatest Records, 252 N.Y.S.2d 553; Metro. Opera Ass’n, 101 N.Y.S.2d 483.

No New York case has ever found the unlicensed public performance of sound recordings to be

unfair competition. To the extent that Plaintiff’s claim for unfair competition is based on public

performance, rather than unauthorized reproduction, see Compl. ¶¶ 1, 2, 16(C), it should be

dismissed.

2. Plaintiff Has Failed To Plead Competition Between It and Sirius XM as Needed To State a Common Law Unfair Competition Claim

The New York Court of Appeals has made clear that a claim for unfair competition under

New York law requires “competition in the marketplace or similar actions designed for

commercial benefit … or deception of the public.” Naxos, 4 N.Y.3d at 563-64, 830 N.E.2d at

266 (citations omitted). This requirement was recently discussed at length in Yantha v. Omni

Childhood Ctr., Inc., 13-CV-1948 ARR JMA, 2013 WL 5327516 (E.D.N.Y. Sept. 20, 2013).

There, the district court dismissed the plaintiff’s unfair competition claim for failing to

adequately allege competition between the parties, explaining that unfair competition does not

simply mean that the defendant benefits by getting something without paying, but that it does so

to gain an unfair competitive advantage over the plaintiff. Id. at *7 (noting lack of allegation of

defendant “obtaining business that should rightfully be plaintiff’s or in any other way usurping


16

her commercial advantage”); see also ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467, 478-79, 880

N.E.2d 852, 859 (2007) (“[M]isappropriation theory . . . prohibits a defendant from using a

plaintiff’s property right or commercial advantage . . . to compete unfairly against the plaintiff in

New York.” (emphasis added)); Roy Export Co. v. Columbia Broad. Sys., Inc., 672 F.2d 1095,

1105 (2d Cir. 1982) (“An unfair competition claim involving misappropriation usually concerns

the taking and use of the plaintiff’s property to compete against the plaintiff’s own use of the

same property.” (emphasis added)).

Plaintiff’s allegations on this element of the claim do not come close to satisfying the

pleading standards established by the Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009).

There, the Supreme Court explained:

[T]he pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.”

Id. at 678-79 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-57 (2007)). Thus,

“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory

statements,” are insufficient and courts “‘are not bound to accept as true a legal conclusion

couched as a factual allegation.’” Id. at 678 (quoting Twombly, 550 U.S. at 555). The

Complaint contains only the conclusory statement that Sirius XM “unfairly and directly

compet[es]” with Plaintiff and other members of the putative class, Compl. ¶ 30, without a single

factual allegation to support this “threadbare recital of the elements of [the] cause of action.” Id.

The Complaint does not, for example, allege that Sirius XM competes with the Plaintiff as a

creator, seller, or licensor of sound recordings, nor does it allege that Plaintiff offers a satellite

radio broadcast service (or any other broadcast service) in competition with Sirius XM. The


17

Complaint is devoid of even any allegations that Plaintiff has ever licensed a competitor of Sirius

XM to make public performances of Pre-1972 Recordings, or that Sirius XM has paid another

record company (that is, one of Plaintiff’s competitors) for the right to publicly perform its Pre-

1972 Recordings. Although each of the 100 works at issue was recorded more than 40 years

ago, Plaintiff does not point to a single broadcaster, webcaster, bar, restaurant, retail

establishment or other third party that has ever taken a license from it for the right to perform any

of its “numerous iconic hits.” These shortcomings are fatal to the pleading. See, e.g., Edelman

v. Starwood Capital Grp., LLC, No. 0601077, 2008 WL 2713489 (Sup. Ct. June 27, 2008)

(granting motion to dismiss because unfair competition “requires competition in the

marketplace”); Zinter Handling, Inc. v. Gen. Elec. Co., 956 N.Y.S.2d 626, 630 n.6 (App. Div.

2012) (dismissing claim because “Plaintiff failed to plead . . . that it was in competition with GE

for commercial benefit” (citing Edelman v. Starwood Capital Grp., LLC, 892 N.Y.S.2d 37, 39

(App. Div. 2009)).

Plaintiff fares no better by alleging that Sirius XM’s “unauthorized use of the Pre-1972

Recordings is likely to cause confusion, mistake or deception as to the source, sponsorship,

affiliation or connection between Plaintiff and the other Class Members, and Defendants.”

Compl. ¶ 31. As Iqbal makes clear, a court is “not bound to accept as true a legal conclusion

couched as a factual allegation.” 556 U.S. at 678. Plaintiff does not allege any facts to support

the legal conclusion concerning confusion it hopes this Court will reach. Plaintiff does not allege

a single instance of actual confusion, even though it alleges that Sirius XM has been playing its

sound recordings “every hour of every day.” Compl. ¶ 2. Moreover, there is no factual

allegation that even attempts to explain how anything Sirius XM does might cause confusion or

deception as to an affiliation between Sirius XM and Plaintiff and the owners of other Pre-1972


18

Recordings broadcast on the Sirius XM service. The Complaint simply gives no basis on which

this Court could credit Plaintiff’s naked assertion about a purported likelihood of confusion as to

source, sponsorship or affiliation.

Plaintiff’s unfair competition claim with respect to Sirius XM’s performances boils down

to a claim that Sirius XM is broadcasting its sound recordings without paying for them. But this

contention is insufficient to state a claim for unfair competition under New York law.

3. Plaintiff Has Failed To Plead a Competitive Injury Adequate To Support a Common Law Unfair Competition Claim

Plaintiff’s Complaint also fails to “allege a commercial or competitive injury cognizable

under New York law.” Yantha, 2013 WL 5327516, at *6 (granting motion to dismiss). This

deficiency is also fatal. In Yantha, the court probed at length the requirement to plead

“competitive injury”:

The complaint is deficient . . . in stating a competitive injury as a result of any unfair competition by defendants. Although the law of unfair competition has been broadly construed to provide protection from any form of commercial immorality, the tort is not all-encompassing. Not every act, even if taken in bad faith, constitutes unfair competition. Instead, to state a claim for unfair competition, a plaintiff must allege either 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. . . . Plaintiff . . . cannot claim that she lost profits to which she was entitled, or that defendants diverted her business, or that defendants otherwise deprived her of proceeds she would have been able to reap but for defendants’ unfair competition. Consequently, plaintiff cannot allege a direct competitive injury.

Id. at *7 (internal quotation marks and citations omitted).

Similarly, in Agee v. Paramount Commc’ns, Inc., 59 F.3d 317 (2d Cir. 1995), the

defendants, a television network and the local stations through which it distributed programming,

synchronized portions of sound recordings to video without a license to create a feature for the

Hard Copy program. The plaintiff, who owned the copyrights in the sound recordings, alleged

unfair competition under New York law. The court dismissed the unfair competition claim as


19

“baseless” because the plaintiff “failed to plead facts indicating that his record sales or licensing

revenues have in any way been affected by Paramount’s use of the recording.” Id. at 327.

Consequently, “[t]here is no reasonable ground for believing that [plaintiff] has suffered

economic losses as a result of appellees’ actions, or that consumers think less of the recording.”

Id.

The Complaint here fails for similar reasons. Plaintiff alleges that Sirius XM has

“impaired [its] ability to sell, lawfully exploit, or otherwise control [its] Pre-1972 Recordings,”

Compl. ¶¶ 4, 25, and done “enormous and irreparable harm,” id. ¶ 4. The Complaint also alleges

that Plaintiff and other putative class members have been “damaged” in an amount exceeding

$100 million, id. ¶¶ 26, 33, and suffered “great and irreparable injury,” id. ¶¶ 28, 35. But these

conclusory and unsupported allegations fail to describe any actual financial losses or lost

dealings Plaintiff has suffered due to Sirius XM’s broadcasting of the Pre-1972 Recordings. Just

as in Agee, Plaintiff has “failed to plead facts indicating that [its] record sales or licensing

revenues have in any way been affected by [Sirius XM’s] use of the recordings – or that Plaintiff

“has suffered economic losses . . . or that consumers think less of the recording[s].” 59 F.3d at

327. And just like the plaintiff in Yantha, Flo & Eddie cannot claim that Sirius XM has

“diverted [its] business” or “otherwise deprived [it] of proceeds [it] would have been able to reap

but for defendants’ unfair competition.” 2013 WL 5327516, at *7. Again, Plaintiff’s claimed

injury is merely that Sirius XM (like every other broadcaster) does not pay license fees to

perform Plaintiff’s recordings. This is not legally cognizable injury under New York unfair

competition law. There were no “proceeds” the company failed to “reap” on account of Sirius

XM’s activities; “but for” Sirius XM’s unlicensed use, Flo & Eddie would have been in the exact

same position they find themselves now.


20

CONCLUSION

For the foregoing reasons, the Complaint should be dismissed with prejudice to the extent

its claims are premised on a common law public performance right for Pre-1972 Recordings

under New York law.

Dated: New York, New York Respectfully submitted, October 28, 2013

By: __/s/ R. Bruce Rich________________ R. Bruce Rich Benjamin E. Marks Todd Larson WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 [email protected] [email protected] [email protected] and Michael S. Oberman KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York 10036 Tel: (212) 715-9294 Fax: (212) 715-8294 [email protected] Attorneys for Defendant Sirius XM Radio Inc.




Plaintiff,


Defendants.


NOTICE OF SIRIUS XM’S PARTIAL MOTION TO DISMISS PLAINTIFF’S COMPLAINT

PLEASE TAKE NOTICE that Defendant Sirius XM Radio Inc. (“Sirius XM”) hereby

moves this Court, before the Honorable Colleen McMahon, United States District Judge, United

States District Court for the Southern District of New York, Daniel Patrick Moynihan United

States Courthouse, 500 Pearl Street, Room 14C, New York, New York, for an order pursuant to

Rule 12(b)(6) of the Federal Rules of Civil Procedure to partially dismiss Plaintiff Flo & Eddie,

Inc.’s Complaint with prejudice. In support of this motion, Sirius XM relies upon and expressly

adopts and incorporates by reference the contemporaneously filed Memorandum of Law in

Support of Sirius XM’s Partial Motion to Dismiss Plaintiff’s Complaint.


2

Dated: New York, New York October 28, 2013

By: /s/ R. Bruce Rich

R. Bruce Rich Benjamin E. Marks Todd Larson WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 [email protected] [email protected] [email protected]

and

Michael S. Oberman KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York 10036 Tel: (212) 715-9294 Fax: (212) 715-8294 [email protected]

Attorneys for Defendant Sirius XM Radio Inc.

TO: Henry Gradstein MaryAnn R. Marzano Robert E. Allen GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, CA 90048 Tel: (323) 776-3100 Fax: (323) 931-4990 and Evan S. Cohen 1800 South Beverly Drive, Suite 510 Los Angeles, CA 90035 Tel: (310) 556-9800


3

Fax: (310) 556-9801 and Kathryn L. Crawford Rajika L. Shah Kristen L. Nelson SCHWARCZ, RIMBERG, BOYD & RADER, LLP 6310 San Vicente Blvd., Suite 360 Los Angeles, CA 90048 Tel: (323) 302-9488 Fax: (323) 931-4990 Attorneys for Plaintiff Flo & Eddie, Inc.


1

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK FLO & EDDIE, INC., a California corporation, individually and on behalf of all others similarly situated,

Plaintiff, v. SIRIUS XM RADIO, INC., a Delaware corporation; and DOES 1 through 10,

Defendants.

Civil Action No.: 13-CV-5784(CM)(HP)

PLAINTIFF’S OPPOSITION TO DEFENDANT SIRIUS XM RADIO, INC.’S PARTIAL MOTION TO DISMISS PLAINTIFF’S COMPLAINT

Pending before the Court is the motion of defendant SIRIUS XM Radio, Inc.

(“Defendant”), made pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss partially Plaintiff FLO &

EDDIE, INC.’s (“Plaintiff” or “Flo & Eddie”) Complaint of August 16, 2013. Plaintiff shall be

filing an amended complaint as of right pursuant to Fed. R. Civ. P. 15(a)(1)(B).1 The filing of

the amended complaint supercedes the original and renders it a nullity. Dluhos v. Floating &

Abandoned Vessel, 162 F.3d 63, 68 (2d Cir. 1998) (“[I]t is well established that an amended

complaint ordinarily supersedes the original, and renders it of no legal effect.") (citations

omitted). Castro v. Covenant Aviation Sec., LLC, 2013 U.S. Dist. LEXIS 102972, at *2 n.2

(S.D.N.Y. July 22, 2013) (Amended Complaint superseded the original and "render[ed] it of no

legal effect”); Gonzalez v. Paine, Webber, Jackson & Curtis, Inc., 493 F. Supp. 499, 501

(S.D.N.Y. 1980) (“Since the original complaint has been superseded by the amended complaint,

the motion to dismiss the original complaint has been rendered moot”). As a necessary

consequence, Defendant’s Partial Motion to Dismiss Plaintiff’s Complaint shall be moot and

must be denied upon Plaintiff’s filing of the first amended complaint pursuant to Fed. R. Civ. P.

1 Rule 15(a)(1) was amended in 2009 to allow a plaintiff to amend its complaint “as a

matter of course” within 21 days of the service of a motion under Fed. R. Civ. P. 12(b), (e) or (f).

Plaintiff intends to file its first amended complaint tomorrow, November 13, 2013, well within

the 21-day period for amending its complaint as a matter of course after service of Defendant’s

motion on October 28, 2013.


2

15(a)(1)(B).

CONCLUSION

For the foregoing reasons, Plaintiff respectfully request that the Court deny Defendant’s

partial motion to dismiss Plaintiff’s Complaint as moot.

DATED: November 12, 2013

By: /S/ Robert E. Allen HENRY GRADSTEIN (pro hac vice)

[email protected] MARYANN R. MARZANO (pro hac vice) [email protected] ROBERT E. ALLEN (pro hac vice) [email protected] GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 T: 323-776-3100 F: 323-931-4990 and EVAN S. COHEN (pro hac vice pending) [email protected] 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 T: 310-556-9800 F: 310-556-9801 and KATHRYN L. CRAWFORD (KC5593) [email protected] RAJIKA L. SHAH (pro hac vice) [email protected] KRISTEN L. NELSON (pro hac vice) [email protected] SCHWARCZ, RIMBERG, BOYD & RADER, LLP 6310 San Vicente Blvd., Suite 360 Los Angeles, California 90048 T: 323-302-9488 F: 323-931-4990 Attorneys for Plaintiff FLO & EDDIE, INC.









HENRY GRADSTEIN (pro hac vice) [email protected] MARYANN R. MARZANO (pro hac vice) [email protected] ROBERT E. ALLEN (pro hac vice [email protected] GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 T: 323-776-3100 F: 323-931-4990 and EVAN S. COHEN (pro hac vice pending) [email protected] 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 T: 310-556-9800 F: 310-556-9801 and KATHRYN L. CRAWFORD (KC5593) [email protected] RAJIKA L. SHAH (pro hac vice) [email protected] KRISTEN L. NELSON (pro hac vice) [email protected] SCHWARCZ, RIMBERG, BOYD & RADER, LLP 6310 San Vicente Blvd., Suite 360 Los Angeles, California 90048 T: 323-302-9488 F: 323-931-4990 Attorneys for Plaintiff FLO & EDDIE, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK FLO & EDDIE, INC., a California corporation, individually and on behalf of all others similarly situated,


Defendants.

Civil Action No.: 13-CIV-5784(CM)(HP)

FIRST AMENDED CLASS ACTION COMPLAINT [DEMAND FOR JURY TRIAL]


1

Plaintiff FLO & EDDIE, INC. (“Plaintiff” or “Flo & Eddie”) files this first amended class

action complaint (the “Complaint”) pursuant to Fed. R. Civ. P. 15(a)(1)(B) on behalf of itself and

on behalf of all other similarly situated owners of sound recordings of musical performances that

initially were “fixed” (i.e., recorded) prior to February 15, 1972 (the “Pre-1972 Recordings”)

against Defendants SIRIUS XM RADIO, INC. (“Defendant” or “SiriusXM”) and DOES 1-10,

and alleges as follows:


1. New York common law provides protection for Pre-1972 Recordings from

unauthorized reproduction, performance, distribution or other exploitation, and provides the

owners of Pre-1972 Recordings the right to bring a claim for common law copyright

infringement and a separate claim for unfair competition against parties who engage in such

unauthorized actions. A common law copyright infringement claim in New York consists of two

elements: (1) the existence of a valid copyright; and (2) unauthorized use, reproduction or other

exploitation of the work protected by the copyright. In addition to these two elements, a claim

for unfair competition in New York requires competition in the marketplace or similar actions

designed for commercial benefit or deception of the public.



“Happy Together,” “It Ain’t Me Babe,” “She’d Rather Be With Me,” “You Baby,” “She’s My

Girl,” “Elenore,” and many others. Since approximately 1971, Flo & Eddie has owned the entire


February 15, 1972, and which have been and remain popular and valuable, notwithstanding

changes in how recordings are made, distributed and performed. Plaintiff’s Pre-1972 Recordings

are the product of a significant investment of time, effort, money and creative talent in creating,

manufacturing, advertising, promoting, selling, and licensing its recordings. In return, Plaintiff

receives revenues, royalties and other compensation from its ongoing licensing and exploitation

of these works.


2

3. Plaintiff receives payments for, among other uses, the distribution, reproduction

and digital public performance of its Pre-72 Recordings, including by offering for sale (directly

or though licenses) compact discs and digital music files for download, by licensing them to

digital services (including for digital streaming to the public), and licensing them for use in

motion pictures, television programs and commercials. The payments that Plaintiff receives are

a main source of revenue used to pay Plaintiff’s ongoing investment and expenses, and to

compensate its principals, employees and representatives for their talent and work in creating the

Pre-72 Recordings and for administering and collecting revenue generated by such works.

4. Digital music streaming is becoming integral to the dissemination of music. As

technology changes and greater numbers of people listen to music via digital transmissions in

lieu of purchasing music on CDs or digital music files, Plaintiff relies increasingly on revenues

from the digital public performance of music, including Pre-72 Recordings. It is extremely

important to Plaintiff’s business that those who make a commercial use of Plaintiff’s Pre-72

Recordings obtain licenses and pay Plaintiff for their use of Pre-72 Recordings.

5. Defendant SiriusXM is the sole provider of satellite radio service in the United

States, known as “Sirius Satellite Radio,” “XM Satellite Radio” and “SiriusXM Satellite Radio”

(individually and collectively, the “Service”). SiriusXM uses satellite technology to transmit the

Service to its subscribers. SiriusXM’s channels are beamed from the ground to satellites, which

then transmit digital audio files to SiriusXM receivers possessed by its subscribers. Over the

past few years, SiriusXM has expanded into Internet-based digital streaming transmissions,

increasing the number of its subscribers to over 25 million and earning billions of dollars in

revenue.

6. The Service is distributed in New York to its subscribers through (a) satellite digital

transmission directly to subscribers via digital radios manufactured or licensed by SiriusXM; (b)

satellite digital transmission to subscribers of other services, such as DIRECTV Satellite

Television Service and Dish Network Satellite Television Service via digital set top boxes

manufactured or licensed by DIRECTV or Dish; and (c) the Internet, by way of (i) digital media


3

streaming devices, such as Roku, digital radios and home audio systems, such as Sonos; (ii) its

website at www.SiriusXM.com; or (iii) computer, smart phone and other mobile applications for

various operating systems, including Apple iOS, Android, Windows, Blackberry and HP webOS.

As part of the Service, many subscribers in New York are also able to: (A) download the stream

of a selected channel on the Service, allowing later or multiple listenings of the sound recordings

previously streamed during the selected time period; (B) download particular sound recordings,

allowing later or multiple listenings of such sound recordings; (C) download particular programs

incorporating sound recordings as part of the Service’s “On Demand” feature, allowing later or

multiple listenings of such sound recordings; and (D) allow subscribers to pause, rewind and

replay sound recordings using the Service’s “Replay” feature or its “My SXM” feature.

7. SiriusXM sells the Service to subscribers for $14.49 per month for its “Select”

package and $17.99 per month for its “Premier” package. The “Select” package provides over

165 satellite radio channels to its subscribers, including around-the-clock “commercial-free

music, sports, talk, and entertainment.” Of the seven categories into which SiriusXM

characterizes its channels (for example, “Sports Talk/Play-by-Play,” “News & Issues,” and

“Comedy”), by far the largest category is “Commercial-Free Music,” which SiriusXM claims has

72 channels (The second-largest category, “Talk & Entertainment,” has only 22 channels.).

8. The significant value of Pre-72 Recordings to SiriusXM’s business and the

popularity of Pre-72 Recordings among its paying subscribers is evidenced by, among other

things, its advertising and promotion of the availability of Pre-72 Recordings on the Service. A

significant portion of SiriusXM’s channels feature classic recordings, including channels

exclusively devoted to continuous public performances of the most popular Pre-72 Recordings

by well-known recording artists.

9. SiriusXM uses Plaintiff’s Pre-72 Recordings by distributing, reproducing and then

publicly performing them to millions of SiriusXM subscribers. Additionally, SiriusXM has

copied Plaintiffs’ Pre-72 Recordings without Plaintiff’s consent. Plaintiff is informed and

believes, and on that basis alleges, that SiriusXM has done so, among other ways, by obtaining


4

Plaintiff’s recordings and copying them to its servers and to its satellites. SiriusXM then uses

those unauthorized copies of Plaintiff’s Pre-72 Recordings to transmit the performances

embodied thereon to its subscribers. Plaintiff is informed and believes, and on that basis alleges,

that in such way, SiriusXM has distributed, reproduced and publicly performed Plaintiff’s Pre-72

Recordings numerous times throughout the United States, including in the state and county of

New York.

10. SiriusXM has never been licensed or authorized to duplicate, distribute, reproduce

or publicly perform any of Plaintiff’s Pre-72 Recordings. Although a significant portion of

SiriusXM’s $3.4 billion in revenue earned in 2012 is attributable to Pre-72 Recordings, and

though SiriusXM capitalizes on its customers’ desire to listen to these recordings, SiriusXM

refuses to seek licenses from Plaintiff or pay to Plaintiff any royalties or other compensation.

Conversely, SiriusXM pays digital public performance royalties for the performance of post-

1972 sound recordings that are covered by the federal Copyright Act.

11. By its conduct, SiriusXM not only deprives Plaintiff of the revenues to which it and

others are entitled, but also places those streaming services that do obtain licenses from, account

to, and pay Plaintiff for the performance of Plaintiff’s Pre-72 Recordings in a competitive

disadvantage. SiriusXM’s refusal to pay for its continued use of Pre-72 Recordings directly

contravenes New York law and policy, which always have provided equal, if not greater, rights

to owners of sound recordings than the federal Copyright Act.

12. In 1972, Congress amended the United States Copyright Act to add for the first

time “sound recordings” to the list of works protected under federal copyright law. 17 U.S.C. §

102(a)(7) (2013). At the same time, Congress also preserved “any rights or remedies under the

common law or statutes of any State” with respect to sound recordings “fixed” before February

15, 1972. 17 U.S.C. § 301(c) (2013). As a result, pre-existing New York protection for Pre-72

Recordings was left untouched and subject to evolution and refinement by the courts. Congress

initially limited the federal sound recording copyright to include certain of the exclusive rights

conferred on other works – namely, the rights of reproduction, adaptation, and distribution – and


5

to exclude the right to publicly perform sound recordings. New York law has never delimited,

either explicitly or implicitly, the scope of common law protection of Pre-72 Recordings, and did

not exclude the right of public performance from the rights of owners in Pre-72 Recordings.

13. This broad protection afforded to Pre-72 Recordings is consistent with the

recognition by New York courts of critical, important public policy interests in providing strong

state law protection for sound recordings. These interests include ensuring that record

companies receive compensation from their substantial expenditure of effort, skill and money in

creating, marketing and exploiting recorded performances, as well as ensuring that the owners of

sound recordings possess adequate remedies against those who misappropriate and profit from

such performances. New York’s protections for sound recordings thus are complete, providing

exclusive ownership and rights in Pre-72 Recordings that are not limited in any way, and that

include any conduct by which individuals or entities seek to unfairly compete and profit from the

skill and labor of Plaintiff by appropriating and exploiting Pre-72 Recordings for their own

benefit, including by unauthorized and unlicensed reproduction and public performance of these

recordings.

14. The need for effective state law protection of Pre-72 Recordings is especially great

today. Pre-72 Recordings comprise a significant and important share of the overall body of

existing musical recordings, and include some of the most popular and valued recordings in

history. Many digital radio channels and services are dedicated entirely to the dissemination and

performance of Pre-72 Recordings, such as classic rock, jazz, R&B, and classical recordings.

The rise of digital media has made the threat to Pre-72 Recordings acute, as virtually anyone

with a computer and an Internet connection can copy and then distribute and perform high-

quality music instantaneously to millions. As digital technology has improved, the cost of digital

services has diminished, and, as a result music consumption habits have changed. Music

consumers increasingly obtain and enjoy music via online or satellite “radio” or digital streaming

services instead of purchasing CDs or digital music files.


6

15. To address the anticipated shift in music consumption habits and the rise of digital

radio services and, therefore, the need to provide federal protection for the performance of

copyrighted sound recordings, Congress passed the Digital Performance Rights in Sound

Recordings Act (“DPRA”), granting owners of post-72 copyrighted sound recordings the right to

“perform the copyrighted work publicly by means of a digital audio transmission.” 17 U.S.C.

§ 106(6) (2013).

16. New York’s protection for Pre-72 Recordings has never been less extensive than

federal copyright protection for post-72 recordings. New York had provided common law

protection for Pre-72 Recordings without any exclusions and including the right of public

performance. Those, like SiriusXM, who build their business and make money from the

copying, reproduction and public performance of Pre-72 Recordings must obtain the right under

New York law to use them and must compensate their owners.

17. Plaintiff Flo & Eddie brings this class action on its own behalf and on behalf of all

other similarly situated owners of Pre-1972 Recordings (the “Class” or “Class Members”) to put

an end to SiriusXM’s wholesale infringement and misappropriation of their Pre-1972 Recordings

and to obtain damages, including punitive damages, and injunctive relief. Simply stated,

SiriusXM has disregarded the Plaintiff’s and other Class Members’ exclusive ownership of their

Pre-1972 Recordings in New York, impaired their ability to sell, lawfully exploit, or otherwise

control their Pre-1972 Recordings as permitted under New York law and misappropriated same

for its own financial gain. SiriusXM’s conduct is causing, and will continue to cause, enormous

and irreparable harm to Plaintiff and the other Class Members unless compensatory and punitive

damages are awarded against SiriusXM and it is enjoined and restrained from engaging in further

infringement and misappropriation of the Pre-1972 Recordings.

THE PARTIES, JURISDICTION AND VENUE


California, with its principal place of business in Los Angeles, California. Plaintiff is engaged in

the business of distributing, selling, and/or licensing the reproduction, distribution, sale, and


7

performance of its Pre-1972 Recordings in phonorecords, in audiovisual works, and for

streaming (i.e., performing) and downloading over the Internet. Plaintiff invests substantial

money, time, effort, and creative talent in creating, advertising, promoting, selling, and licensing

its unique and valuable sound recordings.

19. Plaintiff possesses exclusive ownership rights in The Turtles Pre-1972 Recordings,

the titles of which are specified on the schedule attached hereto as Exhibit A and incorporated

herein by reference (“Plaintiff’s Recordings”). The United States Congress expressly has

recognized that the states provide exclusive protection through various state law doctrines to

recordings “fixed” before February 15, 1972, and that the federal Copyright Act does not

“annul[] or limit[]those rights until February 15, 2067.” 17 U.S.C. § 301(c). Accordingly, as

quoted above, New York law protects the exclusive ownership of Plaintiff and the other Class

Members to their Pre-1972 Recordings in New York.

20. Upon information and belief, Defendant SiriusXM is a corporation duly organized

and existing under the laws of Delaware, with its principal place of business in New York, New

York. The Court has personal jurisdiction over Defendant in that Defendant’s principal place of

business is in the County of New York, Defendant is engaged in tortious conduct in New York,

and Defendant’s conduct causes injury to Plaintiff and the other Class Members in New York.

21. This court has subject matter jurisdiction over the subject matter of this class action

pursuant to 28 U.S.C. § 1332(d). The amount in controversy exceeds Five Million Dollars

($5,000,000), there are more than one thousand (1,000) putative Class Members, and the

requisite minimal diversity of citizenship exists because Plaintiff and Defendant are citizens of

different States.

22. Venue of this action is proper in this jurisdiction under 28 U.S.C. § 1391(b) in that

Defendant maintains its principal offices in the County of New York.

23. The true names and capacities, whether individual, corporate, associate or

otherwise, of defendants named herein as Does 1 through 10, inclusive, are unknown to Plaintiff

who therefore sues said defendants by such fictitious names (the “Doe Defendants”). Plaintiff


8

will amend this Complaint to allege their true names and capacities when such have been

ascertained. Upon information and belief, each of the Doe Defendants herein is responsible in

some manner for the occurrences herein alleged, and Plaintiff’s injuries and those of the other

Class Members as herein alleged were proximately caused by such defendants’ acts or

omissions. (All of the Defendants, including the Doe Defendants, collectively are referred to as

“Defendants”).

CLASS ACTION ALLEGATIONS

24. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23 on behalf of itself and the other Class Members defined as the owners of Pre-1972

Recordings reproduced, performed, distributed or otherwise exploited by Defendants in New

York without a license or authorization to do so during the period from August 10, 2009 to the

present. Plaintiff reserves the right to modify this definition of the Class after further discovery;

the Court may also be requested to utilize and certify subclasses in the interests of

ascertainability, manageability, justice and/or judicial economy.


is a well-defined community of interest in the litigation and the Class Members are readily and

easily ascertainable and identifiable from Defendant SiriusXM’s database files and records.

Plaintiff is informed and believes, and on that basis alleges, that Defendants have engaged a third

party to supply the metadata, including the metadata relating to Pre-1972 Recordings unlawfully

streamed to subscribers in New York, and that such metadata contains the name and location of

the owners thereof. The Class members are further ascertainable through methods typical of

class action practice and procedure.

26. Plaintiff is informed and believes, and alleges thereon, that the Pre-1972

Recordings infringed and misappropriated in New York by Defendants number in the millions

and are owned by many thousands of Class Members. It is therefore impractical to join all of the

Class Members as named Plaintiffs. Further, the claims of the Class Members may range from


9

smaller sums to larger sums. Accordingly, using the class action mechanism is the most

economically feasible means of determining and adjudicating the merits of this litigation.

27. The claims of Plaintiff are typical of the claims of the Class Members, and

Plaintiff’s interests are consistent with and not antagonistic to those of the other Class Members

it seeks to represent. Plaintiff and the other Class Members have all been subject to infringement

and misappropriation of their Pre-1972 Recordings in New York, have sustained actual

pecuniary loss and face irreparable harm from Defendants’ continued infringement and

misappropriation of their Pre-1972 Recordings.

28. Plaintiff has no interests that are adverse to, or which conflict with, the interests of

the other Class Members and is ready and able to fairly and adequately represent and protect the

interests of the other Class Members. Plaintiff believes strongly in the protection of artists’

rights in connection with their creative work. Plaintiff has raised viable claims for infringement

and unfair competition of the type well established in New York and reasonably expected to be

raised by Class Members. Plaintiff will diligently pursue those claims. If necessary, Plaintiff

may seek leave of the Court to amend this Complaint to include additional class representatives

to represent the Class or additional claims as may be appropriate. Plaintiff is represented by

experienced, qualified and competent counsel who are committed to prosecuting this action.

29. Common questions of fact and law exist as to all Class Members that plainly

predominate over any questions affecting only individual Class Members. These common legal

and factual questions, which do not vary from Class Member to Class Member, and which may

be determined without reference to the individual circumstances of any Class Member include,

without limitation, the following:

(A) Whether Defendant SiriusXM reproduced, performed, distributed or

otherwise exploited Pre-1972 Recordings in New York;

(B) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in New York constitutes common law

copyright infringement under New York law;


10

(C) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in New York constitutes unfair competition in

violation of New York law;

(D) The basis on which restitution and/or damages to all injured members of

the Class can be computed;

(E) Whether Defendant SiriusXM’s violation of New York common law for

copyright infringement entitles the Class Members to recover punitive damages;

(F) Whether Defendant SiriusXM’s violation of New York common law for

copyright infringement is continuing, thereby entitling Class Members to injunctive or

other equitable relief;

(G) Whether Defendant SiriusXM’s violation of New York’s laws against

unfair competition entitles the Class Members to recover punitive damages; and

(H) Whether Defendant SiriusXM’s violation of New York’s laws against

unfair competition is continuing, thereby entitling Class Members to injunctive or other

relief.

30. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy, since individual litigation of the claims of all Class Members is

highly impractical. Even if every Class Member could afford to pursue individual litigation, the

Court system could not. It would be unduly burdensome to the courts in which individual

litigation of numerous cases would proceed. Individualized litigation would also present the

potential for varying, inconsistent or contradictory judgments and would magnify the delay and

expense to all parties and to the court system resulting from multiple trials of the same factual

issues. By contrast, maintenance of this action as a class action, with respect to some or all of

the issues presented herein, presents few management difficulties, conserves the resources of the

parties and of the court system, and protects the rights of each Class Member. Plaintiff

anticipates no difficulty in the management of this action as a class action.


11

31. Additionally, the prosecution of separate actions by individual Class Members may

create a risk of adjudications with respect to them that would, as a practical matter, be dispositive





32. Defendants have engaged in common law copyright infringement and unfair

competition, which has affected all of the Class Members such that final and injunctive relief on

behalf of the Class as a whole is efficient and appropriate.

FIRST CAUSE OF ACTION

(Common Law Copyright Infringement)


above, as though set forth in full herein.

34. The Pre-1972 Recordings are unique intellectual property subject to common law

copyright protection under the law of the State of New York.

35. As the owners of valid common law copyrights or exclusive licensees in and to the

Pre-1972 Recordings, Plaintiff and the other Class Members possess the exclusive rights to

reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings, and license, or

refrain from licensing, others to do so.

36. Plaintiff and the other Class Members have not authorized or licensed Defendants

to reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings in any manner.

37. The distribution, reproduction, performance or other exploitation by Defendants of

unauthorized copies of the Pre-1972 Recordings, including, without limitation, those listed in

Exhibit A, constitute infringement of Plaintiff and the Other Class Member’s common law

copyrights in such recordings and violation of their exclusive rights therein. The Plaintiff and

Class Members have invested substantial time and money in the development of their Pre-1972

Recordings.


12

38. The Defendants have infringed the copyrights to the Pre-1972 Recordings at little

or no cost and without license or authority. They have copied the Pre-1972 Recordings owned

by Plaintiff and the other Class Members, and distributed and publicly perform these recordings

in New York for their subscribers. Defendants have disregarded the Plaintiff’s and other Class

Members’ copyrights in and exclusive ownership of their Pre-1972 Recordings, impaired their

ability to sell, lawfully exploit, or otherwise control their Pre-1972 Recordings, all for their own

financial gain.

39. As a direct and proximate consequence of Defendants’ copyright infringement of

the Pre-1972 Recordings owned by Plaintiff and the Class Members, Plaintiff and the Class

Members have been damaged in an amount that is not as yet fully ascertained but which Plaintiff

is informed and believes, and alleges thereon, exceeds $100,000,000, according to proof.


conduct described above, the Defendants acted with oppression, fraud and/or malice. The

conduct of the Defendants has been despicable and undertaken in conscious disregard of the

Plaintiff’s and each Class Member’s rights. Accordingly, Plaintiff and the Class Members are

entitled to an award of punitive damages against Defendants in an amount sufficient to punish

and make an example of them according to proof.

41. Defendants’ conduct is causing, and unless enjoined and restrained by this Court,


fully be compensated or measured in money, and for which Plaintiff and each Class Member has

no adequate remedy at law. Plaintiff and the other Class Members are entitled to temporary,

preliminary and permanent injunctions, prohibiting further violation of Plaintiff’s and Class

Members’ rights in and exclusive ownership of their Pre-1972 Recordings in New York.

SECOND CAUSE OF ACTION

(Unfair Competition)


above, as though set forth herein.


13

43. Plaintiff’s Pre-1972 Recordings are valuable assets to Plaintiff. Plaintiff is engaged

in the selling and licensing of all forms of distribution, reproduction, performance or other

exploitation of their Pre-1972 Recordings, including, without limitation, by selling physical

compact discs and digital Phonorecord deliveries, licensing distribution and performances via

digital streaming transmission and licensing the master use in audio-visual recordings, such as

movies and commercials. From inception, such Pre-1972 Recordings have generated for

Plaintiff millions of dollars in revenues from such selling and licensing activities. Plaintiff’s

licensing the distribution of the Pre-1972 Recordings via digital streaming transmission has

increased significantly over the past several years, and now represent a significant portion of the

overall revenues received by Plaintiff.

44. Without a license or payment, SiriusXM copies, distributes, reproduces and

performs the Pre-1972 Recordings, and allows its subscribers to: (a) listen to Pre-1972

Recordings via satellite or online digital audio transmissions without purchasing or licensing

them; (b) replay, skip and remove (for such subscriber) sound recordings on certain channels

through its “Replay” feature and its “MySXM” feature; and (c) download Pre-1972 Recordings

to a subscriber’s device, including through its OnDemand feature.

45. Defendants have paid nothing to Plaintiff or the Other Class Members for

distributing, reproducing and performing the Pre-1972 Recordings. Without expending any time,

labor or money of its own, Defendants have simply appropriated the commercial qualities,

reputation and salable properties of the Pre-1972 Recordings, including, without limitation those

recordings listed on Exhibit A, by unfairly and directly competing with Plaintiff and the other

Class Members’ use, sale, distribution and exploitation of the Pre-1972 Recordings. In so doing,

Defendants have undermined Plaintiff and the other Class Members’ substantial creative and

financial investment for Defendants’ own commercial benefit.

46. Defendants have usurped for itself the fruits of Plaintiff and the other Class

Members’ financial and creative investments. Defendants are profiting from the results of

Plaintiff and the other Class Members’ expenditures and skill without having to incur any


14

expense or risk of its own in relation to the Pre-1972 Recordings. Furthermore, Defendants’

unauthorized use of the Pre-1972 Recordings is likely to cause confusion, mistake or deception

as to the source, sponsorship, affiliation or connection between Plaintiff and the other Class

Members, and Defendants.

47. Through its marketing, selling and licensing activities, Plaintiff is in the business of

exploiting its Pre-1972 Recordings for Plaintiff’s commercial gain. Through marketing and

operating the Service, Defendants are using and exploiting the Pre-1972 Recordings without

license or payment for Defendants’ financial gain and commercial advantage. Defendants’

copying, distribution, reproduction and performance of Pre-1972 Recordings through the Service

compete with Plaintiff in several ways. First, Defendants copying, distribution, reproduction and

performance of the Pre-1972 Recordings without a license and without payment place a

significant, unfair and anticompetitive downward pressure on the licensing fees Plaintiff is able

to charge other services in the marketplace who do license and pay for such rights from Plaintiff,

resulting in a direct financial loss to Plaintiff. Second, as digital transmissions are substituting

over time for sales of sound recordings, Defendants are diverting to themselves income Plaintiff

would have otherwise collected from sales of Plaintiff’s Pre-1972 Recordings, resulting in

Defendants’ obtaining business that rightfully belongs to Plaintiff, and lost dealings and lost

profits to Plaintiff from Defendants’ anticompetitive acts. Such actions by Defendants are

designed for their commercial benefit to the detriment of Plaintiff and the other Class Members.

As a result, Plaintiff has been harmed by lost license fees and lost sales.

48. Defendants’ acts constitute a misappropriation of Plaintiff and the other Class

Members’ property and rights in and to the Pre-1972 Recordings, and constitute

misappropriation and unfair competition under New York law.

49. As a direct and proximate result of Defendants’ misappropriation and unfair

competition, Plaintiff and the Class Members are entitled to recover all proceeds and other

compensation received or to be received by Defendants from their misappropriation and unfair

competition of the Pre-1972 Recordings. Plaintiff and the members of the Class have been


15

damaged, and Defendants have been unjustly enriched, in an amount that is not as yet fully

ascertained but which Plaintiff is informed and believes, and alleges thereon, exceeds

$100,000,000, according to proof at trial. Such damages and/or restitution and disgorgement

should include a declaration by this Court that Defendants are constructive trustees for the

benefit of Plaintiff and the other Class Members, and an order that Defendants convey to


Defendants misappropriation of the Pre-1972 Recordings.


conduct as described above, the Defendants acted with oppression, fraud and/or malice. The


Plaintiff’s rights. Accordingly, Plaintiff and the Class Members are entitled to an award of

punitive damages against Defendants, and each of them, in an amount sufficient to punish and



will continue to cause, Plaintiff and the Class Members great and irreparable injury that cannot

fully be compensated or measured in money. Plaintiff and the other Class Members are entitled

to temporary, preliminary and permanent injunctions, prohibiting further violation of Plaintiff’s

and the other Class Members right to exclusive ownership of their Pre-1972 Recordings and

further acts of unfair competition and misappropriation.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff, on behalf of itself and the other Class Members, prays for

Judgment against Defendants, and each of them, as follows:

Regarding the Class Action:

1. That this is a proper class action maintainable pursuant to the applicable provisions of the

Federal Rules of Civil Procedure; and

2. That the named Plaintiff is appropriate to be appointed representative of the respective

Class.


16

On The First Cause of Action For Common Law Copyright Infringement against all

Defendants:

1. For compensatory damages in excess of $100,000,000 according to proof at trial;

2. Punitive and exemplary damages according to proof trial; and

3. A temporary, preliminary, and permanent injunction enjoining and restraining

Defendants, and their respective agents, servants, directors, officers, principals,

employees, representatives, subsidiaries and affiliated companies, successors, assigns,

and those acting in concert with them or at their direction, from directly or indirectly

infringing the copyrights in the Pre-1972 Recordings in New York in any manner,

including without limitation by directly or indirectly copying, reproducing, downloading,

distributing, communicating to the public, uploading, linking to, transmitting, publicly

performing, or otherwise exploiting in any manner any of the Pre-1972 Recordings.

On The Second Cause of Action For Unfair Competition against all Defendants:

1. For compensatory damages in excess of $ 100,000,000 according to proof at trial;

2. Punitive and exemplary damages according to proof at trial;

3. Imposition of a constructive trust;

4. Restitution of Defendants’ unlawful proceeds, including Defendants’ gross profits; and





misappropriating in any manner the Pre-1972 Recordings, including without limitation by

directly or indirectly copying, reproducing, downloading, distributing, communicating to

the public, uploading, linking to, transmitting, publicly performing, or otherwise

exploiting in any manner any of the Pre-1972 Recordings.

On All Causes of Action:

1. For reasonable attorneys’ fees and costs as permitted by law;


17

2. For prejudgement interest at the legal rate; and

3. For such other and further relief as the Court deems just and proper.


By: _________________________________________ HENRY GRADSTEIN (pro hac vice application

pending) [email protected] MARYANN R. MARZANO (pro hac vice application pending) [email protected] ROBERT E. ALLEN (pro hac vice application pending) [email protected] GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 T: 323-776-3100 F: 323-931-4990 and EVAN S. COHEN (pro hac vice pending) [email protected] 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 T: 310-556-9800 F: 310-556-9801 and KATHRYN L. CRAWFORD (KC5593) [email protected] RAJIKA L. SHAH (pro hac vice application pending) [email protected] KRISTEN L. NELSON (pro hac vice application pending) [email protected] SCHWARCZ, RIMBERG, BOYD & RADER, LLP 6310 San Vicente Blvd., Suite 360 Los Angeles, California 90048 T: 323-302-9488 F: 323-931-4990 Attorneys for Plaintiff FLO & EDDIE, INC.


18


Pursuant to the Federal Rules of Civil Procedure, Rule 38(b), Plaintiff FLO & EDDIE, INC.

hereby demands a jury trial on all issues so triable.


By: __________/s/_____________________________ HENRY GRADSTEIN (pro hac vice)

[email protected] MARYANN R. MARZANO (pro hac vice) [email protected] ROBERT E. ALLEN (pro hac vice) [email protected] GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 T: 323-776-3100 F: 323-931-4990 and EVAN S. COHEN (pro hac vice pending) [email protected] 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 T: 310-556-9800 F: 310-556-9801 and KATHRYN L. CRAWFORD (KC5593) [email protected] RAJIKA L. SHAH (pro hac vice) [email protected] KRISTEN L. NELSON (pro hac vice) [email protected] SCHWARCZ, RIMBERG, BOYD & RADER, LLP 6310 San Vicente Blvd., Suite 360 Los Angeles, California 90048 T: 323-302-9488 F: 323-931-4990 Attorneys for Plaintiff FLO & EDDIE, INC.




Plaintiff,


Defendants.


DEFENDANT SIRIUS RADIO XM’S ANSWER TO THE FIRST AMENDED CLASS ACTION COMPLAINT

R. Bruce Rich Benjamin E. Marks Bruce S. Meyer John R. Gerba Todd Larson WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 [email protected] [email protected] [email protected] and Michael S. Oberman KRAMER LEVIN NAFTALIS & FRANKEL LLP 1177 Avenue of the Americas New York, New York 10036 Tel: (212) 715-9294 Fax: (212) 715-8294 [email protected] Attorneys for Defendant Sirius XM Radio Inc.


2

Defendant Sirius XM Radio Inc. (“Sirius XM” or “Defendant”), by its attorneys, Weil,

Gotshal & Manges LLP and Kramer Levin Naftalis & Frankel LLP, for its Answer to the First

Amended Class Action Complaint (the “First Amended Complaint”) of plaintiff Flo & Eddie,

Inc. (“Plaintiff”) states as follows:

INTRODUCTION


publicly performed widely ever since by myriad broadcast and other outlets, asks this Court to

radically transform the scope of protection accorded to sound recordings under New York law.

Plaintiff asks the Court to recognize an exclusive right of public performance under New York

law for sound recordings created before February 15, 1972, as well as an exclusive right to create

pre-broadcast server copies to facilitate such performances, in the absence of any authority

recognizing such a right. The result Plaintiff seeks would dramatically expand New York law

and unravel a century of contrary understandings between the music and broadcasting industries.

Worse, it would immediately turn each radio and television broadcaster, webcaster, nightclub,

retail establishment, fitness center, and the like that performs such recordings in New York into a

serial copyright infringer. Because no New York court has ever recognized the claim Plaintiff

seeks to plead, the First Amended Complaint fails to state a claim upon which relief may be

granted and should be dismissed in its entirety.

RESPONSES TO SPECIFIC ALLEGATIONS

1. The allegations contained in paragraph 1 of the First Amended Complaint call for

legal conclusions to which no responsive pleading is required. To the extent a response is



3


allegations of paragraph 2 of the First Amended Complaint.




allegations of paragraph 4 of the First Amended Complaint, except it admits that music users

have enjoyed music on CDs in digital format since at least the 1980s and have accessed music

via digital streaming since at least the mid-1990s.

5. Sirius XM denies the allegations of paragraph 5 of the First Amended Complaint,

except it admits that Sirius XM (a) has over 25 million subscribers to its satellite radio service;

(b) operates the sole national satellite radio service in the United States, which makes digital

audio transmissions via satellite technology; and (c) offers certain digital streaming services via

the Internet.


except it admits that Sirius XM’s nationwide broadcasts can be received in New York: (a) via

satellite radio by subscribers who receive the satellite broadcast on authorized Sirius XM

receivers; (b) via the Internet by subscribers who may receive the transmission on computers (at

www.siriusxm.com), smart phones and tablets (via the Sirius XM mobile applications), and/or

home audio devices/systems, such as Roku and Sonos; and (c) via satellite television channels on

Dish Network. Sirius XM further admits that its Internet radio product has features identified as

“MySXM” and “On Demand” and that certain devices capable of receiving the Sirius XM

satellite service offer a feature identified as “Replay.” Users of the “Replay” and “My SXM”


4

features are provided with limited pause, rewind and replay functionality depending upon the

device, channel and delivery method.


except it admits that Sirius XM (a) has a variety of packages it offers to subscribers at various

prices, including the “Premier” and “Select” packages; and (b) has approximately 70 channels

that are, at times, referred to as “Commercial-Free Music” channels, although the number of

such channels may vary across time and subscriber platform.


except it admits that Sirius XM’s service includes some channels that play sound recordings of

musical performances that initially were “fixed” (i.e., recorded) prior to February 15, 1972 (“Pre-

1972 Recordings”).


except it admits (a) that some Sirius XM servers located in New York state contain copies of

certain Pre-1972 Recordings, including certain recordings by the Turtles, to facilitate broadcasts

of those recordings; and (b) that recordings by the Turtles are among the thousands of recordings

transmitted as part of Sirius XM’s nationwide broadcasts, which are available to subscribers in

New York state.

10. Sirius XM denies the allegations of paragraph 10 of the First Amended

Complaint, except it admits that Sirius XM (a) pays royalties for digital audio transmissions of

sound recordings created on or after February 15, 1972 as required by federal copyright law; and

(b) does not pay royalties for performances of Pre-1972 Recordings because no such royalties are

required by law.


5

11. Sirius XM denies the allegations in the first sentence of paragraph 11 of the First

Amended Complaint. The allegations contained in the second sentence call for legal conclusions

to which no responsive pleading is required. To the extent a response is required, Sirius XM


12. The allegations contained in paragraph 12 of the First Amended Complaint call

for legal conclusions to which no responsive pleading is required. To the extent a response is






allegations of paragraph 14 of the First Amended Complaint, except that Sirius XM admits that

consumers enjoy music via satellite radio and Sirius XM Internet radio.


for legal conclusions to which no responsive pleading is required.






required, Sirius XM denies the allegations and, without limitation, expressly denies all

allegations of wrongdoing by Sirius XM.


6




allegations in the first sentence of paragraph 19 of the First Amended Complaint. The remaining

allegations of paragraph 19 of the First Amended Complaint call for legal conclusions to which

no responsive pleading is required. To the extent a response is required, Sirius XM denies the

allegations.

20. Sirius XM denies the allegations of paragraph 20 of the First Amended

Complaint, except it admits that Sirius XM is a Delaware corporation with its principal place of

business in New York City, and that this Court has personal jurisdiction over Sirius XM.


allegations in paragraph 21 of the First Amended Complaint, except it admits that this Court has

subject matter jurisdiction over the subject matter of this class action pursuant to 28 U.S.C. §

1332(d).


for legal conclusions to which no responsive pleading is required. Sirius XM admits, however,

that venue is proper in this District.

23. Sirius XM does not respond to paragraph 23 of the First Amended Complaint,

which contains no factual allegations about Sirius XM.

24. The allegations contained in paragraph 24 of the First Amended Complaint are

not factual in nature; they merely characterize the basis on which Plaintiff purports to bring this

action and purport to reserve certain rights to the Plaintiff. Accordingly, no responsive pleading

is required. To the extent a response is required, Sirius XM denies the allegations.


7












28. The allegations contained in the first sentence of paragraph 28 of the First

Amended Complaint call for legal conclusions to which no responsive pleading is required. To

the extent a response is required, Sirius XM denies knowledge or information sufficient to

respond to the allegations, as it does for the allegations in the second and last sentences of

paragraph 28. Sirius XM denies the allegations in the third sentence of paragraph 28, and does

not respond to the fourth and fifth sentences, which are not factual in nature.








8

required, Sirius XM denies the allegations. Sirius XM denies knowledge or information

sufficient to respond to the allegations in the last sentence of paragraph 30.








With Respect to the First Cause of Action

33. Sirius XM repeats and incorporates by reference its responses to paragraphs 1-32

of the First Amended Complaint.













9

the extent a response is required, Sirius XM denies the allegations and, without limitation,

expressly denies all allegations of wrongdoing by Sirius XM. Sirius XM denies knowledge or

information sufficient to respond to the allegations in the second sentence of paragraph 37 of the

First Amended Complaint.



the extent a response is required, Sirius XM denies the allegations and, without limitation,

expressly denies all allegations of wrongdoing by Sirius XM. Sirius XM denies the allegations

contained in the remaining sentences of paragraph 38 of the First Amended Complaint, except it

admits that (a) that some Sirius XM servers located in New York state contain copies made by

Sirius XM of certain Pre-1972 Recordings, including certain recordings by the Turtles, to

facilitate broadcasts of those recordings; and (b) that recordings by the Turtles and certain other

Pre-1972 Recordings are among the thousands of recordings transmitted as part of Sirius XM’s

nationwide broadcasts, which are available to subscribers in New York state.










10





With Respect to the Second Cause of Action


of the First Amended Complaint.



44. Sirius XM denies the allegations contained in paragraph 44 of the First Amended

Complaint, except admits that (a) some Sirius XM servers located in New York state contain

copies made by Sirius XM of certain Pre-1972 Recordings in order to facilitate broadcast of such

recordings; (b) certain Pre-1972 Recordings are among the thousands of recordings transmitted

as part of Sirius XM’s nationwide broadcasts and online digital audio transmissions, which are

available to subscribers in New York state; (c) users of the “Replay” and “My SXM” features are

provided with limited skip functionality depending upon the device, channel and delivery

method. Sirius XM further admits that its Internet radio product has features identified as


satellite service offer a feature identified as “Replay.”



required, Sirius XM admits that Sirius XM does not pay royalties for Pre-1972 Recordings


11

because no such royalties are required by law, but otherwise denies all allegations of wrongdoing

by Sirius XM.






allegations in the first sentence of paragraph 47 of the First Amended Complaint. The remaining

allegations of paragraph 47 of the First Amended Complaint call for legal conclusions to which

no responsive pleading is required. To the extent a response is required, Sirius XM denies the

allegations and, without limitation, expressly denies all allegations of wrongdoing by Sirius XM.














12






52. Without assuming the burden of proof where such burden properly rests with

Plaintiff, and expressly reserving and not waiving the right to assert any and all such defenses at

such time and to such extent as discovery and factual developments establish a basis therefor,

Sirius XM hereby asserts the following defenses to the claims asserted in the First Amended

Complaint.


(Failure to State a Claim)

53. The First Amended Complaint fails to state any claim upon which relief can be

granted.


(Laches)

54. Plaintiff’s claims are barred, in whole or in part, by the doctrine of laches.


(Waiver)

55. Plaintiff’s claims are barred, in whole or in part, by the doctrine of waiver.


(Estoppel)

56. Plaintiff’s claims are barred, in whole or in part, by the doctrine of estoppel.


13


(License)

57. Plaintiff’s claims are barred, in whole or in part, by an implied license conveyed

by Plaintiff to Sirius XM or because Plaintiff otherwise licensed, authorized, or consented to

Sirius XM’s alleged conduct.


(Fair Use)

58. Plaintiff’s claims are barred, in whole or in part, by the doctrine of fair use.



59. Plaintiff’s claims are barred, in whole or in part, by applicable statutes of

limitations.


(Lack of Harm)

60. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has not suffered

any harm from Sirius XM’s alleged conduct.



61. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has failed to

take appropriate and necessary steps to mitigate its alleged damages, if any.


14


(Lack of Ownership)

62. Plaintiff’s claims are barred, in whole or in part, because Plaintiff does not own

the purported rights at issue.


(Adequate Remedy at Law)

63. The injunctive relief sought by Plaintiff is barred, in whole or in part, because

Plaintiff has available an adequate remedy at law.

PRAYER FOR RELIEF


1. Dismiss Plaintiff’s First Amended Complaint in its entirety with prejudice;

2. Enter judgment in favor of Defendant Sirius XM and against Plaintiff on each and

every cause of action set forth in the First Amended Complaint;

3. Award attorneys’ fees and costs in favor of Defendant Sirius XM against Plaintiff

as permitted by applicable law; and

4. Award such other and further relief as the Court deems just and proper.


15

Dated: New York, New York Respectfully submitted, December 6, 2013

By: /s/ R. Bruce Rich____________ R. Bruce Rich Benjamin E. Marks Bruce S. Meyer Todd Larson John R. Gerba WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 [email protected] [email protected] [email protected] and Michael S. Oberman Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Tel: (212) 715-9294 Fax: (212) 715-8294 [email protected] Attorneys for Defendant Sirius XM Radio Inc.


ECFU.S. District Court

Southern District of New York (Foley Square)CIVIL DOCKET FOR CASE #: 1:13−cv−05784−CM

Flo &Eddie, Inc v. Sirius XM Radio, Inc. et alAssigned to: Judge Colleen McMahonDemand: $9,999,000Cause: 28:1332 Diversity−Account Receivable

Date Filed: 08/16/2013Jury Demand: PlaintiffNature of Suit: 820 CopyrightJurisdiction: Federal Question

Plaintiff

Flo &Eddie, IncA california Corporation, individuallyand on behalf of all others similarlysituated

represented byRobert L. RimbergGoldberg &Rimberg, PLLC115 Broadway, Suite 302New York, NY 10006(212) 697−3250Fax: (212) 812−0696Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Evan S CohenEvan S. Cohen1180 South Beverly Drive, Suite 510Los Angeles, CA 90035(310) 721−5159Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Harvey Wayne GellerGradstein &Marzano, P.C.6310 San Vincente Blvd., Suite 510Los Angeles, CA 90048(323)−776−3100Fax: (323)−931−4990Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Henry D. GradsteinGradstein &Marzano, P.C.6310 San Vicente Blvd., Suite 510Los Angeles, CA 90048(310) 489−6551Fax: (310) 571−1717Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Joel Steven SchneckGoldberg &Rimberg, PLLC115 Broadway, Suite 302New York, NY 10006(212)−697−3250Fax: (212)−227−4533Email: [email protected] TO BE NOTICED

Kathryn Lee CrawfordSchwarcz Rimberg Boyd &Rader, LLP115 Broadway, Suite 302New York, CA 10066

Case: 1:13-cv-05784-CM As of: 02/20/2014 03:19 PM EST 1 of 7






(212) 697−3250Fax: (212) 227−4533Email: lboyd@srbr−law.comATTORNEY TO BE NOTICED

Kristen Leigh NelsonSchwartz & Perry295 Madison AvenueNew York, NY 10017(323)−302−9488Fax: (323)−931−4990Email: knelson@srbr−law.comATTORNEY TO BE NOTICED

Larry Steven CastruitaGradstein &Marzano, P.C.6310 San Vicente Blvd., Suite 510Los Angeles, CA 90048(213)−675−0650Email: [email protected] TO BE NOTICED

Maryann Rose MarzanoGradstein &Marzano, P.C.6310 San Vicente Blvd, Suite 510Los Angeles, CA 90048(323)−776−3100Fax: 323−931−4990Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

Rajika Lynn ShahSchwarcz, Rimberg, Boyd &Rader, LLP6310 San Vicente Boulevard, Suite 360Los Angeles, CA 90048(323) 302−9488Fax: (323) 931−4990Email: rshah@srbr−law.comATTORNEY TO BE NOTICED

Robert Edward AllenGradstein &Marzano, P.C.6310 San Vicente Blvd, Suite 510Los Angeles, CA 90048(310)−895−8925Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

V.

Defendant

Sirius XM Radio, Inc.A Delaware Corporation

represented byBenjamin Ely MarksWeil, Gotshal &Manges LLP (NYC)767 Fifth Avenue, 25th Fl.New York, NY 10153(212)−735−4566Fax: (212)−310−8007Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Bruce S. Meyer









Weil, Gotshal &Manges LLP (NYC)767 Fifth Avenue, 25th Fl.New York, NY 101532123108000Fax: 2128333148Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Robert Bruce RichWeil, Gotshal &Manges LLP (NYC)767 Fifth Avenue, 25th Fl.New York, NY 10153(212) 310−8000Fax: (212) 310−8007Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

John Ryan GerbaWeil, Gotshal &Manges LLP (NYC)767 Fifth Avenue, 25th Fl.New York, NY 10153(212)−310−8190Fax: (212)−310−8007Email: [email protected] TO BE NOTICED

Michael Stewart ObermanKramer Levin Naftalis &Frankel, LLP1177 Avenue of the AmericasNew York, NY 10036(212) 715−9294Fax: (212)−715−8000Email: [email protected] TO BE NOTICED

Todd Daniel LarsonWeil, Gotshal &Manges LLP (NYC)767 Fifth Avenue, 25th Fl.New York, NY 10153(212)−310−8238Fax: (212)−310−8007Email: [email protected] TO BE NOTICED

Defendant

Does1 through 10TERMINATED: 11/13/2013

Defendant

DOES 1 through 10


08/16/2013 1 COMPLAINT against Does, Sirius XM Radio, Inc. (Filing Fee $ 350.00, ReceiptNumber 465401074674)Document filed by Flo &Eddie, Inc.(jd) (jd). (Entered:08/20/2013)

08/16/2013 SUMMONS ISSUED as to Does, Sirius XM Radio, Inc. (jd) (Entered: 08/20/2013)







https://ecf.nysd.uscourts.gov/doc1/127112873776?caseid=416398&de_seq_num=10&pdf_header=1&pdf_toggle_possible=1

08/16/2013 Magistrate Judge Henry B. Pitman is so designated. (jd) (Entered: 08/20/2013)

08/16/2013 Case Designated ECF. (jd) (Entered: 08/20/2013)

08/20/2013 3 FILING ERROR − DEFICIENT DOCKET ENTRY − MOTION for MaryannR. Marzano to Appear Pro Hac Vice. Filing fee $ 200.00, receipt number0208−8800462. Motion and supporting papers to be reviewed by Clerk'sOffice staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1 ExhibitCertificate of Good Standing, # 2 Text of Proposed Order)(Marzano, Maryann)Modified on 8/20/2013 (bcu). (Entered: 08/20/2013)

08/20/2013 >>>NOTICE REGARDING DEFICIENT MOTION TO APPEAR PRO HACVICE. Notice regarding Document No. 3 MOTION for Maryann R. Marzanoto Appear Pro Hac Vice. Filing fee $ 200.00, receipt number 0208−8800462.Motion and supporting papers to be reviewed by Clerk's Office staff.. Thefiling is deficient for the following reason(s): Missing Certificate of GoodStanding. Certificate of Good Standing must be issued from the State Courtnot from a State Bar Association. Re−file the document as a Corrected Motionto Appear Pro Hac Vice and attach a valid Certificate of Good Standing,issued within the past 30 days. (bcu) (Entered: 08/20/2013)

08/21/2013 4 RULE 7.1 CORPORATE DISCLOSURE STATEMENT. No Corporate Parent.Document filed by Flo &Eddie, Inc.(Crawford, Kathryn) (Entered: 08/21/2013)

09/18/2013 5 NOTICE OF APPEARANCE by Robert Bruce Rich on behalf of Sirius XM Radio,Inc.. (Rich, Robert) (Entered: 09/18/2013)

09/18/2013 6 RULE 7.1 CORPORATE DISCLOSURE STATEMENT. Identifying CorporateParent Liberty Media Corporation for Sirius XM Radio, Inc.. Document filed bySirius XM Radio, Inc..(Rich, Robert) (Entered: 09/18/2013)

09/18/2013 7 NOTICE OF APPEARANCE by Robert Bruce Rich on behalf of Sirius XM Radio,Inc.. (Rich, Robert) (Entered: 09/18/2013)

09/18/2013 8 NOTICE OF APPEARANCE by Bruce S. Meyer on behalf of Sirius XM Radio,Inc.. (Meyer, Bruce) (Entered: 09/18/2013)

09/18/2013 9 NOTICE OF APPEARANCE by Benjamin Ely Marks on behalf of Sirius XMRadio, Inc.. (Marks, Benjamin) (Entered: 09/18/2013)

09/18/2013 10 NOTICE OF APPEARANCE by Todd Daniel Larson on behalf of Sirius XMRadio, Inc.. (Larson, Todd) (Entered: 09/18/2013)

09/18/2013 11 NOTICE OF APPEARANCE by John Ryan Gerba on behalf of Sirius XM Radio,Inc.. (Gerba, John) (Entered: 09/18/2013)

09/18/2013 12 NOTICE OF APPEARANCE by Michael Stewart Oberman on behalf of SiriusXM Radio, Inc.. (Oberman, Michael) (Entered: 09/18/2013)

10/28/2013 13 FILING ERROR − DEFICIENT DOCKET ENTRY − FILER ERROR −MOTION to Dismiss Plaintiff's Complaint. Document filed by Sirius XM Radio,Inc..(Marks, Benjamin) Modified on 10/29/2013 (ka). (Entered: 10/28/2013)

10/28/2013 14 FILING ERROR − DEFICIENT DOCKET ENTRY − FILER ERROR −MEMORANDUM OF LAW in Support re: 13 MOTION to Dismiss Plaintiff'sComplaint.. Document filed by Sirius XM Radio, Inc.. (Marks, Benjamin)Modified on 10/29/2013 (ka). (Entered: 10/28/2013)

10/28/2013 15 MOTION to Dismiss Plaintiff's Complaint. Document filed by Sirius XM Radio,Inc..(Rich, Robert) (Entered: 10/28/2013)

10/28/2013 16 MEMORANDUM OF LAW in Support re: 15 MOTION to Dismiss Plaintiff'sComplaint.. Document filed by Sirius XM Radio, Inc.. (Rich, Robert) (Entered:10/28/2013)

10/29/2013 17 MOTION for Maryann R. Marzano to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9025339. Motion and supporting papers to be reviewedby Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate of Good Standing, # 2 Text of Proposed Order)(Marzano,Maryann) (Entered: 10/29/2013)
























10/29/2013 >>>NOTICE REGARDING PRO HAC VICE MOTION. RegardingDocument No. 17 MOTION for Maryann R. Marzano to Appear Pro HacVice. Filing fee $ 200.00, receipt number 0208−9025339. Motion andsupporting papers to be reviewed by Clerk's Office staff.. The document hasbeen reviewed and there are no deficiencies. (bcu) (Entered: 10/29/2013)

10/29/2013 18 MOTION for Robert Edward Allen to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9025517. Motion and supporting papers to be reviewedby Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate of Good Standing, # 2 Text of Proposed Order)(Allen, Robert)(Entered: 10/29/2013)

10/29/2013 19 MOTION for Henry Daniel Gradstein to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9025686. Motion and supporting papers to be reviewedby Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate of Good Standing, # 2 Text of Proposed Order)(Gradstein,Henry) (Entered: 10/29/2013)

10/29/2013 20 MOTION for Larry Steven Castruita to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9025753. Motion and supporting papers to be reviewedby Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate of Good Standing, # 2 Text of Proposed Order)(Castruita,Larry) (Entered: 10/29/2013)

10/29/2013 >>>NOTICE REGARDING PRO HAC VICE MOTION. RegardingDocument No. 19 MOTION for Henry Daniel Gradstein to Appear Pro HacVice. Filing fee $ 200.00, receipt number 0208−9025686. Motion andsupporting papers to be reviewed by Clerk's Office staff., 20 MOTION forLarry Steven Castruita to Appear Pro Hac Vice. Filing fee $ 200.00, receiptnumber 0208−9025753. Motion and supporting papers to be reviewed byClerk's Office staff.. The document has been reviewed and there are nodeficiencies. (wb) (Entered: 10/29/2013)

10/29/2013 21 MOTION for Rajika L. Shah to Appear Pro Hac Vice. Filing fee $ 200.00, receiptnumber 0208−9026322. Motion and supporting papers to be reviewed byClerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate, # 2 Text of Proposed Order)(Shah, Rajika) (Entered:10/29/2013)

10/29/2013 22 MOTION for Kristen L. Nelson to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9026334. Motion and supporting papers to be reviewedby Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate, # 2 Text of Proposed Order)(Nelson, Kristen) (Entered:10/29/2013)

10/30/2013 >>>NOTICE REGARDING PRO HAC VICE MOTION. RegardingDocument No. 21 MOTION for Rajika L. Shah to Appear Pro Hac Vice.Filing fee $ 200.00, receipt number 0208−9026322. Motion and supportingpapers to be reviewed by Clerk's Office staff., 22 MOTION for Kristen L.Nelson to Appear Pro Hac Vice. Filing fee $ 200.00, receipt number0208−9026334. Motion and supporting papers to be reviewed by Clerk'sOffice staff.. The document has been reviewed and there are no deficiencies.(wb) (Entered: 10/30/2013)

10/31/2013 23 ORDER FOR ADMISSION PRO HAC VICE granting 17 Motion for Maryann R.Marzano to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on10/31/2013) (rjm) (Entered: 10/31/2013)

10/31/2013 24 ORDER FOR ADMISSION PRO HAC VICE granting 18 Motion for Robert E.Allen to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on10/31/2013) (rjm) (Entered: 10/31/2013)

10/31/2013 25 ORDER FOR ADMISSION PRO HAC VICE granting 19 Motion for HenryGradstein to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on10/31/2013) (rjm) (Entered: 10/31/2013)

10/31/2013 26 ORDER FOR ADMISSION PRO HAC VICE granting 20 Motion for Larry S.Castruita to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on






























10/31/2013) (rjm) (Entered: 10/31/2013)

10/31/2013 27 ORDER FOR ADMISSION PRO HAC VICE granting 21 Motion for Rajika L.Shah to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on 10/31/2013)(rjm) (Entered: 10/31/2013)

10/31/2013 28 ORDER FOR ADMISSION PRO HAC VICE granting 22 Motion for Kristen L.Nelson to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on10/31/2013) (rjm) (Entered: 10/31/2013)

11/04/2013 29 ENDORSED LETTER addressed to Judge Colleen McMahon from Robert E.Allen, Esq. dated 11/1/2013 re: Plaintiff seeks clarification from this Court as towhether: (1) the Court will be holding a conference after the motion pursuant tooption (c) above; (2) if such a conference will not be held, whether Plaintiff mayamend its Complaint to address the alleged deficiencies identified by Defendant inits Motion (either pursuant to Section III(A)(4) above or Fed. R. Civ. Proc.15(a)(1)(B)); and (3) whether the time for opposing Defendant's Motion is stayeduntil after Plaintiff has an opportunity to file a First Amended Complaint.ENDORSEMENT: I do not require a pre−motion conference. I do not do any ofthe procedures listed below. "May" is not "must". Defendant has no obligation toconsent with you before availing itself of Rule 12(b). Respond to the motion. If thefederal rules allow you to amend as of right you may amend. (Signed by JudgeColleen McMahon on 11/4/2013) (ft) Modified on 11/6/2013 (ft). (Entered:11/05/2013)

11/07/2013 30 ENDORSED LETTER addressed to Judge Colleen McMahon from R. Bruce Richdated 11/4/2013 re: Counsel writes on behalf of Sirius XM Radio Inc. to respond tothe letter to the Court submitted by Plaintiff Flo &Eddie, Inc. on Friday, 11/1/2013.ENDORSEMENT: This letter was not necessary. I have responded to plaintiff.(Signed by Judge Colleen McMahon on 11/7/2013) (tro) (Entered: 11/07/2013)

11/12/2013 31 RESPONSE in Opposition to Motion re: 15 MOTION to Dismiss Plaintiff'sComplaint.. Document filed by Flo &Eddie, Inc. (Allen, Robert) (Entered:11/12/2013)

11/13/2013 32 FIRST AMENDED COMPLAINT amending 1 Complaint against Sirius XMRadio, Inc., DOES 1 through 10 with JURY DEMAND.Document filed by Flo&Eddie, Inc. Related document: 1 Complaint filed by Flo &Eddie, Inc.(djc)(Entered: 11/19/2013)

11/25/2013 33 AMENDED CALENDAR NOTICE: Rule (16) Conference rescheduled for1/10/2014 at 10:15 AM in Courtroom 14C, U.S. District Court, 500 Pearl Street,New York, NY 10007 before Judge Colleen McMahon. (Signed by Judge ColleenMcMahon on 11/25/2013) (ft) (Entered: 11/25/2013)

12/06/2013 34 ANSWER to 32 Amended Complaint. Document filed by Sirius XM Radio,Inc..(Rich, Robert) (Entered: 12/06/2013)

01/07/2014 35 NOTICE OF APPEARANCE by Robert L. Rimberg on behalf of Flo &Eddie, Inc.(Rimberg, Robert) (Entered: 01/07/2014)

01/09/2014 36 NOTICE OF APPEARANCE by Joel Steven Schneck on behalf of Flo &Eddie,Inc. (Schneck, Joel) (Entered: 01/09/2014)

01/10/2014 Minute Entry for proceedings held before Judge Colleen McMahon: Initial PretrialConference held on 1/10/2014. Decision: Conference held. Limited discovery (onissues other than the amount of damages that may be owed) must be completed byThursday, April 3, 2014. All other discovery is stayed. At 2:00 PM on April 3,2014, the parties will conference with the Court to discuss the possibility of morediscovery in this case.(Submitted by Zachary Vaughan). (mde) (Entered:01/10/2014)

01/10/2014 Set/Reset Hearings: Conference set for 4/3/2014 at 2:00 PM in Courtroom 14C,500 Pearl Street, New York, NY 10007 before Judge Colleen McMahon. (mde)(Entered: 01/10/2014)

01/29/2014 37 MOTION for Harvey Wayne Geller to Appear Pro Hac Vice. Filing fee $ 200.00,receipt number 0208−9306608. Motion and supporting papers to be reviewed



















by Clerk's Office staff. Document filed by Flo &Eddie, Inc. (Attachments: # 1Exhibit Certificate of Good Standing, # 2 Text of Proposed Order)(Geller, Harvey)(Entered: 01/29/2014)

01/29/2014 >>>NOTICE REGARDING PRO HAC VICE MOTION. RegardingDocument No. 37 MOTION for Harvey Wayne Geller to Appear Pro HacVice. Filing fee $ 200.00, receipt number 0208−9306608. Motion andsupporting papers to be reviewed by Clerk's Office staff.. The document hasbeen reviewed and there are no deficiencies. (bcu) (Entered: 01/29/2014)

01/30/2014 38 ORDER FOR ADMISSION PRO HAC VICE granting 37 Motion for HarveyWayne Geller to Appear Pro Hac Vice. (Signed by Judge Colleen McMahon on1/30/2014) (mro) (Entered: 01/30/2014)







1 HELLER WALDMAN, P.L.

3250 MARY STREET, SUITE 102 ● COCONUT GROVE, FLORIDA 33133

{00107175.DOCX }

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Case No.______________________________-CV-____________________

FLO & EDDIE, INC., a California corporation, individually and on behalf of all others similarly situated,


Defendants.

/

CLASS ACTION COMPLAINT

Plaintiff FLO & EDDIE, INC. (“Plaintiff” or “Flo & Eddie”) files this class action

Complaint on behalf of itself and on behalf of all other similarly situated owners of sound

recordings of musical performances that initially were “fixed” (i.e., recorded) prior to February

15, 1972 (the “Pre-1972 Recordings”) against Defendants SIRIUS XM RADIO, INC.

(“Defendant” or “SiriusXM”) and DOES 1-10, and alleges as follows:


1. Florida common law and statutory law provide protection for Pre-1972 Recordings

from their unauthorized reproduction, performance, distribution or other exploitation, and permit

the owners of Pre-1972 Recordings the right to bring the following separate claims for relief

against parties who engage in such unauthorized actions: (a) common law copyright

infringement; (b) common law misappropriation / unfair competition; (c) common law

conversion; and (d) civil theft under Fla. Stat. § 772.11 for violations of Fla. Stat. § 812.014(1).

A person commits common law copyright infringement of a sound recording not protected by the

US Copyright Act in Florida by doing, without the consent of the owner, anything which is the

sole right of the owner to do, including reproducing, distributing, performing or otherwise

exploiting such recording. The elements of a misappropriation / unfair competition claim

Case 1:13-cv-23182-KMM Document 1 Entered on FLSD Docket 09/03/2013 Page 1 of 18

2

HELLER WALDMAN, P.L.


{00107175.DOCX }

involving record piracy in Florida are: (A) time, labor and money expended by the Plaintiff; (B)

competition; and (C) commercial damage. A claim for conversion exists for a wrongful taking

of intangible interests in a business venture. Finally, Fla. Stat. § 812.014(1) provides that one is

liable for theft if one “knowingly obtains or uses the property of another with intent to

appropriate the property to his or her own use.” 1






February 15, 1972. Notwithstanding the absence of any license or authorization from Plaintiff,

The Turtles recordings can be heard every hour of every day by subscribers in Florida to the

satellite and Internet services owned by Defendant known as “Sirius Satellite Radio,” “XM

Satellite Radio” and “SiriusXM Satellite Radio” (individually and collectively, the “Service”).

Plaintiff Flo & Eddie brings this class action on its own behalf and on behalf of all other

similarly situated owners of Pre-1972 Recordings (the “Class” or “Class Members”) to put an

end to SiriusXM’s wholesale infringement, misappropriation / unfair competition, conversion

and civil theft of their Pre-1972 Recordings and to obtain damages, including punitive damages,

and injunctive relief.

3. The Service is a highly profitable business that engages in the large-scale

distribution and public performance of sound recordings to over 24 million subscribers. The

1 As set forth below, Plaintiff intends to amend this Complaint to add a claim for civil theft

pursuant to Fla. Stat. § 722.11 for violating Fla. Stat. § 812.014(1) in the event the letter attached

hereto as Exhibit B does not result in a return of the monies described therein.


3



{00107175.DOCX }

Service is distributed in Florida to its subscribers through (a) satellite digital transmission

directly to subscribers via digital radios manufactured or licensed by SiriusXM; (b) satellite

digital transmission to subscribers of other services, such as DIRECTV Satellite Television

Service and Dish Network Satellite Television Service via digital set top boxes manufactured or

licensed by DIRECTV or Dish; and (c) the Internet, by way of (i) digital media streaming

devices, such as Roku, digital radios and home audio systems, such as Sonos; (ii) its website at

www.SiriusXM.com; or (iii) computer, smart phone and other mobile applications for various

operating systems, including Apple iOS, Android, Windows, Blackberry and HP webOS. In

furtherance of the Service, SiriusXM, without any license or authority, has copied Plaintiff’s and

each Class Members’ Pre-1972 Recordings onto the Service’s central server(s) and makes such

copies available to its subscribers in Florida. SiriusXM publicly performs these recordings in

Florida via streaming audio transmission through the Service for a fee as part of a subscription

plan that currently includes up to 72 different music channels. As part of the Service, many

subscribers in Florida are also able to: (A) download the stream of a selected channel on the

Service, allowing later or multiple listenings of the sound recordings previously streamed during

the selected time period; (B) download particular sound recordings, allowing later or multiple

listenings of such sound recordings; (C) download particular programs incorporating sound

recordings as part of the Service’s “On Demand” feature, allowing later or multiple listenings of

such sound recordings; and (D) allow subscribers to pause, rewind and replay sound recordings

using the Service’s “Replay” feature.

4. Simply stated, SiriusXM has disregarded the Plaintiff’s and other Class Members’

exclusive ownership of their Pre-1972 Recordings in Florida, impaired their ability to sell,

license, lawfully exploit, or otherwise control their Pre-1972 Recordings as permitted under

Florida law, and misappropriated / unfairly competed, converted and stolen same for its own

financial gain. SiriusXM’s conduct is causing, and will continue to cause, enormous and


http://www.pandora.com/

4



{00107175.DOCX }

irreparable harm to Plaintiff and the other Class Members unless compensatory and punitive


infringement, misappropriation / unfair competition, conversion and civil theft of the Pre-1972

Recordings.







money, time, effort, and creative talent in creating, advertising, promoting, selling and licensing






recordings initially “fixed” before February 15, 1972, and that the federal Copyright Act does not


quoted above, Florida law protects the exclusive ownership of Plaintiff and the other Class

Members to their Pre-1972 Recordings in Florida.



York. The Court has personal jurisdiction over Defendant in that Defendant has offices

throughout Florida, including, without limitation, in Miami, Jupiter, Deerfield Beach and Boca


5



{00107175.DOCX }

Raton, Defendant is engaged in tortious conduct in Florida, and Defendant’s conduct causes

injury to Plaintiff and the other Class Members in Florida.





different States.


Defendant maintains several offices in the Southern District of Florida and a substantial part of

the events giving rise to the claims alleged herein occurred in the Southern District of Florida.









“Defendants”).




Recordings reproduced, performed, distributed or otherwise exploited by Defendants in Florida

without a license or authorization to do so during the period from August 29, 2009 to the present.

Plaintiff reserves the right to modify this definition of the Class after further discovery; the Court


6



{00107175.DOCX }

may also be requested to utilize and certify subclasses in the interests of ascertainability,

manageability, justice and/or judicial economy.






streamed to subscribers in Florida, and that such metadata contains the name and location of the

owners thereof. The Class members are further ascertainable through methods typical of class

action practice and procedure.


Recordings infringed, misappropriated / unfairly competed, converted and/or stolen in Florida by

Defendants number in the millions and are owned by many thousands of Class Members. It is

therefore impractical to join all of the Class Members as named Plaintiffs. Further, the claims of

the Class Members may range from smaller sums to larger sums. Accordingly, using the class

action mechanism is the most economically feasible means of determining and adjudicating the

merits of this litigation.



it seeks to represent. Plaintiff and the other Class Members have all been subject to

infringement, misappropriation / unfair competition, conversion and theft of their Pre-1972

Recordings in Florida, have sustained actual pecuniary loss and face irreparable harm from

Defendants’ continued infringement, misappropriation / unfair competition, conversion and theft

of their Pre-1972 Recordings.


7



{00107175.DOCX }




rights in connection with their creative work. Plaintiff has raised viable claims for infringement,

misappropriation / unfair competition, conversion and theft of the type well established in

Florida and reasonably expected to be raised by Class Members. Plaintiff will diligently pursue

those claims. If necessary, Plaintiff may seek leave of the Court to amend this Complaint to

include additional class representatives to represent the Class or additional claims as may be

appropriate. Plaintiff is represented by experienced, qualified and competent counsel who are

committed to prosecuting this action.







otherwise exploited Pre-1972 Recordings in Florida;


other exploitation of Pre-1972 Recordings in Florida constitutes common law copyright

infringement under Florida law;


other exploitation of Pre-1972 Recordings in Florida constitutes misappropriation / unfair

competition under Florida law;


8



{00107175.DOCX }

(D) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in Florida constitutes conversion under Florida

law;

(E) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in Florida constitutes civil theft in violation of

Fla. Stat. §§ 722.11 and 812.014(1);

(F) The basis on which restitution and/or damages to all injured members of


(G) Whether Defendant SiriusXM’s violation of Florida common law for


(H) Whether Defendant SiriusXM’s violation of Florida common law for



(I) Whether Defendant SiriusXM’s violation of Florida’s laws against

misappropriation / unfair competition entitles the Class Members to recover punitive

damages;

(J) Whether Defendant SiriusXM’s violation of Florida’s laws against

misappropriation / unfair competition is continuing, thereby entitling Class Members to

injunctive or other relief;

(K) Whether Defendant SiriusXM’s violation of Florida’s laws against

conversion entitles the Class Members to recover punitive damages;

(L) Whether Defendant SiriusXM’s violation of Florida’s laws against

conversion is continuing, thereby entitling Class Members to injunctive or other relief;


9



{00107175.DOCX }

(M) Whether Defendant SiriusXM’s violation of Fla. Stat. § 812.014(1) for

civil theft entitles the Class Members to recover treble the amount of compensatory

damages in accordance with Fla. Stat. § 772.11; and

(N) Whether Defendant SiriusXM’s violation of Fla. Stat. § 812.014(1) for

civil theft is continuing, thereby entitling Class Members to injunctive or other relief.


















19. Defendants have engaged in common law copyright infringement, misappropriation

/ unfair competition, conversion and civil theft, which has affected all of the Class Members such

that final and injunctive relief on behalf of the Class as a whole is efficient and appropriate.


10



{00107175.DOCX }

FIRST CLAIM FOR RELIEF





copyright protection under the law of the State of Florida.







Defendants are not, and at all relevant times were not, entitled to or authorized to reproduce,

perform, distribute or otherwise exploit the Pre-1972 Recordings.

24. The reproduction, performance, distribution or other exploitation by Defendants of

unauthorized copies of the Pre-1972 Recordings, including, without limitation, Plaintiff’s

Recordings, constitute infringement of Plaintiff and the Other Class Member’s common law



Recordings.



by Plaintiff and the other Class Members and publicly perform these recordings in Florida for

their subscribers as set forth in paragraph 3, above. Defendants have disregarded the Plaintiff’s

and other Class Members’ copyrights in and exclusive ownership of their Pre-1972 Recordings,


11



{00107175.DOCX }

impaired their ability to sell, lawfully exploit, or otherwise control their Pre-1972 Recordings, all

for their own financial gain.
















Members’ rights in and exclusive ownership of their Pre-1972 Recordings in Florida.

SECOND CLAIM FOR RELIEF

(Misappropriation / Unfair Competition)


above, as though set forth herein.

30. Plaintiff and each Class Member are, and at relevant times were, the exclusive

owner of all right, title and interest in and to their Pre-1972 Recordings and possession thereof in

Florida.


12



{00107175.DOCX }



Defendants are not, and at all relevant times were not, entitled to or authorized to to reproduce,


32. Plaintiff and the Other Class Members have expended significant time, labor and

money in the making, marketing and distributing the Pre-1972 Recordings. Defendants have

paid nothing to Plaintiff or the Other Class Members for reproducing, performing, distributing or

otherwise exploiting the Pre-1972 Recordings. Without expending any time, labor or money of

its own, Defendants have simply appropriated the commercial qualities, reputation and salable

properties of the Pre-1972 Recordings, including, without limitation Plaintiff’s Recordings, by

unfairly and directly competing with Plaintiff and the other Class Members’ use, sale,

distribution and exploitation of the Pre-1972 Recordings. In so doing, Defendants have

undermined Plaintiff and the other Class Members’ substantial creative and financial investment

for Defendants’ own commercial benefit and have commercially damaged the market value of

the licenses Plaintiff and the Other Class Members are now and had been able to negotiate with

third parties to reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings.









13



{00107175.DOCX }


Members’ rights in and to the Pre-1972 Recordings, and constitute misappropriation and unfair

competition involving record piracy under Florida law.























14



{00107175.DOCX }



THIRD CLAIM FOR RELIEF

(Conversion)





Florida.

40. Plaintiff and each Class Member have, and for all times relevant herein has had, an

intangible property interest in the time, effort and expense of producing the Pre-1972

Recordings. Additionally, as set forth in paragraphs 20 through 24 above, Plaintiff and each

Class Member have a common law copyright in each of the Pre-1972 Recordings.

41. Plaintiff and the Class Members created and produced the Pre-1972 Recordings as

part of a business venture to commercially reproduce, perform, distribute and otherwise exploit

the Pre-1972 Recordings.

42. By their acts and conduct alleged above, Defendants have converted Plaintiff’s and

the Class Members’ property rights in their Pre-1972 Recordings, including, without limitation

Plaintiff’s Recordings, for Defendants’ own use and wrongful disposition for financial gain.

43. As a direct and proximate result of Defendants’ conversion, Plaintiff and the

members of the Class have been damaged, and Defendants have been unjustly enriched, in an

amount that is not as yet fully ascertained but which Plaintiff is informed and believes, and

alleges thereon, exceeds $100,000,000 according to proof at trial. Defendants are constructive

trustees for the benefit of Plaintiff and Class Members, and the Court should order Defendants to


15



{00107175.DOCX }

convey to Plaintiff and the Class Members the gross receipts received or to be received from

Defendants conversion of the Pre-1972 Recordings.

44. Plaintiff is informed and believes, and based thereon alleges, that in engaging in the






45. Defendants’ conduct is causing, and unless enjoined and restrained by this Court


fully be compensated or measured in money. Plaintiff and each Class Member are entitled to

temporary, preliminary and permanent injunctions prohibiting further acts of conversion of their

Pre-1972 Recordings.

FOURTH CLAIM FOR RELIEF

(Civil Theft under Fla. Stat. § 772.11 for violations of Fla. Stat. § 812.014)

46. Plaintiff has submitted the demand letter attached hereto as Exhibit B required by

Fla. Stat. §772.11(1) before it can bring a claim for Civil Theft. As soon as the thirty (30) days

have run and assuming Defendants have not agreed to pay the amounts contained in that demand,

Plaintiff will amend this Complaint to add a claim for Civil Theft pursuant to Fla. Stat. §772.11.

PRAYER FOR RELIEF







16



{00107175.DOCX }


Class.

On The First Claim For Relief For Common Law Copyright Infringement against all

Defendants:







infringing in any manner the copyrights in the Pre-1972 Recordings in Florida, including

without limitation by directly or indirectly copying, reproducing, downloading,



On The Second Claim For Relief For Misappropriation / Unfair Competition against all

Defendants:










17



{00107175.DOCX }

misappropriating and/or unfairly competing in any manner the Pre-1972 Recordings in

Florida, including without limitation by directly or indirectly copying, reproducing,

downloading, distributing, communicating to the public, uploading, linking to,

transmitting, publicly performing, or otherwise exploiting in any manner any of the Pre-

1972 Recordings.

On the Third Claim For Relief For Conversion against all Defendants:









converting in any manner the Pre-1972 Recordings in Florida, including without

limitation by directly or indirectly copying, reproducing, downloading, distributing,

communicating to the public, uploading, linking to, transmitting, publicly performing, or

otherwise exploiting in any manner any of the Pre-1972 Recordings.


1. For reasonable attorneys’ fees and costs as permitted by law;




18



{00107175.DOCX }

JURY TRIAL DEMAND

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff and the Class

Members demand a trial by jury on claims alleged in this Complaint.

DATED: September 3, 2013

Respectfully submitted,


Attorneys for FLO & EDDIE, INC.

3250 Mary Street, Suite 102

Coconut Grove, Florida 33133

Telephone: (305) 448-4144 Telecopier: (305) 448-4155 By: s/Glen H. Waldman

Glen H. Waldman, Esq. Fla. Bar No. 618624 Eleanor T. Barnett, Esq. Fla. Bar No. 0355630 Jason Gordon, Esq. Fla. Bar No. 0012973

Henry Gradstein (pro hac vice motion will be filed once a case number has been assigned) Maryann R. Marzano (pro hac vice motion will be filed once a case number has been assigned) Robert E. Allen (pro hac vice motion will be filed once a case number has been assigned) GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 Telephone: (323) 776-3100 Fax: (323) 931-4990 And

Evan S. Cohen (pro hac vice motion will be filed once a case number has been assigned) 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 Telephone: (310) 556-9800 Fax: (310) 556-9801


US_ACTIVE:\44367133\10\76061.0012

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION Case 1:13-CV-23182 (Moore)

-----------------------------------------------------------------x FLO & EDDIE, INC., individually and on behalf of all others similarly situated, Plaintiff, -against- SIRIUS XM RADIO INC., and DOES 1 through 10, Defendants. -----------------------------------------------------------------x

DEFENDANT SIRIUS XM’S PARTIAL MOTION TO DISMISS PLA INTIFF’S COMPLAINT AND SUPPORTING MEMORANDUM OF LAW


TABLE OF CONTENTS

Page

i US_ACTIVE:\44367133\10\76061.0012

MOTION..........................................................................................................................................1

MEMORANDUM OF LAW ...........................................................................................................1

I. PRELIMINARY STATEMENT ...............................................................................................1

II. BACKGROUND .......................................................................................................................3

III. ARGUMENT .............................................................................................................................6

THERE IS NO PUBLIC PERFORMANCE RIGHT FOR PRE-1972 RECORDINGS UNDER FLORIDA LAW ............................................................................6

A. The History of Failed Efforts by the Recording Industry To Obtain a Right of Public Performance for Sound Recordings................................................7

B. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Common Law Copyright Infringement ................................10

C. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Unfair Competition ..............................................................12

1. Plaintiff Has Failed to Plead Deceptive or Fraudulent Conduct or a Likelihood of Consumer Confusion ...................................................13

2. Plaintiff Has Failed to Plead That It Competes With Sirius XM as a Broadcaster .........................................................................................14

D. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Conversion ...........................................................................18

IV. CONCLUSION ........................................................................................................................20


ii US_ACTIVE:\44367133\10\76061.0012


Page(s)

Cases

Agee v. Paramount Commc’ns, 59 F.3d 317 (2d Cir. 1995).................................................................................................17, 18

Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009).......................................................................................................4

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ......................................................................................................... passim

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .....................................................................................................13, 16, 20

Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356 (Fed. Cir. 2006)................................................................................................16

Carnival Corp. v. Rolls-Royce PLC, No. 08-23318-CIV, 2009 WL 3861450 (S.D. Fla. Nov. 17, 2009) ...........................................7

CBS, Inc. v. Garrod, 622 F. Supp. 532 (M.D. Fla. 1985) .................................................................................. passim

Clever Covers, Inc. v. Storm Guard, Inc., No. 806CV1062T27MAP, 2006 WL 2691759 (M.D. Fla. Sept. 20, 2006) ............................15

DeSilva Constr. Corp. v. Herrald, 213 F. Supp. 184 (M.D. Fla. 1962) ....................................................................................11, 12

Donald Frederick Evans & Assocs., Inc. v. Cont’l Homes, Inc., 785 F.2d 897 (11th Cir. 1986) .................................................................................................12

Ediciones Musicales Y Representaciones Internacionales, S.A. v. San Martin, 582 F. Supp. 2d 1358 (S.D. Fla. 2008) ....................................................................................14

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13-CV-5784 (CM) (S.D.N.Y. Aug. 15, 2013) ....................................................................6

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. BC 517032 (Cal. Super. Ct. L.A. Cnty. Aug. 1, 2013) .......................................................6

Gary v. D. Agustini & Asociados, S.A., 865 F. Supp. 818 (S.D. Fla. 1994) .............................................................................................8



Page(S)

iii US_ACTIVE:\44367133\10\76061.0012

Hill v. Celebrity Cruises, Inc., No. 09–23815–CIV, 2011 WL 9379007 (S.D. Fla. July 11, 2011) ...........................................7

Hill v. Opus Corp., 841 F. Supp. 2d 1070 (C.D. Cal. 2011) .....................................................................................7

Hogan v. Provident Life & Acc. Ins. Co., No. 6:08-cv-1897-Orl-19KRS, 2009 WL 2169850 (M.D. Fla. July 20, 2009) .......................20

Home Design Servs., Inc. v. Park Square Enters., Inc., No. 6:02-CV-637-ORL28JGG, 6:03-CV-595-ORL28JGG, 2005 WL 1027370 (M.D. Fla. May 2, 2005) ...............................................................................................................15, 16

In re Aqua Clear Techs., Inc., 361 B.R. 567 (Bankr. S.D. Fla. 2007)......................................................................................20

In re Corbin’s Estate, 391 So. 2d 731 (Fla. Dist. Ct. App. 1980) ...............................................................................20

Int’l Tape Mfrs. Ass’n v. Gerstein, 344 F. Supp. 38 (S.D. Fla. 1972) .............................................................................................11

Kisling v. Rothschild, 388 So. 2d 1310 (Fla. Dist. Ct. App. 1980) .............................................................................11

Larach v. Standard Chartered Bank Int’l (Am.) Ltd., 724 F. Supp. 2d 1228 (S.D. Fla. 2010) ......................................................................................8

Leggins v. Orlando Hous. Auth., No. 6:13-cv-232-Orl-37DAB, 2013 WL 937739 (M.D. Fla. Mar. 11, 2013)............................8

M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486 (11th Cir. 1990) ...............................................................................................12

Magical Mile, Inc. v. Benowitz, 510 F. Supp. 2d 1085 (S.D. Fla. 2007) ..............................................................................12, 13

Manasa v. Univ. of Miami, 320 So. 2d 467 (Fla. Dist. Ct. App. 1975) ...............................................................................11

Mfg. Research Corp. v. Greenlee Tool Co., 693 F.2d 1037 (11th Cir. 1982) ...............................................................................................17



Page(S)

iv US_ACTIVE:\44367133\10\76061.0012

Marine Transp. Servs. Sea-Barge Grp., Inc. v. Python High Performance Marine Corp., 16 F.3d 1133 (11th Cir. 1994) .................................................................................................19

Murrell v. Trio Towing Serv., Inc., 294 So. 2d 331 (Fla. Dist. Ct. App. 1974) ...............................................................................19

Nat’l Union Fire Ins. Co. v. Carib Aviation, Inc., 759 F.2d 873 (11th Cir. 1985) .................................................................................................18

Neva, Inc. v. Christian Duplications Int'l, Inc., 743 F. Supp. 1533 (M.D. Fla. 1990) ........................................................................................11

Practice Mgmt. Assocs., Inc. v. Old Dominion Ins. Co., 601 So. 2d 587 (Fla. Dist. Ct. App. 1992) (per curiam) ..........................................................15

Rochelle Asparagus Co. v. Princeville Canning Co., 170 F. Supp. 809 (D.C. Ill. 1959) ............................................................................................12

Schism v. United States, 972 F. Supp. 1398 (N.D. Fla. 1997)...........................................................................................8

Senfeld v. Bank of Nova Scotia Trust Co. (Cayman) Ltd., 450 So. 2d 1157 (Fla. Dist. Ct. App. 1984) .............................................................................19

Shelby Mut. Ins. Co. of Shelby, Ohio v. Crain Press, Inc., 481 So. 2d 501 (Fla. Dist. Ct. App. 1985) ...............................................................................18

Small Bus. Admin. v. Echevarria, 864 F. Supp. 1254 (S.D. Fla. 1994) ...................................................................................18, 19

SmokEnders, Inc. v. Smoke No More, Inc., 184 U.S.P.Q. 309 (S.D. Fla. 1974) ..........................................................................................12

Stagg Shop of Miami, Inc. v. Moss, 120 So. 2d 39 (Fla. Dist. Ct. App. 1960) .................................................................................13

Star Fruit Co. v. Eagle Lake Growers, 33 So. 2d 858 (Fla. 1948)...................................................................................................18, 19

Third Party Verification v. Signaturelink, 492 F. Supp. 2d 1314 (M.D. Fla. 2007) ...................................................................................15



Page(S)

v US_ACTIVE:\44367133\10\76061.0012

Van Dusen v. Se. First Nat’l Bank, 478 So. 2d 82 (Fla. Dist. Ct. App. 1985) .................................................................................12

Workplace Corp. v. Office Depot, Inc., No. 89-1485-CIV-T-13A, 1990 WL 106727 (M.D. Fla. June 5, 1990) ............................14, 15

Statutes

17 U.S.C. § 102 ................................................................................................................................4

17 U.S.C. § 106 ..................................................................................................................4, 5, 8, 10

17 U.S.C. § 114 ............................................................................................................................5, 8

17 U.S.C. § 301 ............................................................................................................................4, 5

Act of Jan. 6, 1897, 29 Stat. 481 ......................................................................................................4

Fla. Stat. § 768.72 ..........................................................................................................................20

Pub. L. No. 92-140, 85 Stat. 391 (1971) ......................................................................................4, 8

Pub. L. No. 104-39 § 2(3), 109 Stat. 336 (1995) .......................................................................5, 10

Other Authorities

117 Cong. Rec. 2002 (Feb. 8, 1971) ................................................................................................8

55 Fla. Jur. 2d Trademarks & Unfair Competition § 22 ................................................................12

Authorizing a Composer’s Royalty in Revenues from Coin-operated Machines and to Establish a Right of Copyright in Artistic Interpretations: Hearings Before Subcomm. on Patents, Trade-marks, and Copyrights of the Comm. on the Judiciary on H.R. 1269, H.R. 1207, and H.R. 2570, 80th Cong., 1st Sess. (Comm. Print 1947) ...........................9

Economic Conditions in the Performing Arts: Hearings Before the Select Subcomm. on Ed. of the Comm. on Ed. and Labor, 87th Cong., 1st & 2d Sess. (Comm. Print 1962) ............9

Fed. R. Civ. P. 8 .............................................................................................................................13

Fed. R. Civ. P. 12 .........................................................................................................................1, 7

Fed. R. Civ. P. 56 .............................................................................................................................7



Page(S)

vi US_ACTIVE:\44367133\10\76061.0012

H.R. Rep. No. 92-487 (1971) ...........................................................................................................8

H.R. Rep. No. 104-274 (1995) .....................................................................................................8, 9

Plaintiff’s Response to Defendant, Sirius XM Inc.’s, Motion to Transfer Venue, Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 1:13-cv-23182 (KMM) (S.D. Fla. Oct. 28, 2013), ECF No. 23 ...........................................................................................................2, 3, 14

Revision of Copyright Laws: Hearings Before the Comm. on Patents, 74th Cong., 2d Sess. (Comm. Print 1936) ..........................................................................................................9

S. Rep. No. 92-72 (1971) .................................................................................................................8

Second Supplementary Register’s Report on the General Revision of the U.S. Copyright Law (1975), available at Melville B. Nimmer & David Nimmer, 9 Nimmer on Copyright, App. 16 (Lexis 2013) .............................................................................................10

Testimony of Jason S. Berman Chairman and CEO of RIAA Before the Judiciary Subcomm. on Counts & Intellectual Property: Hearing on H.R. 1506, (June 21, 1995) 1995 WL 371088 (Westlaw) ....................................................................................................10

Testimony of the NAB Before the House Judiciary Comm. Subcomm. on Courts & Intellectual Property on H.R. 1506 (June 21, 1995), 1995 WL 371107 (Westlaw) ................10


US_ACTIVE:\44367133\10\76061.0012

MOTION

Defendant Sirius XM Radio Inc. (“Sirius XM”) hereby respectfully moves the Court to

dismiss the Complaint of Flo & Eddie, Inc. (“Plaintiff”) pursuant to Federal Rule of Civil

Procedure 12(b)(6) to the extent the Complaint is premised on Sirius XM’s public performance

of Plaintiff’s sound recordings. Since Florida law does not provide, and has never provided,

owners of sound recordings with a right of public performance, for the reasons set forth in more

detail in the Memorandum of Law below, partial dismissal is warranted.

MEMORANDUM OF LAW

I. PRELIMINARY STATEMENT



radically transform the scope of protection accorded to sound recordings under Florida law.

Plaintiff asks the Court to recognize an exclusive right of public performance under Florida law

for sound recordings created before February 15, 1972 (“Pre-1972 Recordings”) in the absence

of any authority recognizing such a right. The result Plaintiff seeks would dramatically expand

Florida law and unravel a century of contrary understandings between the music and

broadcasting industries. Worse, it would immediately turn each radio and television broadcaster,

webcaster, nightclub, retail establishment, fitness center, and the like that performs such

recordings in Florida into a serial copyright infringer. This overt effort to use Florida law as a

means of providing record companies with windfall recoveries from broadcasters or other music

users arising out of performances of such sound recordings, having no basis in law, should be

rejected at the outset of this litigation. Doing so will avoid both needless expense and Plaintiff’s

hoped-for in terrorem effect associated with retaining this critical element of Plaintiff’s case.


2 US_ACTIVE:\44367133\10\76061.0012

Plaintiff alleges that since 1971 it has owned some 100 master recordings of songs by

The Turtles. Compl. ¶ 2. It concedes that none of these sound recordings is entitled to

protection under federal copyright law, as the Copyright Act only affords certain protections to

sound recordings made on or after February 15, 1972, and each of the sound recordings at issue

here was made before that date. Id. Bereft of rights under federal law, Plaintiff (a) asserts that

Sirius XM’s broadcasts of Pre-1972 Recordings infringe a purported performance right under

Florida common law and (b) alleges that the performances at issue support a recovery in excess

of $100 million in damages supposedly sustained by Plaintiff and members of a putative class of

similarly situated owners of Pre-1972 Recordings. Id. ¶¶ 24, 26, 35, 43. The Complaint leaves

unanswered why, if a state-law performance right in Pre-1972 Recordings in fact exists, Plaintiff

waited more than four decades to assert it, let alone why Plaintiff has asserted this supposed right

against just one broadcaster out of many thousands of music users. Nothing about Sirius XM’s

operations either distinguishes it from other music users in this regard or otherwise overcomes

the legal vacuum in which Plaintiff’s performance right-based claims have been fashioned.

While the Complaint contends that the claimed injury to Plaintiff and the putative class

derives from multiple asserted unauthorized acts on the part of Sirius XM—to wit, the

“unauthorized reproduction, performance, distribution, or other exploitation” of Pre-1972

Recordings (id. ¶ 1)—it is unquestionably the asserted performance right that is central to this

action. See id. ¶ 2 (adverting to Sirius XM’s performances of Turtles recordings “every hour of

every day” to subscribers in Florida); id. ¶ 3 (describing various platforms by which Sirius XM

programming allegedly is transmitted); Pl.’s Resp. to Def.’s Mot. To Transfer Venue at 11 & n.2,

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 1:13-cv-23182 (KMM) (S.D. Fla. Oct. 28, 2013),

ECF No. 23 (asserting that “transmissions” are “gravamen of the Complaint” and conceding that


3 US_ACTIVE:\44367133\10\76061.0012

allegations regarding copying are “secondary to the larger claim involving Sirius’ transmissions

of the Masters in Florida to Sirius’ Florida subscribers”). Sirius XM therefore brings this motion

for partial dismissal of the Complaint at the threshold of this action because there is no

performance right for sound recordings under Florida law. A ruling in Sirius XM’s favor would

materially narrow this dispute, resulting in more efficient litigation of the case and conservation

of judicial resources, impacting, among other matters, the propriety of class treatment, the

identity of prospective class members should class treatment be determined appropriate, as well

as the scope of fact and putative damages discovery more generally. What would remain is the

balance of Plaintiff’s claims premised on alleged reproductions made by Sirius XM via server

copies of sound recordings in aid of its broadcast transmissions and copies offered for sale or

distribution via download. Sirius XM intends to seek disposition of that part of Plaintiff’s claims

on a motion for summary judgment on the basis that Sirius XM makes no such copies of sound

recordings in Florida (and in the case of downloads, makes no such copies at all), but recognizes

that limited discovery must first be completed before it addresses those claims.1

II. BACKGROUND

Terminology and Statutory Background

Plaintiff alleges in the preamble to the Complaint that it owns “sound recordings of

musical performances that initially were ‘fixed’ (i.e., recorded) prior to February 15, 1972,” and

later alleges that it engages in the business of licensing, inter alia, the “performance of its Pre-

1972 Recordings.” Id. ¶ 5. Although the Complaint asserts claims only under Florida law, the

allegations of the Complaint as well as the arguments made below addressing those allegations

are best understood in relation to certain definitions and rights found in the federal Copyright

1 This motion does not address Plaintiff’s civil theft claim. Although the Complaint stated Plaintiff’s intention to amend to add such a claim, Compl. ¶ 46, Plaintiff has not done so.


4 US_ACTIVE:\44367133\10\76061.0012

Act, which are briefly summarized here.

The Copyright Act recognizes two separate copyrights associated with recorded music:

one copyright in the music and lyrics (together, a “musical composition”) and another in a

recorded rendition of that song, e.g., when it is recorded by a particular singing group or

orchestra (a “sound recording”). See 17 U.S.C. § 102(a)(2), (7). While musical compositions

have enjoyed copyright protection since 1897, see Act of Jan. 6, 1897, 29 Stat. 481, sound

recordings—the only category of works at issue in this case—were not covered by the federal

Copyright Act until February 15, 1972, the effective date of the Sound Recording Act of 1971.

See Pub. L. No. 92-140, 85 Stat. 391 (1971) (“Sound Recording Act”). The Sound Recording

Act afforded only prospective protection, such that only recordings created on or after the

effective date would be protected under federal law, and it limited that protection to the right

“[t]o reproduce and distribute” “tangible” copies of sounds recordings. Id.

The upshot of the Sound Recording Act was twofold. First, Pre-1972 Recordings like

those at issue in this case remained subject to state law and whatever protections such law did (or

did not) provide. See 17 U.S.C. § 301(c) (preserving unspecified state law remedies for Pre-

1972 Recordings). Second, even as to those “post-1972” recordings granted federal copyright

protection for the first time, the copyright owners (usually record companies) received no right

of public performance, and therefore “no right to extract licensing fees from radio stations and

other broadcasters of recorded music.” Arista Records, LLC v. Launch Media, Inc., 578 F.3d

148, 152 (2d Cir. 2009). Congress thus left sound recordings on a distinctly different footing

than musical compositions, which had long enjoyed a public performance right. See 17 U.S.C. §

106(4); Arista Records, 578 F.3d at 152.


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Effective February 1, 1996, the Digital Performance Right in Sound Recordings Act of

1995 granted owners of federally copyrighted sound recordings (i.e., those created on or after

February 15, 1972) the limited right “to perform the copyrighted work publicly by means of a

digital audio transmission.” Pub. L. No. 104-39 § 2(3), 109 Stat. 336 (1995) (codified at 17

U.S.C. §§ 106(6), 114). Pursuant to section 106(6), Sirius XM is required to pay royalties for its

digital audio transmissions of post-1972 sound recordings. Because Congress has never afforded

copyright protection to Pre-1972 Recordings, they remain protected, if at all, under state law.

The Complaint

Plaintiff’s principals have been performing together as The Turtles since 1965. Compl. ¶

2. Since approximately 1971, Plaintiff has owned the entire catalog of 100 master recordings

made by The Turtles. Id. Each of these master recordings was made prior to February 15, 1972,

and therefore each falls outside of the scope of federal copyright protection. Id.; 17 U.S.C. §

301(c). While the Complaint includes allegations that Sirius XM has copied Plaintiff’s Pre-1972

Recordings onto central servers and enables subscribers to download streams of sound

recordings for later listening, Compl. ¶ 3, the gravamen of the Complaint is that Sirius XM

performs Turtles recordings “every hour of every day” to subscribers in Florida. Id. ¶ 2. Apart

from the bare allegation that Plaintiff “is engaged in the business of distributing, selling, and/or

licensing the reproduction, distribution, sale, and performance of its Pre-1972 Recordings,” id. ¶

5, and notwithstanding its contention that its recordings include “numerous iconic hits,” id. ¶ 2,

Plaintiff fails to allege a single instance in which it has licensed the public performance of its

recordings, that any radio broadcaster or other performer of music has ever requested such a

license from it, or that any third party has refused to take a license from Plaintiff because of

Sirius XM’s use of the recordings.


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Plaintiff also alleges that Sirius XM’s “use of the Pre-1972 Recordings is likely to cause

confusion, mistake or deception as to the source, sponsorship, affiliation or connection between

Plaintiff and the other Class Members, and Defendants.” Id. ¶ 33. Even though Sirius XM

(together with its predecessors) has been offering its service continuously since 2001, Plaintiff

neither identifies a single instance of actual confusion by anyone, nor alleges how Sirius XM’s

inclusion of Plaintiff’s songs among the millions of tracks it performs each year by thousands of

recording artists could possibly deceive or confuse the public into the mistaken belief that

Plaintiff is somehow sponsoring or affiliated with Sirius XM.

Related Actions

Plaintiff has filed nearly identical suits against Sirius XM in California and New York on

behalf of the same putative class, the only meaningful difference being that Plaintiff seeks relief

in those cases under California and New York law, rather than Florida law. Flo & Eddie, Inc. v.

Sirius XM Radio, Inc., No. BC 517032 (Cal. Super. Ct. L.A. Cnty. Aug. 1, 2013) (subsequently

removed to federal court); Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13-CV-5784 (CM)

(S.D.N.Y. Aug. 15, 2013). Sirius XM has moved to transfer this case and the California action

to the Southern District of New York, and to stay Sirius XM’s time to respond until the transfer

motions are decided. Those motions are pending. Sirius XM has filed a partial motion to

dismiss the complaint in the New York action on grounds similar to those argued in this motion.

III. ARGUMENT

THERE IS NO PUBLIC PERFORMANCE RIGHT FOR PRE-1972 RECORDINGS UNDER FLORIDA LAW

The Complaint hinges on the mistaken notion that Florida law affords to the owner of a

Pre-1972 Recording the exclusive right of public performance. Because no such right exists, no

liability arises out of Sirius XM’s broadcasting of Pre-1972 Recordings. This conclusion is


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compelled by (i) the decades-long efforts of the record industry to secure a first-ever

performance right for sound recordings in any venue, the legislative history of which confirms

the absence of state law, in Florida or elsewhere, providing for such a right (see infra, Section A)

and (ii) the lack of any cases finding an exclusive right of public performance for sound

recordings under the causes of action asserted by Plaintiff or Florida law more generally (see

infra, Sections B-D).

Insofar as those portions of the Complaint premised on a public performance right for

Pre-1972 Recordings fail to state a claim upon which relief may be granted, partial dismissal of

the Complaint is warranted. See, e.g., Hill v. Opus Corp., 841 F. Supp. 2d 1070, 1082 (C.D. Cal.

2011) (granting motion to dismiss parts of plaintiff’s claims); Hill v. Celebrity Cruises, Inc., No.

09–23815–CIV, 2011 WL 9379007, at *1, *3 (S.D. Fla. July 11, 2011); Carnival Corp. v. Rolls-

Royce PLC, No. 08-23318-CIV, 2009 WL 3861450, at *6 (S.D. Fla. Nov. 17, 2009). In the

alternative, pursuant to Rules 12(d) and 56(a) of the Federal Rules of Civil Procedure, the Court

could convert this motion to a partial motion for summary judgment addressed to that part of

each claim premised on an exclusive right of public performance.

A. The History of Failed Efforts by the Recording Industry To Obtain a Right of Public Performance for Sound Recordings

For nearly a century, the recording industry tried, and failed, to obtain a public

performance right for sound recordings. The legislative history of those efforts to amend the

Copyright Act to provide this sought-after right reflects the widespread and uniform

understanding, shared by Congress, the United States Copyright Office, the recording industry,


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and broadcasters alike as to the historic absence of such a right under state law, whether in

Florida or elsewhere.2

The words “sound recording” appeared for the first time in the Copyright Act in 1971,

following passage of the Sound Recording Act. This new grant of rights was limited: Federal

copyright protection was afforded only to recordings created on or after February 15, 1972, and

the scope of that protection was circumscribed. See Sound Recording Act §§ 1, 3. The stated

goal of the Sound Recording Act was to address the problem of rampant record piracy, which

had “rapid[ly] increase[d]” in preceding years due to technological advances. 117 Cong. Rec.

2002 (Feb. 8, 1971); see also H.R. Rep. No. 92-487, at 2 (1971); S. Rep. No. 92-72, at 1, 7

(1971). In furtherance of those goals, owners of qualifying sound recordings were granted

exclusive rights of reproduction and commercial distribution of their works. See 17 U.S.C. §

106(1), (3). At the same time, however, Congress determined not to extend to owners of sound

recordings the right to prevent others from publicly performing those recordings without license

authority. See Sound Recording Act §§ 1(a), 3; 17 U.S.C. § 114(a) (stating that sound recording

rights “do not include any right of performance under section 106(4)”); see also H.R. Rep. No.

92-487, at 14 (1971) (“[T]he exclusive right accorded by this bill does not extend to the

reproduction of the sounds themselves, as, for example, by playing a sound recording over the

radio.”). The record industry’s advocacy for a performance right was viewed by Congress as an

unnecessary augmentation of the rights needed to accomplish the main goal of the legislation.

See H.R. Rep. No. 104-274, at 11 (1995) (explaining that sound recordings “were not granted the

2 The Court may consider such legislative history on a motion to dismiss for failure to state a claim. See, e.g., Larach v. Standard Chartered Bank Int’l (Am.) Ltd., 724 F. Supp. 2d 1228 (S.D. Fla. 2010); Gary v. D. Agustini & Asociados, S.A., 865 F. Supp. 818 (S.D. Fla. 1994); Leggins v. Orlando Hous. Auth., No. 6:13-cv-232-Orl-37DAB, 2013 WL 937739 (M.D. Fla. Mar. 11, 2013); Schism v. United States, 972 F. Supp. 1398 (N.D. Fla. 1997).


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rights of public performance, on the presumption that the granted rights would suffice to protect

against record piracy”).

Congress’s denial of a performance right comported with the uniform understanding that,

unlike for the rights of reproduction and distribution, where a patchwork of state laws had

existed to address record piracy, there was no existing protection for public performance of

sound recordings at the state level. This recognition permeates repeated legislative efforts by the

record industry to expand legal protections to encompass public performances of sound

recordings. As early as the 1930s, record producers acknowledged that “the law up to date has

not granted” protection against radio stations’ “indiscriminate use of phonograph records.”

Revision of Copyright Laws: Hearings Before the Comm. on Patents, 74th Cong., 2d Sess. 622

(Comm. Print 1936) (Ex. A).3 This lament was repeated during 1947 hearings, with record

industry representatives noting that while “use of records . . . has become standard practice with

hundreds of radio stations,” the performing artist “has no rights at all beyond an original

agreement with the manufacturer.” Authorizing a Composer’s Royalty in Revenues from Coin-

operated Machines and to Establish a Right of Copyright in Artistic Interpretations: Hearings

Before Subcomm. on Patents, Trade-marks, and Copyrights of the Comm. on the Judiciary on

H.R. 1269, H.R. 1207, and H.R. 2570, 80th Cong., 1st Sess. 6 (Comm. Print 1947) (Ex. B).

During 1961 and 1962, performing artists similarly complained to Congress as to the absence of

royalties “from repeated use” of “[p]laying [records] on radios.” Economic Conditions in the

Performing Arts: Hearings Before the Select Subcomm. on Ed. of the Comm. on Ed. and Labor,

87th Cong., 1st & 2d Sess. 64-65 (Comm. Print 1962) (Ex. C).

3 Relevant excerpts of several older authorities cited herein are appended as Exhibits A to C.


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In connection with efforts by the recording industry to obtain a right of public

performance during the overhaul of the copyright laws that led to the Copyright Act of 1976, the

Register of Copyrights reported to Congress that a sound recording performance right had been

removed from the proposed general revision of federal copyright law because such change, in

practice, would “impose severe financial burdens on broadcasters.” Second Supplementary

Register’s Report on the General Revision of the U.S. Copyright Law, 218-21 (1975), available

at Melville B. Nimmer & David Nimmer, 9 Nimmer on Copyright, App. 16 (Lexis 2013). Prior

to enactment of the Digital Performance Rights in Sound Recordings Act of 1995, Pub. L. No.

104-39 § 3(3), 109 Stat. 336, which created a limited right in “digital audio transmissions” of

sound recordings at 17 U.S.C. § 106(6), the Recording Industry Association of America

acknowledged that, “[u]nder existing law, record companies and performers . . . have no rights to

authorize or be compensated for the broadcast or other public performance of their works.”

Testimony of Jason S. Berman Chairman and CEO of RIAA Before the Judiciary Subcomm. on

Counts & Intellectual Property: Hearing on H.R. 1506, (June 21, 1995) 1995 WL 371088

(Westlaw) (emphasis added). This was echoed by the broadcast industry’s trade association, the

National Association of Broadcasters, which testified that “public performance rights” in sound

recordings are “essentially alien to ways we have conducted our business for over 60 years” and

that their imposition “would be enormously disruptive and harmful.” Testimony of the NAB

Before the House Judiciary Comm. Subcomm. on Courts & Intellectual Property on H.R. 1506, §

C (June 21, 1995), 1995 WL 371107 (Westlaw).

B. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Common Law Copyright Infringement

Plaintiff asserts that: (1) it is the owner of common law copyrights in its Pre-1972

Recordings; (2) as the purported owner of such common law copyrights, Plaintiff possesses the


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exclusive right to perform its Pre-1972 Recordings; and (3) Sirius XM infringes these purported

common law copyrights by broadcasting Plaintiff’s Pre-1972 Recordings without a license.

Compl. ¶¶ 21-24. These assertions are incorrect.

First, to the extent Plaintiff ever owned any common law copyrights in its Pre-1972

Recordings, it no longer does. Plaintiff does not (and cannot) allege that any of its Pre-1972

Recordings have not been published. Under Florida law, “common law copyrights are lost

through publication.” DeSilva Constr. Corp. v. Herrald, 213 F. Supp. 184, 194 (M.D. Fla.

1962); see also Manasa v. Univ. of Miami, 320 So. 2d 467, 468 (Fla. Dist. Ct. App. 1975)

(affirming dismissal of common law copyright infringement claim because work at issue was

published, and “therefore, not subject to common law copyright”). As the appellate court in

Kisling v. Rothschild, 388 So. 2d 1310 (Fla. Dist. Ct. App. 1980), observed: “[t]he umbrella of

protection afforded by a common law copyright folds up and vanishes when the owner of the

product ‘publishes’ it, or in some manner dedicates it to the public.” Id. at 1312. This principle

applies to sound recordings like any other form of work otherwise capable of protection under

common law copyright. Once a sound recording has been disseminated to the public—and

Plaintiff’s “numerous iconic hits” unquestionably have been—“the performances embodied

within the recorded sounds lose common law copyright protection.” Int’l Tape Mfrs. Ass’n v.

Gerstein, 344 F. Supp. 38, 57 (S.D. Fla. 1972), vacated on other grounds, 494 F.2d 25 (5th Cir.

1974); see also Neva, Inc. v. Christian Duplications Int'l, Inc., 743 F. Supp. 1533, 1544 (M.D.

Fla. 1990) (explaining that “[u]pon the creation of a work, the author of the work is vested with a

copyright under state common law until the work is published”) (emphasis added).4

4 In CBS, Inc. v. Garrod, 622 F. Supp. 532 (M.D. Fla. 1985) (“CBS”), a case involving record piracy rather than broadcasting activities, the court concluded that sound recordings that had


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Second, even for unpublished works, the scope of protection afforded to common law

copyrights is limited to acts of reproduction and distribution. It does not extend to public

performance. As stated in DeSilva Construction, “there is not copyright infringement unless the

copyrighted work itself had been copied.” 213 F. Supp. at 198 (quoting Rochelle Asparagus Co.

v. Princeville Canning Co., 170 F. Supp. 809 (D.C. Ill. 1959)); see also Van Dusen v. Se. First

Nat’l Bank, 478 So. 2d 82, 87-88 (Fla. Dist. Ct. App. 1985) (limiting infringement to cases

where defendant publishes copies of a work in violation of the plaintiff’s right of first

publication); SmokEnders, Inc. v. Smoke No More, Inc., 184 U.S.P.Q. 309, 318 (S.D. Fla. 1974)

(noting need to prove “actual copying” in case involving unpublished teaching manuals). In

short, no Florida court has ever held that unlicensed public performances of Pre-1972

Recordings constitute copyright infringement. Nothing in the history or controlling body of

Florida law in any way cuts against the common understanding described in detail in Section A,

supra, that no such performance right exists.

C. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Unfair Competition

The elements of a Florida common-law unfair competition claim are most typically stated

as (1) deceptive or fraudulent conduct of a competitor, and (2) a likelihood of consumer

confusion. See 55 Fla. Jur. 2d Trademarks & Unfair Competition § 22; M.G.B. Homes, Inc. v.

Ameron Homes, Inc., 903 F.2d 1486, 1493 (11th Cir. 1990) (“Florida law requires that [plaintiff]

establish deceptive or fraudulent conduct of a competitor and likelihood of consumer

confusion.”) (citing Donald Frederick Evans & Assocs., Inc. v. Cont’l Homes, Inc., 785 F.2d

897, 914 (11th Cir. 1986)); Magical Mile, Inc. v. Benowitz, 510 F. Supp. 2d 1085, 1089-90 (S.D.

been published could nonetheless be protected under other common law doctrines, including unfair competition and conversion. We address CBS in more detail below. See, infra, Section C.


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Fla. 2007) (citing Stagg Shop of Miami, Inc. v. Moss, 120 So. 2d 39 (Fla. Dist. Ct. App. 1960)).

No Florida court has ever found unauthorized public performances of sound recordings to

constitute unfair competition under this test. Plaintiff’s woefully deficient unfair competition

claim must be dismissed because its threadbare and implausible allegations of deceptive or

fraudulent conduct by Sirius XM, consumer confusion, and competition between Plaintiff and

Sirius XM fail to satisfy the pleading standards under Rule 8 of the Federal Rules of Civil

Procedure as articulated by the U.S. Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662, 678-79

(2009) (“Iqbal”) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-57 (2007) (“Twombly”).

1. Plaintiff Has Failed to Plead Deceptive or Fraudulent Conduct or a Likelihood of Consumer Confusion

Plaintiff’s sole allegation concerning deceptive conduct or a likelihood of consumer

confusion is the conclusory assertion that Sirius XM’s “unauthorized use of the Pre-1972

Recordings is likely to cause confusion, mistake or deception as to the source, sponsorship,

affiliation or connection between Plaintiff and the other Class Members, and Defendants.”

Compl. ¶ 33. That statement does not come close to satisfying the pleading standards established

in Iqbal:

[T]he pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” . . . Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. . . . We “are not bound to accept as true a legal conclusion couched as a factual allegation.”

556 U.S. 662, 678-79 (2009) (quoting Twombly, 550 U.S. at 555-57).

Plaintiff does not allege any facts to support the legal conclusions concerning deceptive

conduct, fraud, and the likelihood of consumer confusion it hopes this Court will reach. There is

no factual allegation concerning Sirius XM’s open and notorious broadcasting of sound


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recordings that could be construed as evidencing deception or fraud. Plaintiff cannot allege even

a single instance of actual consumer confusion despite alleging that Sirius XM has been playing

its sound recordings “every hour of every day.” Compl. ¶ 2. Moreover, there is no factual

allegation that attempts to explain how anything Sirius XM does might cause confusion as to an

affiliation between Sirius XM and Plaintiff or the owners of other Pre-1972 Recordings

broadcast by Sirius XM. The Complaint simply gives no basis on which this Court could credit

Plaintiff’s naked assertion about fraud or a purported likelihood of consumer confusion. It is at

best a “legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678.

2. Plaintiff Has Failed to Plead That It Competes With Sirius XM as a Broadcaster

Perhaps in recognition of its inability to meet the pleading standards for a typical Florida

unfair competition claim, Plaintiff contends that it need only show “(A) time, labor and money

expended by the Plaintiff; (B) competition; and (C) commercial damage.” Compl. ¶ 1. To the

extent Plaintiff’s unfair competition claim is directed at Sirius XM’s broadcast activities, i.e., the

activities it contends are “the gravamen of the dispute,”5 Plaintiff is relying on an inapposite test

from a single outlier case involving the copying and sale of bootlegged records rather than

performances by a broadcaster. See CBS, 622 F. Supp. at 536. The CBS court adopted its

alternative formulation solely to deal with the specific problem of record piracy, and subsequent

cases have recognized its application is limited to that factual setting. See, e.g., Ediciones

Musicales Y Representaciones Internacionales, S.A. v. San Martin, 582 F. Supp. 2d 1358, 1361

(S.D. Fla. 2008) (“[I]n CBS, the court limited the availability of these elements to state a cause of

action for unfair competition to those cases involving record piracy.”); Workplace Corp. v. Office

Depot, Inc., No. 89-1485-CIV-T-13A, 1990 WL 106727, at *1 & n.2 (M.D. Fla. June 5, 1990)

5 Pl.’s Resp. to Def.’s Mot. To Transfer Venue at 11.


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(“As specifically stated in CBS, [the court’s] list of requisite elements extend[] only to cases

involving record piracy.”); Clever Covers, Inc. v. Storm Guard, Inc., No. 806CV1062T27MAP,

2006 WL 2691759, at *1 n.1 (M.D. Fla. Sept. 20, 2006). No case has ever applied CBS to public

performances like those made every day by Sirius XM and other radio broadcasters.

Even if the Court were to adopt this inapposite set of elements, Plaintiff’s performance-

based claims would still fail. Plaintiff does not adequately allege either (a) competition with

Sirius XM’s broadcast activities, or (b) any commercial damage that flows from them. As the

Florida appellate court has recognized:

The phrase “unfair competition” . . . refers unambiguously only to actions affecting competitors. This is consistent with the Florida case law that requires injury to a competitor as an essential element of any claim of unfair competition. Even giving the phrase “unfair competition” its broadest ordinary meaning, the offense must include at least two elements, “unfairness” and “competition.” This requirement that the offense include an element of rivalry is consistent with the plain meaning of the words and with recognized definitions. To define “unfair competition” simply to mean any act of a commercial enterprise which is unfair would be to expand the phrase to include all alleged wrongdoing by business and therefore include all manner of breach of contract, torts and violations of statutes, administrative regulations and the like. Such a boundless definition is therefore unreasonable.

Practice Mgmt. Assocs., Inc. v. Old Dominion Ins. Co., 601 So. 2d 587, 587-88 (Fla. Dist. Ct.

App. 1992) (per curiam). Numerous other courts are in accord. See, e.g., Third Party

Verification v. Signaturelink, 492 F. Supp. 2d 1314, 1325 (M.D. Fla. 2007) (“To state [a] claim

for unfair competition, the pleading party must allege that it competes with its opponent for a

common pool of customers.”); Home Design Servs., Inc. v. Park Square Enters., Inc., No. 6:02-

CV-637-ORL28JGG, 6:03-CV-595-ORL28JGG, 2005 WL 1027370, at *14 (M.D. Fla. May 2,

2005) (“Although Park Square might reasonably be seen as both a homebuilder and home

designer, there is no indication in the record that it competes with Home Design for a common

pool of customers. While Home Design is exclusively an architectural design firm which


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develops house plans for homebuilders, Park Square designs architectural plans for its own

purposes as a homebuilder.”); Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d

1356, 1362 (Fed. Cir. 2006) (“A claim of unfair competition in Florida arises under the common

law and, while elusive of precise definition, requires a plaintiff to prove, at minimum,

competition and unfairness.” (emphasis removed)).

Plaintiff does not plead competition between it and Sirius XM in a manner consistent

with the Iqbal/Twombly standard. The Complaint contains only the conclusory statement that

Sirius XM “unfairly and directly compet[es]” with Plaintiff and other members of the putative

class, Compl. ¶ 32, without a single factual allegation to support this “[t]hreadbare recital[] of the

elements of [the] cause of action.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

The Complaint does not, for example, allege that Sirius XM competes with the Plaintiff as a

creator, seller, or licensor of sound recordings, nor does it allege that Plaintiff offers a satellite

radio broadcast service (or any other broadcast service) in competition with Sirius XM. The

Complaint is devoid even of any allegations that Plaintiff has ever licensed a competitor of Sirius

XM to make public performances of Pre-1972 Recordings, or that Sirius XM has paid another

record company (that is, one of Plaintiff’s competitors) for the right to publicly perform its Pre-

1972 Recordings. Although each of the 100 works at issue was recorded more than 40 years

ago, Plaintiff does not point to a single broadcaster, bar, restaurant, retail establishment or other

third party that has ever taken a license from it for the right to perform any of its “numerous

iconic hits.” These shortcomings are fatal to the pleading.

Plaintiff fares no better with its attempt to plead “commercial damage.” In CBS, the

“damage” was the plaintiff’s failure to make a sale it would have made but for the record piracy.

No comparable damage is alleged to arise from the public performance of Pre-1972 Recordings


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here. While no subsequent Florida case has interpreted the “commercial damage” prong of the

CBS standard, cases from analogous settings suggest that commercial damage requires either

diminution of the value of the plaintiff’s product, or some loss suffered by the plaintiff that

would not have occurred absent defendant’s actions – i.e., something more than the defendant’s

failure to pay for its own use of the property. For example, in Manufacturing Research Corp. v.

Greenlee Tool Co., 693 F.2d 1037 (11th Cir. 1982), the Eleventh Circuit explained that

cognizable damage under an unfair competition claim (there based on tortious interference)

could result from statements by the defendant “either calculated to diminish the market for

[plaintiff’s product] or made knowing the market was substantially certain to be diminished.” Id.

at 1040. In Agee v. Paramount Communications, 59 F.3d 317 (2d Cir. 1995), the court dismissed

the sound recording owner’s unfair competition claim as “baseless” because the plaintiff “failed

to plead facts indicating that his record sales or licensing revenues have in any way been affected

by [defendants’] use of the recording.” Id. at 327. Consequently, “[t]here is no reasonable

ground for believing that [plaintiff] has suffered economic losses as a result of [the defendants’]

actions, or that consumers think less of the recording.” Id.

The Complaint here fails for similar reasons. Plaintiff alleges that Sirius XM has

“impaired [its] ability to sell, license, lawfully exploit, or otherwise control [its] pre-1972

Recordings” (Compl. ¶ 4) and done “enormous and irreparable harm” (id.) in an amount

exceeding $100 million (id. ¶¶ 26, 33). But these conclusory and unsupported allegations fail to

describe any actual financial losses or lost dealings Plaintiff has suffered due to Sirius XM’s

broadcasting of its Pre-1972 Recordings. Unlike in Manufacturing Research Corp., Plaintiff has

failed to allege any actual facts as to how its market has been “diminished” (that is, how its

ability to sell its Pre-1972 Recordings has been “impaired”) by Sirius XM’s performances. And


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just as in Agee, Plaintiff has “failed to plead facts indicating that [its] record sales or licensing

revenues have in any way been affected by [Sirius XM’s] use of the recordings” – or that

Plaintiff “has suffered economic losses . . . or that consumers think less of the recording[s].” See

Agee, 59 F.3d at 327. Again, Plaintiff’s claimed injury is merely that Sirius XM (like every

other broadcaster) does not pay license fees to perform Plaintiff’s recordings. This is not a

legally cognizable injury under Florida unfair competition law. Accordingly, Plaintiff’s claim

should be dismissed insofar as it is based on unauthorized performances of its works.

D. Sirius XM’s Public Performance of Plaintiff’s Pre-1972 Recordings Does Not Constitute Conversion

Plaintiff does not allege facts sufficient to state a claim for conversion. Under Florida

law, “conversion is an unauthorized act which deprives another of his property permanently or

for an indefinite time.” Small Bus. Admin. v. Echevarria, 864 F. Supp. 1254 (S.D. Fla. 1994)

(Moore, J.) (citing Nat’l Union Fire Ins. Co. v. Carib Aviation, Inc., 759 F.2d 873 (11th Cir.

1985)); see Shelby Mut. Ins. Co. of Shelby, Ohio v. Crain Press, Inc., 481 So. 2d 501, 503 (Fla.

Dist. Ct. App. 1985). Dispossession or deprivation of the property is essential to the tort, and it

is absent here. As the Florida Supreme Court explained nearly 60 years ago:

[The] [e]ssential element of a conversion is a wrongful deprivation of property to the owner…. The gist of a conversion has been declared to be not the acquisition of the property of the wrongdoer, but the wrongful deprivation of a person of property to the possession of which he is entitled. A conversion consists of an act in derogation of the plaintiff’s possessory rights, and any wrongful exercise or assumption of authority over another’s goods, depriving him of the possession, permanently or for an indefinite time.

Star Fruit Co. v. Eagle Lake Growers, 33 So. 2d 858, 860 (Fla. 1948) (en banc) (internal

quotation marks and citations omitted); see also id. (describing conversion as “detaining goods

so as to deprive the person entitled to the possession of them his dominion over them” and

“exercise of dominion to the exclusion and in defiance of the plaintiff’s right” (internal quotation


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marks and citations omitted)). Moreover, to state a claim for conversion, a plaintiff must show

not just that it was deprived of its property, but that the defendant intended to deprive the

plaintiff of possession:

The Court has examined the cases addressing this issue and concludes that if the Supreme Court chose to revisit the issue, it would not disturb its prior rulings holding that intent is a necessary element of conversion. Specifically, the Court follows the Third District Court of Appeals decision in Senfeld, which found that “the essence of conversion is not the possession of property by the wrongdoer but rather such possession in conjunction with a present intent … to deprive the person entitled to possession of the property.”

Small Business Admin., 864 F. Supp. at 1262-63 (quoting Senfeld v. Bank of Nova Scotia Trust

Co. (Cayman) Ltd., 450 So. 2d 1157, 1161 (Fla. Dist. Ct. App. 1984)).

In other words, conversion does not arise merely where a defendant benefits by the use of

property without paying for it, but only where that use deprives the property owner of its

possession. As this Court has explained: “Acquisition of the property is unimportant. The

essence of the tort of conversion is a party’s refusal to surrender the property after demand has

been made.” Small Business Admin., 864 F. Supp. at 1262 (citing Murrell v. Trio Towing Serv.,

Inc., 294 So. 2d 331 (Fla. Dist. Ct. App. 1974) and Star Fruit Co., supra); see also Marine

Transp. Servs. Sea-Barge Grp., Inc. v. Python High Performance Marine Corp., 16 F.3d 1133,

1140 (11th Cir. 1994) (explaining that “the essence of the tort is not the acquisition of the

property; rather, it is the wrongful deprivation” (internal quotation marks and citations omitted)).

Here, no demand was made and there is nothing to surrender. Not surprisingly, no Florida court

has ever held the unlicensed public performance of sound recordings to constitute conversion of

those recordings. Plaintiff cannot state a conversion claim because Sirius XM’s performances of

copies of the Plaintiff’s recordings do not deprive or dispossess Plaintiff of its master recordings.

Plaintiff does not even attempt to allege that it does (much less that Sirius XM acts intentionally


20 US_ACTIVE:\44367133\10\76061.0012

to deprive Plaintiff of its recordings).6

Again, CBS is not to the contrary. As noted above, the case involved record piracy—that

is to say, a defendant whose sale of bootleg records interfered with and deprived the plaintiff of

the opportunity to sell its own copies. Thus, while the case does represent an extension of the

traditional conversion tort from tangible items to the conversion of “intangible interests in a

business venture,” see Compl. ¶ 1, the logic of the decision puts it squarely in line with the

requirements outlined above: namely, that the defendant be deprived of its property as a result of

the defendant’s actions (in that case, sales revenue the plaintiff otherwise could have earned and

“possessed” itself).7 That logic does not extend to unauthorized performances that do not

interfere with any of Plaintiff’s existing business activities.

IV. CONCLUSION

For the foregoing reasons, the Complaint should be dismissed with prejudice to the extent

it is premised on a public performance right for Pre-1972 Recordings under Florida law.

6 As to the latter, the closest Plaintiff comes is the boilerplate recitation of the required elements for obtaining punitive damages, i.e., that Sirius XM acted with “oppression, fraud and/or malice.” Compl. ¶ 44. As Iqbal instructs, however, courts “‘are not bound to accept as true a legal conclusion couched as a factual allegation.’” 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555); see also Hogan v. Provident Life & Acc. Ins. Co., No. 6:08-cv-1897-Orl-19KRS, 2009 WL 2169850, at *5-7 (M.D. Fla. July 20, 2009) (rejecting punitive damage claim as “merely conclusory” and thus in violation of Iqbal as well as substantive punitive damage pleading standard of Fla. Stat. § 768.72, which requires “reasonable showing” that demonstrates “a reasonable basis for recovery of such damages”). 7 This interpretation is confirmed by the cases on which CBS relies. In re Corbin’s Estate, for example, involved a defendant who sold a deceased’s entire business to a third party in a way that deprived the heirs of possession of the business and its income stream and profits. 391 So. 2d 731, 731-32 (Fla. Dist. Ct. App. 1980). Similarly, In re Aqua Clear Techs., Inc. involved the taking of a business phone number whereby calls to the number would be diverted to the defendant rather than to the estate of the original “owner” of the phone number. 361 B.R. 567, 574-75 (Bankr. S.D. Fla. 2007). Unlike these situations, where the “business interest” could be possessed by one, and only one, person at a time, Sirius XM’s performance of its copies of the class members’ recordings does not deprive them of anything.


21 US_ACTIVE:\44367133\10\76061.0012

Dated: November 14, 2013 Respectfully submitted,

/s/ Edward Soto Edward Soto (Fla. Bar No. 0265144) [email protected] Weil, Gotshal & Manges LLP 1395 Brickell Ave, Suite 1200 Miami, FL 33131 (305) 577-3100 R. Bruce Rich (pro hac vice pending) Bruce S. Meyer (pro hac vice pending) Benjamin E. Marks (pro hac vice pending) Todd Larson (pro hac vice pending) John R. Gerba (pro hac vice pending) Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Tel: 212-310-8000 Michael S. Oberman (pro hac vice pending) Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Tel: 212-715-9294



22 US_ACTIVE:\44367133\10\76061.0012

CERTIFICATE OF SERVICE I hereby certify that on November 14, 2013, I electronically filed the foregoing with the

Clerk of the Court for the United States District Court for the Southern District of Florida by

using the CM/ECF system, which sent notification of such filing to all CM/ECF participants. All

other counsel shall be served by United States mail.

Plaintiff Flo & Eddie, Inc.’s Counsel: Glen H. Waldman Eleanor T. Barnett Jason Gordon Heller Waldman, P.L. 3250 Mary Street, Suite 102 Coconut Grove, Florida 33133 Henry Gradstein Maryann R. Marzano Robert E. Allen Gradstein & Marzano, P.C. 6310 San Vincente Blvd., Suite 510 Los Angeles, California 90048

/s/ Edward Soto________________ Edward Soto (Fla. Bar No. 0265144) [email protected] WEIL, GOTSHAL & MANGES LLP 1395 Brickell Ave, Suite 1200 Miami, FL 33131 (305) 577-3100 Attorneys for Defendant Sirius XM Radio Inc.



3250 MARY STREET, SUITE 102 ● COCONUT GROVE, FLORIDA 33133 {00110481.DOCX }

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Case No. 13-CV-23182

FLO & EDDIE, INC., a California corporation, individually and on behalf of all others similarly situated,


Defendants.

/

AMENDED CLASS ACTION COMPLAINT1

Plaintiff FLO & EDDIE, INC. (“Plaintiff” or “Flo & Eddie”), by and through its

undersigned counsel, files this class action Amended Complaint on behalf of itself and on behalf

of all other similarly situated owners of sound recordings of musical performances that initially

were “fixed” (i.e., recorded) prior to February 15, 1972 (the “Pre-1972 Recordings”) against

Defendants SIRIUS XM RADIO, INC. (“Defendant” or “SiriusXM”) and DOES 1-10, and

alleges as follows:


1. Florida common law and statutory law provide protection for Pre-1972 Recordings

from their unauthorized reproduction, performance, distribution or other exploitation, and permit

the owners of Pre-1972 Recordings the right to bring the following separate claims for relief

1 Pursuant to Fed. R. Civ. P. 15(a)(1)(B), Plaintiff is filing this Amended Complaint as a matter of course in lieu of filing a Response to Defendant, SIRIUS XM RADIO, INC.’s Partial Motion to Dismiss, since the Amended Complaint is being filed within twenty-one (21) days of the date of the Motion.




against parties who engage in such unauthorized actions: (a) common law copyright

infringement; (b) common law misappropriation/unfair competition; (c) common law

conversion; (d) civil theft under Fla. Stat. § 772.11 for violations of Fla. Stat. § 812.014(1); and

(e) preliminary injunction and permanent injunction. A person commits common law copyright

infringement of a sound recording not protected by the US Copyright Act in Florida by doing,

without the consent of the owner, anything which is the sole right of the owner to do, including

reproducing, distributing, performing or otherwise exploiting such recording. The elements of a

misappropriation/unfair competition claim involving record piracy in Florida are: (A) time,

labor and money expended by the Plaintiff; (B) competition; and (C) commercial damage. A

claim for conversion exists for a wrongful taking of intangible interests in a business venture.

Finally, Fla. Stat. § 812.014(1) provides that one is liable for theft if one “knowingly obtains or

uses the property of another with intent to appropriate the property to his or her own use.”

“Property” is defined under Section 812.012(4)(b) as “anything of value” including “[t]angible

or intangible personal property.”






February 15, 1972, and which have been and remain popular and valuable, notwithstanding

changes in how recordings are made, distributed and performed. Plaintiff’s Pre-1972 Recordings

are the product of a significant investment of time, effort, money and creative talent in creating,




manufacturing, advertising, promoting, selling and licensing its recordings. In return, Plaintiff

receives revenues, royalties and other compensation from its ongoing licensing and exploitation

of these works.

3. Plaintiff receives payments for, among other uses, the distribution, reproduction

and digital public performance of its Pre-72 Recordings, including by offering for sale (directly

or through licenses) compact discs and digital music files for download, by licensing them to

digital services (including for digital streaming to the public), and licensing them for use in

motion pictures, television programs and commercials. The payments that Plaintiff receives are

a main source of revenue used to pay Plaintiff’s ongoing investment and expenses, and to

compensate its principals, employees and representatives for their talent and work in creating the

Pre-72 Recordings and for administering and collecting revenue generated by such works.

4. Digital music streaming is becoming integral to the dissemination of music. As

technology changes and greater numbers of people listen to music via digital transmissions in

lieu of purchasing music on CDs or digital music files, Plaintiff relies increasingly on revenues

from the digital public performance of music, including Pre-72 Recordings. It is extremely

important to Plaintiff’s business that those who make a commercial use of Plaintiff’s Pre-72

Recordings obtain licenses and pay Plaintiff for their use of Pre-72 Recordings.

5. Defendant SiriusXM is the sole provider of satellite radio service in the United

States, known as “Sirius Satellite Radio,” “XM Satellite Radio” and “SiriusXM Satellite Radio”

(individually and collectively, the “Service”). SiriusXM uses satellite technology to transmit the

Service to its subscribers. SiriusXM’s channels are beamed from the ground to satellites, which

then transmit digital audio files to SiriusXM receivers possessed by its subscribers. Over the




past few years, SiriusXM has expanded into Internet-based digital streaming transmissions,

increasing the number of its subscribers to over 25 million and earning billions of dollars in

revenue.

6. The Service is distributed in Florida to its subscribers through (a) satellite digital

transmission directly to subscribers via digital radios manufactured or licensed by SiriusXM; (b)

satellite digital transmission to subscribers of other services, such as DIRECTV Satellite

Television Service and Dish Network Satellite Television Service via digital set top boxes

manufactured or licensed by DIRECTV or Dish; and (c) the Internet, by way of (i) digital media

streaming devices, such as Roku, digital radios and home audio systems, such as Sonos; (ii) its

website at www.SiriusXM.com; or (iii) computer, smart phone and other mobile applications for

various operating systems, including Apple iOS, Android, Windows, Blackberry and HP webOS.

As part of the Service, many subscribers in Florida are also able to: (A) download the stream of

a selected channel on the Service, allowing later or multiple listenings of the sound recordings

previously streamed during the selected time period; (B) download particular sound recordings,

allowing later or multiple listenings of such sound recordings; (C) download particular programs

incorporating sound recordings as part of the Service’s “On Demand” feature, allowing later or

multiple listenings of such sound recordings; and (D) allow subscribers to pause, rewind and

replay sound recordings using the Service’s “Replay” feature or its “My SXM” feature.

7. SiriusXM sells the Service to subscribers for $14.49 per month for its “Select”

package and $17.99 per month for its “Premier” package. The “Select” package provides over

165 satellite radio channels to its subscribers, including around-the-clock “commercial-free

music, sports, talk, and entertainment.” Of the seven categories into which SiriusXM




characterizes its channels (for example, “Sports Talk/Play-by-Play,” “News & Issues,” and

“Comedy”), by far the largest category is “Commercial-Free Music,” which SiriusXM claims has

72 channels (The second-largest category, “Talk & Entertainment,” has only 22 channels.).

8. The significant value of Pre-72 Recordings to SiriusXM’s business and the

popularity of Pre-72 Recordings among its paying subscribers is evidenced by, among other

things, its advertising and promotion of the availability of Pre-72 Recordings on the Service. A

significant portion of SiriusXM’s channels feature classic recordings, including channels

exclusively devoted to continuous public performances of the most popular Pre-72 Recordings

by well-known recording artists.

9. SiriusXM uses Plaintiff’s Pre-72 Recordings by distributing, reproducing and then

publicly performing them to millions of SiriusXM subscribers. Additionally, SiriusXM has

copied Plaintiffs’ Pre-72 Recordings without Plaintiff’s consent. Plaintiff is informed and

believes, and on that basis alleges, that SiriusXM has done so, among other ways, by obtaining

Plaintiff’s recordings and copying them to its servers and to its satellites. SiriusXM then uses

those unauthorized copies of Plaintiff’s Pre-72 Recordings to transmit the performances

embodied thereon to its subscribers. Plaintiff is informed and believes, and on that basis alleges,

that in such way, SiriusXM has distributed, reproduced and publicly performed Plaintiff’s Pre-72

Recordings numerous times throughout the United States, including in Florida.











11. By its conduct, SiriusXM not only deprives Plaintiff of the revenues to which it and

others are entitled, but also places those streaming services that do obtain licenses from, account

to, and pay Plaintiff for the performance of Plaintiff’s Pre-72 Recordings in a competitive

disadvantage. SiriusXM’s refusal to pay for its continued use of Pre-72 Recordings directly

contravenes Florida law and policy, which always have provided equal, if not greater, rights to

owners of sound recordings than the federal Copyright Act.

12. In 1972, Congress amended the United States Copyright Act to add for the first

time “sound recordings” to the list of works protected under federal copyright law. 17 U.S.C. §

102(a)(7) (2013). At the same time, Congress also preserved “any rights or remedies under the

common law or statutes of any State” with respect to sound recordings “fixed” before February

15, 1972. 17 U.S.C. § 301(c) (2013). As a result, pre-existing Florida protection for Pre-72

Recordings was left untouched and subject to evolution and refinement by the courts. Congress

initially limited the federal sound recording copyright to include certain of the exclusive rights

conferred on other works – namely, the rights of reproduction, adaptation, and distribution – and

to exclude the right to publicly perform sound recordings. Florida law has never delimited,

either explicitly or implicitly, the scope of common law protection of Pre-72 Recordings, and did

not exclude the right of public performance from the rights of owners in Pre-72 Recordings.

13. This broad protection afforded to Pre-72 Recordings is consistent with the

recognition by Florida courts of critical, important public policy interests in providing strong




state law protection for sound recordings. These interests include ensuring that record

companies receive compensation from their substantial expenditure of effort, skill and money in

creating, marketing and exploiting recorded performances, as well as ensuring that the owners of

sound recordings possess adequate remedies against those who misappropriate and profit from

such performances. Florida’s protections for sound recordings thus are complete, providing

exclusive ownership and rights in Pre-72 Recordings that are not limited in any way, and that

include any conduct by which individuals or entities seek to unfairly compete and profit from the

skill and labor of Plaintiff by appropriating and exploiting Pre-72 Recordings for their own

benefit, including by unauthorized and unlicensed reproduction and public performance of these

recordings.

14. The need for effective state law protection of Pre-72 Recordings is especially great

today. Pre-72 Recordings comprise a significant and important share of the overall body of

existing musical recordings, and include some of the most popular and valued recordings in

history. Many digital radio channels and services are dedicated entirely to the dissemination and

performance of Pre-72 Recordings, such as classic rock, jazz, R&B, and classical recordings.

The rise of digital media has made the threat to Pre-72 Recordings acute, as virtually anyone

with a computer and an Internet connection can copy and then distribute and perform high-

quality music instantaneously to millions. As digital technology has improved, the cost of digital

services has diminished, and, as a result music consumption habits have changed. Music

consumers increasingly obtain and enjoy music via online or satellite “radio” or digital streaming

services instead of purchasing CDs or digital music files.




15. To address the anticipated shift in music consumption habits and the rise of digital

radio services and, therefore, the need to provide federal protection for the performance of

copyrighted sound recordings, Congress passed the Digital Performance Rights in Sound

Recordings Act (“DPRA”), granting owners of post-72 copyrighted sound recordings the right to

“perform the copyrighted work publicly by means of a digital audio transmission.” 17 U.S.C.

§ 106(6) (2013).

16. Florida’s protection for Pre-72 Recordings has never been less extensive than

federal copyright protection for post-72 recordings. Florida had provided common law

protection for Pre-72 Recordings without any exclusions and including the right of public

performance. Those, like SiriusXM, who build their business and make money from the

copying, reproduction and public performance of Pre-72 Recordings must obtain the right under

Florida law to use them and must compensate their owners.








18. Simply stated, SiriusXM has disregarded the Plaintiff’s and other Class Members’

exclusive ownership of their Pre-1972 Recordings in Florida, impaired their ability to sell,

license, lawfully exploit, or otherwise control their Pre-1972 Recordings as permitted under




Florida law, and misappropriated/unfairly competed, converted and stolen same for its own

financial gain. SiriusXM’s conduct is causing, and will continue to cause, enormous and

irreparable harm to Plaintiff and the other Class Members unless compensatory and punitive


infringement, misappropriation/unfair competition, conversion and civil theft of the Pre-1972

Recordings.







money, time, effort, and creative talent in creating, advertising, promoting, selling and licensing






recordings initially “fixed” before February 15, 1972, and that the federal Copyright Act does not


quoted above, Florida law protects the exclusive ownership of Plaintiff and the other Class

Members to their Pre-1972 Recordings in Florida.






York. The Court has personal jurisdiction over Defendant in that Defendant has offices

throughout Florida, including, without limitation, in Miami, Jupiter, Deerfield Beach and Boca

Raton, Defendant is engaged in tortious conduct in Florida, and Defendant’s conduct causes

injury to Plaintiff and the other Class Members in Florida.





different States.


Defendant maintains several offices in the Southern District of Florida and a substantial part of

the events giving rise to the claims alleged herein occurred in the Southern District of Florida.












“Defendants”).




Recordings reproduced, performed, distributed or otherwise exploited by Defendants in Florida

without a license or authorization to do so during the period from August 29, 2009 to the present.

Plaintiff reserves the right to modify this definition of the Class after further discovery; the Court

may also be requested to utilize and certify subclasses in the interests of ascertainability,

manageability, justice and/or judicial economy.






streamed to subscribers in Florida, and that such metadata contains the name and location of the

owners thereof. The Class members are further ascertainable through methods typical of class

action practice and procedure.


Recordings infringed, misappropriated/unfairly competed, converted and/or stolen in Florida by

Defendants number in the millions and are owned by many thousands of Class Members. It is

therefore impractical to join all of the Class Members as named Plaintiffs. Further, the claims of




the Class Members may range from smaller sums to larger sums. Accordingly, using the class

action mechanism is the most economically feasible means of determining and adjudicating the

merits of this litigation.



it seeks to represent. Plaintiff and the other Class Members have all been subject to

infringement, misappropriation / unfair competition, conversion and theft of their Pre-1972

Recordings in Florida, have sustained actual pecuniary loss and face irreparable harm from

Defendants’ continued infringement, misappropriation / unfair competition, conversion and theft

of their Pre-1972 Recordings.




rights in connection with their creative work. Plaintiff has raised viable claims for infringement,

misappropriation/unfair competition, conversion and theft of the type well established in Florida

and reasonably expected to be raised by Class Members. Plaintiff will diligently pursue those

claims. If necessary, Plaintiff may seek leave of the Court to amend this Complaint to include

additional class representatives to represent the Class or additional claims as may be appropriate.

Plaintiff is represented by experienced, qualified and competent counsel who are committed to

prosecuting this action.










otherwise exploited Pre-1972 Recordings in Florida;


other exploitation of Pre-1972 Recordings in Florida constitutes common law copyright

infringement under Florida law;


other exploitation of Pre-1972 Recordings in Florida constitutes misappropriation / unfair

competition under Florida law;

(D) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in Florida constitutes conversion under Florida

law;

(E) Whether Defendant SiriusXM’s reproduction, performance, distribution or

other exploitation of Pre-1972 Recordings in Florida constitutes civil theft in violation of

Fla. Stat. §§ 722.11 and 812.014(1);

(F) The basis on which restitution and/or damages to all injured members of


(G) Whether Defendant SiriusXM’s violation of Florida common law for





(H) Whether Defendant SiriusXM’s violation of Florida common law for



(I) Whether Defendant SiriusXM’s violation of Florida’s laws against

misappropriation/unfair competition entitles the Class Members to recover punitive

damages;

(J) Whether Defendant SiriusXM’s violation of Florida’s laws against

misappropriation / unfair competition is continuing, thereby entitling Class Members to

injunctive or other relief;

(K) Whether Defendant SiriusXM’s violation of Florida’s laws against

conversion entitles the Class Members to recover punitive damages;

(L) Whether Defendant SiriusXM’s violation of Florida’s laws against

conversion is continuing, thereby entitling Class Members to injunctive or other relief;

(M) Whether Defendant SiriusXM’s violation of Fla. Stat. § 812.014(1) for

civil theft entitles the Class Members to recover treble the amount of compensatory

damages in accordance with Fla. Stat. § 772.11; and

(N) Whether Defendant SiriusXM’s violation of Fla. Stat. § 812.014(1) for

civil theft is continuing, thereby entitling Class Members to injunctive or other relief.





















33. Defendants have engaged in common law copyright infringement,

misappropriation/unfair competition, conversion and civil theft, which has affected all of the

Class Members such that final and injunctive relief on behalf of the Class as a whole is efficient

and appropriate.

FIRST CLAIM FOR RELIEF


34. Plaintiff hereby incorporates the allegations set forth in paragraphs 1 through 33

above as though set forth in full herein.





copyright protection under the law of the State of Florida.







Defendants are not, and at all relevant times were not, entitled to or authorized to reproduce,


38. The reproduction, performance, distribution or other exploitation by Defendants of

unauthorized copies of the Pre-1972 Recordings, including, without limitation, Plaintiff’s

Recordings, constitute infringement of Plaintiff and the Other Class Member’s common law



Recordings.



by Plaintiff and the other Class Members and publicly perform these recordings in Florida for

their subscribers as set forth in paragraph 3, above. Defendants have disregarded the Plaintiff’s

and other Class Members’ copyrights in and exclusive ownership of their Pre-1972 Recordings,




impaired their ability to sell, lawfully exploit, or otherwise control their Pre-1972 Recordings, all

for their own financial gain.
















Members’ rights in and exclusive ownership of their Pre-1972 Recordings in Florida.

SECOND CLAIM FOR RELIEF

(Misappropriation/Unfair Competition)


above as though set forth herein.






Florida.

45. Plaintiff’s Pre-1972 Recordings are valuable assets to Plaintiff. Plaintiff is engaged

in the selling and licensing of all forms of distribution, reproduction, performance or other

exploitation of their Pre-1972 Recordings, including, without limitation, by selling physical

compact discs and digital Phonorecord deliveries, licensing distribution and performances via

digital streaming transmission and licensing the master use in audio-visual recordings, such as

movies and commercials. From inception, such Pre-1972 Recordings have generated for

Plaintiff millions of dollars in revenues from such selling and licensing activities. Plaintiff’s

licensing the distribution of the Pre-1972 Recordings via digital streaming transmission has

increased significantly over the past several years, and now represent a significant portion of the

overall revenues received by Plaintiff.

46. Through marketing and operating the Service, Defendants are using and exploiting

the Pre-1972 Recordings without license or payment for Defendants’ financial gain and

commercial advantage. Defendants’ copying, distribution, reproduction and performance of Pre-

1972 Recordings through the Service compete with Plaintiff in several ways. First, Defendants

copying, distribution, reproduction and performance of the Pre-1972 Recordings without a

license and without payment place a significant, unfair and anticompetitive downward pressure

on the licensing fees Plaintiff is able to charge other services in the marketplace who do license

and pay for such rights from Plaintiff, resulting in a direct financial loss to Plaintiff. Second, as

digital transmissions are substituting over time for sales of sound recordings, Defendants are




diverting to themselves income Plaintiff would have otherwise collected from sales of Plaintiff’s

Pre-1972 Recordings, resulting in Defendants’ obtaining business that rightfully belongs to

Plaintiff, and lost dealings and lost profits to Plaintiff from Defendants’ anticompetitive acts.

Such actions by Defendants are designed for their commercial benefit to the detriment of

Plaintiff and the other Class Members. As a result, Plaintiff has been harmed by lost license fees

and lost sales.

47. Without a license or payment, SiriusXM copies, distributes, reproduces and

performs the Pre-1972 Recordings, and allows its subscribers to: (a) listen to Pre-1972

Recordings via satellite or online digital audio transmissions without purchasing or licensing

them; (b) replay, skip and remove (for such subscriber) sound recordings on certain channels

through its “Replay” feature and its “MySXM” feature; and (c) download Pre-1972 Recordings

to a subscriber’s device, including through its OnDemand feature.








49. Plaintiff and the Other Class Members have expended significant time, labor and

money in the making, marketing and distributing the Pre-1972 Recordings. Defendants have

paid nothing to Plaintiff or the Other Class Members for reproducing, performing, distributing or




otherwise exploiting the Pre-1972 Recordings. Without expending any time, labor or money of

its own, Defendants have simply appropriated the commercial qualities, reputation and salable

properties of the Pre-1972 Recordings, including, without limitation Plaintiff’s Recordings, by

unfairly and directly competing with Plaintiff and the other Class Members’ use, sale,

distribution and exploitation of the Pre-1972 Recordings. In so doing, Defendants have

undermined Plaintiff and the other Class Members’ substantial creative and financial investment

for Defendants’ own commercial benefit and have commercially damaged the market value of

the licenses Plaintiff and the Other Class Members are now and had been able to negotiate with

third parties to reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings.


Members’ rights in and to the Pre-1972 Recordings, and constitute misappropriation and unfair

competition involving record piracy under Florida law.



























THIRD CLAIM FOR RELIEF

(Conversion)





Florida.




56. Plaintiff and each Class Member have, and for all times relevant herein has had, an

intangible property interest in the time, effort and expense of producing the Pre-1972

Recordings. Additionally, as set forth in paragraphs 20 through 24 above, Plaintiff and each

Class Member have a common law copyright in each of the Pre-1972 Recordings.

57. Plaintiff and the Class Members created and produced the Pre-1972 Recordings as

part of a business venture to commercially reproduce, perform, distribute and otherwise exploit

the Pre-1972 Recordings.

58. By their acts and conduct alleged above, Defendants have converted Plaintiff’s and

the Class Members’ property rights in their Pre-1972 Recordings, including, without limitation

Plaintiff’s Recordings, for Defendants’ own use and wrongful disposition for financial gain.

59. As a direct and proximate result of Defendants’ conversion, Plaintiff and the

members of the Class have been damaged, and Defendants have been unjustly enriched, in an

amount that is not as yet fully ascertained but which Plaintiff is informed and believes, and

alleges thereon, exceeds $100,000,000 according to proof at trial. Defendants are constructive

trustees for the benefit of Plaintiff and Class Members, and the Court should order Defendants to

convey to Plaintiff and the Class Members the gross receipts received or to be received from

Defendants conversion of the Pre-1972 Recordings.













temporary, preliminary and permanent injunctions prohibiting further acts of conversion of their

Pre-1972 Recordings.

FOURTH CLAIM FOR RELIEF

(Civil Theft under Fla. Stat. § 772.11 for violations of Fla. Stat. § 812.014)

(Statutory Theft under Fla. Stat. § 812.014)




owners of all right, title and interest in and to their Pre-1972 Recordings and possession thereof

in Florida.


to copy, reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings in any

manner. Defendants are not, and at all relevant times were not, entitled to or authorized to use of

the Pre-1972 Recordings for copying, reproduction, performance, distribution or other

exploitation.

65. By their acts and conduct alleged above, Defendants knowingly obtained and used

the Pre-1972 Recordings with the intent to temporarily or permanently appropriate the Pre-1972




Recordings, including, without limitation Plaintiff’s Recordings, for Defendants’ own use and

for the use of the subscribers of the Service, and by so doing, Defendants have committed

statutory theft pursuant to Fla. Stat. § 812.014.




Plaintiff’s rights. Accordingly, Plaintiff and the Class Members are entitled to an award of treble

the amount of compensatory damages against Defendants, and each of them, pursuant to Fla.

Stat. § 772.11(1).

67. Plaintiff and each Class Member are also entitled to reasonable attorney’s fees and

court costs pursuant to Fla. Stat. § 772.11(1).




temporary, preliminary and permanent injunctions prohibiting further acts of statutory theft of

their Pre-1972 Recordings.

69. Plaintiff has submitted the demand letter attached hereto as Exhibit B required by

Fla. Stat. §772.11(1) as required to sustain a claim for Civil Theft. Thirty (30) days have run

since the demand was sent.




FIFTH CLAIM FOR RELIEF

(Preliminary Injunction and Permanent Injunction)



71. Plaintiff and each Class Members are, and at relevant times were, the exclusive

owners of all right, title and interest in and to their Pre-1972 Recordings and possession thereof

in Florida.


to copy, reproduce, perform, distribute or otherwise exploit the Pre-1972 Recordings in any

manner. Defendants are not, and at all relevant times were not, entitled to or authorized to use of

the Pre-1972 Recordings for copying reproduction, performance, distribution or other

exploitation.

73. By their acts and conduct alleged above, Defendants knowingly obtained and used

the Pre-1972 Recordings with the intent to temporarily or permanently appropriate the Pre-1972

Recordings, including, without limitation Plaintiff’s Recordings, for Defendants’ own use and

for the use of the subscribers of the Service.

74. Based on the facts alleged, Plaintiff and the other Class Members have a substantial

likelihood of success on the merits of their claims.

75. Defendants’ infringing conduct has caused, and is causing, substantial and

irreparable injury and damage to Plaintiff and the other Class Members in an amount not capable

of determination, and, unless restrained, will cause further irreparable injury, leaving Plaintiff

and the other Class Members without an adequate remedy at law.




76. The need to protect the copyrighted works of Plaintiff and the other Class Members

outweighs any harm that may be suffered by Defendants if injunctive relief is granted.

77. The public interest will be served by awarding Plaintiff and the other Class

Members injunctive relief as it will uphold the protection of copyrights and prevent infringement

upon such rights.

78. By reason of the foregoing facts, Plaintiff and the other Class Members are entitled

to preliminary and permanent injunctive relief against Defendants.

PRAYER FOR RELIEF







Class.

On The First Claim For Relief For Common Law Copyright Infringement against all

Defendants:










infringing in any manner the copyrights in the Pre-1972 Recordings in Florida, including




On The Second Claim For Relief For Misappropriation / Unfair Competition against all

Defendants:









misappropriating and/or unfairly competing in any manner the Pre-1972 Recordings in

Florida, including without limitation by directly or indirectly copying, reproducing,

downloading, distributing, communicating to the public, uploading, linking to,

transmitting, publicly performing, or otherwise exploiting in any manner any of the Pre-

1972 Recordings.

On the Third Claim For Relief For Conversion against all Defendants:












converting in any manner the Pre-1972 Recordings in Florida, including without

limitation by directly or indirectly copying, reproducing, downloading, distributing,

communicating to the public, uploading, linking to, transmitting, publicly performing, or

otherwise exploiting in any manner any of the Pre-1972 Recordings.

On the Fourth Claim For Relief For Statutory Fraud under Fla. Stat. § 812.014 against all

Defendants:


2. For treble the amount of compensatory damages pursuant to Fla. Stat. § 772.11(1);

3. For reasonable attorneys’ fees and court costs pursuant to Fla. Stat. § 772.11(1); and





committing theft in any manner of the Pre-1972 Recordings in Florida, including





distributing, communicating to the public, uploading, linking to, transmitting,

publicly performing, or otherwise exploiting in any manner any of the Pre-1972

Recordings.

On the Fifth Claim For Relief For Preliminary and Permanent Injunctive Relief against all

Defendants:





committing theft in any manner of the Pre-1972 Recordings in Florida, including


distributing, communicating to the public, uploading, linking to, transmitting,

publicly performing, or otherwise exploiting in any manner any of the Pre-1972

Recordings.


1. For reasonable attorney’s fees and costs as permitted by law;



JURY TRIAL DEMAND

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff and the Class

Members demand a trial by jury on claims alleged in this Complaint.




DATED: December 5, 2013

Respectfully submitted, HELLER WALDMAN, P.L. Attorneys for FLO & EDDIE, INC. 3250 Mary Street, Suite 102 Coconut Grove, Florida 33133 Telephone: (305) 448-4144 Telecopier: (305) 448-4155 By: s/Glen H. Waldman

Glen H. Waldman, Esq. Fla. Bar No. 618624 Eleanor T. Barnett, Esq. Fla. Bar No. 0355630 Jason Gordon, Esq. Fla. Bar No. 0012973

Henry Gradstein (pro hac vice motion is being filed) Maryann R. Marzano (pro hac vice motion is being filed) Robert E. Allen (pro hac vice motion is being filed) GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 Telephone: (323) 776-3100 Fax: (323) 931-4990 And Evan S. Cohen (pro hac vice motion is being filed) 1180 South Beverly Drive, Suite 510 Los Angeles, California 90035 Telephone: (310) 556-9800 Fax: (310) 556-9801

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 5th day of December, 2013, I electronically filed the

foregoing with the Clerk of the Court by using the CM/ECF System.

/s/ Glen H. Waldman_____________ Glen H. Waldman




FLO & EDDIE, INC. v. SIRIUS XM RADIO, INC., ET AL CASE NO.: 13-CV-23182-Moore/Torres

SERVICE LIST

Edward Soto Bruce Rich WEIL GOTSHAL & MANGES LLP Benjamin Marks 1395 Brickell Ave, Suite 1200 WEIL GOTSHAL & MANGES Miami, FL 33131 767 Fifth Avenue Phone: (305) 577-3100 Florida, NY 10153-0119 Fax: (305) 374-7159 Phone: (212) 310-8000 Email: [email protected] Fax: (212) 310-8007 Email: [email protected] [email protected] Michael S. Oberman Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas Florida, NY 10036 Phone: (212) 715-9100 Fax: (212) 715-8000 Email: [email protected]


US_ACTIVE:\44392508\4\76061.0012

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION Case 1:13-CV-23182 (Moore)

-----------------------------------------------------------------x FLO & EDDIE, INC., individually and on behalf of all others similarly situated, Plaintiff, -against- SIRIUS XM RADIO INC., and DOES 1 through 10, Defendants. -----------------------------------------------------------------x

DEFENDANT SIRIUS XM RADIO INC.’S ANSWER TO THE

AMENDED CLASS ACTION COMPLAINT


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Defendant Sirius XM Radio Inc. (“Sirius XM” or “Defendant”), by its attorneys, Weil,

Gotshal & Manges LLP and Kramer Levin Naftalis & Frankel LLP, for its Answer to the

Amended Class Action Complaint (the “Amended Complaint”) of plaintiff Flo & Eddie, Inc.

(“Plaintiff”) states as follows:

INTRODUCTION



radically transform the scope of protection accorded to sound recordings under Florida law.

Plaintiff asks the Court to recognize an exclusive right of public performance under Florida law

for sound recordings created before February 15, 1972, as well as an exclusive right to create

pre-broadcast server copies to facilitate such performances, in the absence of any authority

recognizing such a right. The result Plaintiff seeks would dramatically expand Florida law and

unravel a century of contrary understandings between the music and broadcasting industries.

Worse, it would immediately turn each radio and television broadcaster, webcaster, nightclub,

retail establishment, fitness center, and the like that performs such recordings in Florida into a

serial copyright infringer. Because no Florida court has ever recognized the claim Plaintiff seeks

to plead, the Amended Complaint fails to state a claim upon which relief may be granted and

should be dismissed in its entirety.

Each numbered response in this Answer to Plaintiff’s Amended Complaint (the

“Answer”) is made subject to the following limitations as if fully set forth therein. First, except

as expressly admitted or otherwise responded to below, Sirius XM denies all of the allegations in

the numbered paragraphs of the Amended Complaint. Second, any responses in this Answer do

not constitute Sirius XM’s acknowledgement or admission of the validity or relevance of such


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allegations. Third, Sirius XM denies any and all of Plaintiff’s characterizations of fact or law in

the Amended Complaint. Fourth, any responses in this Answer as to documents or

communications referenced in the Amended Complaint do not constitute Sirius XM’s

acknowledgement or admission of the admissibility or relevance of such documents or

communications. Further, Sirius XM hereby expressly denies that Plaintiff has accurately,

completely, or in context cited from such documents or communications; rather, such documents

and communications speak for themselves. Fifth, to the extent a response is deemed required to

any of the section headings in the Amended Complaint, Sirius XM denies any and all allegations

in such headings. The section headings in this Answer exist for the purpose of convenience only

and shall not be deemed admissions. Sixth, as to the prayer for relief, Sirius XM denies any

liability or obligation, in any form or amount, to Plaintiff or any putative class members.

Seventh, Sirius XM files this Answer without waiving and expressly reserving its arguments in

its Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a) and Supporting Memorandum of

Law [D.E. 15] and Motion to Stay Proceedings Pending Resolution of Its Motion to Transfer

This Action to the Southern District of New York and Supporting Memorandum of Law [D.E.

16].

Sirius XM further reserves its right under the Federal Rules of Civil Procedure to amend

its pleading to add additional or other affirmative defenses or to delete and withdraw affirmative

defenses as may become necessary after additional discovery, investigation, or subsequent

developments relating to this case and expressly reserves its right to amend this Answer to assert

such additional affirmative defenses in the future.


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RESPONSES TO SPECIFIC ALLEGATIONS

1. The allegations contained in paragraph 1 of the Amended Complaint call for legal

conclusions to which no responsive pleading is required. To the extent a response is required,

Sirius XM denies the allegations.


allegations of paragraph 2 of the Amended Complaint.




allegations of paragraph 4 of the Amended Complaint, except it admits that music users have

enjoyed music on CDs in digital format since at least the 1980s and have accessed music via

digital streaming since at least the mid-1990s.

5. Sirius XM denies the allegations of paragraph 5 of the Amended Complaint,

except it admits that Sirius XM (a) has over 25 million subscribers to its satellite radio service;

(b) operates the sole national satellite radio service in the United States, which makes digital

audio transmissions via satellite technology; and (c) offers certain digital streaming services via

the Internet.


except it admits that Sirius XM’s nationwide broadcasts can be received in Florida: (a) via

satellite radio by subscribers who receive the satellite broadcast on authorized Sirius XM

receivers; (b) via the Internet by subscribers who receive the transmission on computers (at

www.siriusxm.com), smart phones and tablets (via the Sirius XM mobile applications), and/or

home audio devices/systems, such as Roku and Sonos; and (c) via satellite television channels on


5 US_ACTIVE:\44392508\4\76061.0012

Dish Network. Sirius XM further admits that its Internet radio service has features identified as


satellite service offer a feature identified as “Replay”; users of the “Replay” and “My SXM”

features are provided with limited pause, rewind and replay functionality depending upon the

device, channel and delivery method.


except it admits that Sirius XM (a) has a variety of packages it offers to subscribers at various

prices, including the “Premier” and “Select” packages; and (b) has approximately 70 channels

that are, at times, referred to as “Commercial-Free Music” channels, although the number of

such channels may vary across time and subscriber platform.


except it admits that Sirius XM’s service includes some channels that play sound recordings of

musical performances that initially were “fixed” (i.e., recorded) prior to February 15, 1972 (“Pre-

1972 Recordings”).


except it admits (a) that some Sirius XM servers located in New York state contain copies of

certain Pre-1972 Recordings, including certain recordings by the Turtles, to facilitate broadcasts

of those recordings; and (b) that recordings by the Turtles are among the thousands of recordings

transmitted as part of Sirius XM’s nationwide broadcasts, which are available to subscribers in

Florida.


except it admits that Sirius XM (a) pays royalties for digital audio transmissions of sound

recordings created on or after February 15, 1972 as required by federal copyright law; and (b)


6 US_ACTIVE:\44392508\4\76061.0012

does not pay royalties for performances of Pre-1972 Recordings because no such royalties are

required by law.

11. Sirius XM denies the allegations in the first sentence of paragraph 11 of the

Amended Complaint. The allegations contained in the second sentence call for legal conclusions

to which no responsive pleading is required. To the extent a response is required, Sirius XM


12. The allegations contained in paragraph 12 of the Amended Complaint call for







allegations of paragraph 14 of the Amended Complaint, except that Sirius XM admits that

consumers enjoy music via satellite radio and Sirius XM Internet radio.



required, Sirius XM refers to the Digital Performing Rights in Sound Recordings Act and its

legislative history for the true contents of that act and Congress’s intent in passing it and

otherwise denies the allegations.





7 US_ACTIVE:\44392508\4\76061.0012


except it admits that Sirius XM (a) pays royalties for digital audio transmissions of sound

recordings created on or after February 15, 1972 as required by federal copyright law; and (b)

does not pay royalties for performances of Pre-1972 Recordings because no such royalties are

required by law.








allegations in the first sentence of paragraph 20 of the Amended Complaint. The remaining

allegations of paragraph 20 of the Amended Complaint call for legal conclusions to which no

responsive pleading is required. To the extent a response is required, Sirius XM denies the

allegations.


except it admits that Sirius XM is a Delaware corporation with its principal place of business in

New York City, Sirius XM has certain offices in Florida, and this Court has personal jurisdiction

over Sirius XM.


allegations in paragraph 22 of the Amended Complaint, except it admits that this Court has


8 US_ACTIVE:\44392508\4\76061.0012

subject matter jurisdiction over the subject matter of this purported class action pursuant to 28

U.S.C. § 1332(d).


legal conclusions to which no responsive pleading is required. Sirius XM admits, however, that

venue is proper in this District.

24. Sirius XM does not respond to paragraph 24 of the Amended Complaint, which

contains no factual allegations about Sirius XM.

25. The allegations contained in paragraph 25 of the Amended Complaint are not

factual in nature; they merely characterize the basis on which Plaintiff purports to bring this

action and purport to reserve certain rights to the Plaintiff. Accordingly, no responsive pleading

is required. To the extent a response is required, Sirius XM denies the allegations.













9 US_ACTIVE:\44392508\4\76061.0012

29. The allegations contained in the first and last sentences of paragraph 29 of the


the extent a response is required, Sirius XM denies knowledge or information sufficient to

respond to the allegations in those sentences and also denies knowledge or information sufficient

to respond to the allegations in the second sentence of paragraph 29. Sirius XM denies the

allegations in the third sentence of paragraph 29, and does not respond to the fourth and fifth

sentences, which are not factual in nature.







required, Sirius XM denies knowledge or information sufficient to respond to the allegations in

the last sentence of paragraph 31 and denies the remaining allegations in paragraph 31.









10 US_ACTIVE:\44392508\4\76061.0012

With Respect to the First Claim for Relief


of the Amended Complaint.










38. The allegations contained in the first sentence of paragraph 38 of the Amended

Complaint call for legal conclusions to which no responsive pleading is required. To the extent a

response is required, Sirius XM denies the allegations and, without limitation, expressly denies

all allegations of wrongdoing by Sirius XM. Sirius XM denies knowledge or information

sufficient to respond to the allegations in the second sentence of paragraph 38 of the Amended

Complaint.

39. The allegations contained in the first sentence of paragraph 39 of the Amended

Complaint call for legal conclusions to which no responsive pleading is required. To the extent a

response is required, Sirius XM denies the allegations and, without limitation, expressly denies

all allegations of wrongdoing by Sirius XM. Sirius XM denies the allegations contained in the

remaining sentences of paragraph 39 of the Amended Complaint, except it admits that (a) some


11 US_ACTIVE:\44392508\4\76061.0012

Sirius XM servers located in New York state contain copies made by Sirius XM of certain Pre-

1972 Recordings, including certain recordings by the Turtles, to facilitate broadcasts of those

recordings; and (b) recordings by the Turtles and certain other Pre-1972 Recordings are among

the many thousands of recordings transmitted as part of Sirius XM’s nationwide broadcasts,

which are available to subscribers in Florida.













With Respect to the Second Claim for Relief






12 US_ACTIVE:\44392508\4\76061.0012

required, Sirius XM denies knowledge or information sufficient to respond to the allegations of

paragraph 44 of the Amended Complaint.







47. Sirius XM denies the allegations contained in paragraph 47 of the Amended

Complaint, except it admits that (a) some Sirius XM servers located in New York contain copies

made by Sirius XM of certain Pre-1972 Recordings in order to facilitate broadcast of such

recordings; (b) certain Pre-1972 Recordings are among the many thousands of recordings

transmitted as part of Sirius XM’s nationwide broadcasts and online digital audio transmissions,

which are available to subscribers in Florida; (c) users of the “Replay” and “My SXM” features

are provided with limited skip functionality depending upon the device, channel and delivery

method. Sirius XM further admits that its Internet radio product has features identified as


satellite service offer a feature identified as “Replay.”






13 US_ACTIVE:\44392508\4\76061.0012


allegations in the first sentence of paragraph 49 of the Amended Complaint. The remaining

allegations of paragraph 49 of the Amended Complaint call for legal conclusions to which no

responsive pleading is required. To the extent a response is required, Sirius XM admits that it

does not pay royalties for Pre-1972 Recordings because no such royalties are required by law,

but otherwise denies all allegations of wrongdoing by Sirius XM.


















14 US_ACTIVE:\44392508\4\76061.0012

With Respect to the Third Claim for Relief





required, Sirius XM denies knowledge or information sufficient to respond to the allegations.



required, Sirius XM denies knowledge or information sufficient to respond to the allegations in

the first sentence of paragraph 56 and denies the allegations in the second sentence of paragraph

56.














15 US_ACTIVE:\44392508\4\76061.0012







With Respect to the Fourth Claim for Relief

















16 US_ACTIVE:\44392508\4\76061.0012












required, Sirius XM denies the allegations except admits that it received the letter attached to the

Amended Complaint as Exhibit B more than 30 days before filing of the Amended Complaint.

With Respect to the Fifth Claim for Relief











17 US_ACTIVE:\44392508\4\76061.0012





















With Respect to the Prayer for Relief

79. In response to the prayer for relief, Sirius XM denies that Plaintiff is entitled to

any of the relief requested.


18 US_ACTIVE:\44392508\4\76061.0012


80. Without assuming the burden of proof where such burden properly rests with

Plaintiff, and expressly reserving and not waiving the right to assert any and all such defenses at

such time and to such extent as discovery and factual developments establish a basis therefor,

Sirius XM hereby asserts the following defenses to the claims asserted in the Amended

Complaint.


(Failure to State a Claim)

81. The Amended Complaint fails to state any claim upon which relief can be

granted.


(Laches)

82. Plaintiff’s claims are barred, in whole or in part, by the doctrine of laches.


(Waiver)

83. Plaintiff’s claims are barred, in whole or in part, by the doctrine of waiver.


(Estoppel)

84. Plaintiff’s claims are barred, in whole or in part, by the doctrine of estoppel.


(License)


19 US_ACTIVE:\44392508\4\76061.0012

85. Plaintiff’s claims are barred, in whole or in part, by an implied license conveyed

by Plaintiff to Sirius XM or because Plaintiff otherwise licensed, authorized, or consented to

Sirius XM’s alleged conduct.


(Fair Use)

86. Plaintiff’s claims are barred, in whole or in part, by the doctrine of fair use.



87. Plaintiff’s claims are barred, in whole or in part, by applicable statutes of

limitations.


(Lack of Harm)

88. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has not suffered

any harm from Sirius XM’s alleged conduct.



89. Plaintiff’s claims are barred, in whole or in part, because Plaintiff has failed to

take appropriate and necessary steps to mitigate its alleged damages, if any.


(Lack of Ownership/Rights)

90. Plaintiff’s claims are barred, in whole or in part, because Plaintiff does not own

the purported works or rights at issue and/or lost such rights upon publication of the works.


20 US_ACTIVE:\44392508\4\76061.0012


(Improper Demand)

91. Plaintiff’s Civil Theft claim is barred for failure to comply with the requirements of Fla.

Stat. § 772.11(1).

Twelfth Affirmative Defense

(Adequate Remedy at Law)

92. The injunctive relief sought by Plaintiff is barred, in whole or in part, because

Plaintiff has available an adequate remedy at law.

PRAYER FOR RELIEF


1. Dismiss Plaintiff’s Amended Complaint in its entirety with prejudice;

2. Enter judgment in favor of Defendant Sirius XM and against Plaintiff on each and

every cause of action set forth in the Amended Complaint;

3. Award attorneys’ fees and costs in favor of Defendant Sirius XM against Plaintiff

as permitted by applicable law; and

4. Award such other and further relief as the Court deems just and proper.


21 US_ACTIVE:\44392508\4\76061.0012

Dated: December 23, 2013 Respectfully submitted,

/s/ Edward Soto Edward Soto (Fla. Bar No. 0265144) [email protected] Weil, Gotshal & Manges LLP 1395 Brickell Ave, Suite 1200 Miami, FL 33131 (305) 577-3100 R. Bruce Rich (pro hac vice pending) Benjamin E. Marks (pro hac vice pending) Todd Larson (pro hac vice pending) John R. Gerba (pro hac vice pending) Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Tel: 212-310-8000 Michael S. Oberman (pro hac vice pending) Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Tel: 212-715-9294



22 US_ACTIVE:\44392508\4\76061.0012

CERTIFICATE OF SERVICE I hereby certify that on December 23, 2013, I electronically filed the foregoing with the

Clerk of the Court for the United States District Court for the Southern District of Florida by

using the CM/ECF system, which sent notification of such filing to all CM/ECF participants. All

other counsel shall be served by United States mail.

Plaintiff Flo & Eddie, Inc.’s Counsel: Glen H. Waldman Eleanor T. Barnett Jason Gordon Heller Waldman, P.L. 3250 Mary Street, Suite 102 Coconut Grove, Florida 33133 Henry Gradstein Maryann R. Marzano Robert E. Allen Gradstein & Marzano, P.C. 6310 San Vincente Blvd., Suite 510 Los Angeles, California 90048

/s/ Edward Soto________________ Edward Soto (Fla. Bar No. 0265144) [email protected] WEIL, GOTSHAL & MANGES LLP 1395 Brickell Ave, Suite 1200 Miami, FL 33131 (305) 577-3100 Attorneys for Defendant Sirius XM Radio Inc.


EGT,MEDREQ,REF_DISCOVU.S. District Court

Southern District of Florida (Miami)CIVIL DOCKET FOR CASE #: 1:13−cv−23182−KMM

Flo &Eddie, Inc. v. Sirius XM Radio, Inc., et alAssigned to: Judge K. Michael MooreCause: 28:1331 Federal Question


Plaintiff

Flo &Eddie, Inc.a California corporation, individuallyand on behalf of all others similarlysituated

represented byEleanor Trotman BarnettHeller Waldman, P.L.3250 Mary StreetSuite 102Coconut Grove, FL 33133305−448−4144Fax: 305−448−4155Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Harvey Wayne GellerGradstein &Mzrzano, P.C.6310 San Vincente Blvd.Suite 510Los Angeles, CA 90048323−776−7100Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Henry GradsteinGradstein &Marzano PC6310 San Vicente BoulevardSuite 510Los Angeles, CA 90048323−776−7100Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Jason GordonHeller Waldman, P.L.3250 Mary StreetSuite 102Coconut Grove, FL 33133305−448−4144Fax: 305−448−4155Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Maryann R. MarzanoGradstein &Marzano PC6310 San Vicente BoulevardSuite 510Los Angeles, CA 90048323−776−7100Email: [email protected] ATTORNEY

Case: 1:13-cv-23182-KMM As of: 02/20/2014 03:20 PM EST 1 of 10






PRO HAC VICEATTORNEY TO BE NOTICED

Robert E. AllenGradstein &Marzano PC6310 San Vicente BoulevardSuite 510Los Angeles, CA 90048323−776−7100Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Glen H. WaldmanHeller Waldman, P.L.3250 Mary StreetSuite 102Coconut Grove, FL 33133305−448−4144Fax: 305−448−4155Email: [email protected] TO BE NOTICED

V.

Defendant

Sirius XM Radio, Inc.a Delaware corporation

represented byBenjamin E. MarksWeil, Gotshal &Manges, LLP767 Fifth AvenueNew York, NY 10153Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Bruce S. MeyerWeil Gotshal &Manges767 5th AvenueNew York, NY 10153−0119212−310−8000Fax: 310−8007Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Edward SotoWeil Gotshal &Manges1395 Brickell AvenueSuite 1200Miami, FL 33131305−577−3177Fax: 374−7159Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

John R. GerbaWeil, Gotshal &Manges, LLP767 Fifth AvenueNew York, NY 10153Email: [email protected] ATTORNEY









Michael S. ObermanKramer, Levin, Naftalis &Frankel, LLP1177 Avenue of the AmericasNew York, NY 10036212−715−9294Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

R. Bruce RichWeil Gotshal &Manges767 5th AvenueNew York, NY 10153−0119212−310−8153Fax: 310−8007Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Todd D. LarsonWeil, Gotshal &Manges, LLp767 Fifth AvenueNew York, NY 10153Email: [email protected] ATTORNEYPRO HAC VICEATTORNEY TO BE NOTICED

Defendant

Does 1 through 10


09/03/2013 1 COMPLAINT (Class Action) against Sirius XM Radio, Inc.. Filing fees $ 400.00receipt number 113C−6027049, filed by Flo &Eddie, Inc.. (Attachments: # 1Exhibit Exhibit A, # 2 Exhibit Exhibit B, # 3 Civil Cover Sheet, # 4 Summon(s)Summons − Sirius)(Waldman, Glen) (Entered: 09/03/2013)

09/03/2013 2 Judge Assignment to Judge K. Michael Moore (ail) (Entered: 09/04/2013)

09/03/2013 3 Clerks Notice to Filer re: Electronic Case. Parties Not Added. The Filer failed toadd all parties associated with the case.Filer is instructed in the future to add allparties during case opening. It is not necessary to re−file this document. (ail)(Entered: 09/04/2013)

09/04/2013 4 Summons Issued as to Sirius XM Radio, Inc.. (ail) (Entered: 09/04/2013)

09/04/2013 5 FORM AO 121 SENT TO DIRECTOR OF U.S. COPYRIGHT OFFICE (ail)(Entered: 09/04/2013)

09/05/2013 6 PAPERLESS ORDER REFERRING PRETRIAL DISCOVERY MATTERS TOMAGISTRATE JUDGE EDWIN G. TORRES. PURSUANT to 28 U.S.C. § 636and the Magistrate Rules of the Local Rules of the Southern District of Florida, theabove captioned Cause is referred to United States Magistrate Judge Edwin G.Torres to take all necessary and proper action as required by law with respect toany and all pretrial discovery matters. Any motion affecting deadlines set by theCourt's Scheduling Order is excluded from this referral, unless specifically referredby separate Order. Signed by Judge K. Michael Moore on 9/5/2013. (nhl) (Entered:09/05/2013)





https://ecf.flsd.uscourts.gov/doc1/051012628240?caseid=427347&de_seq_num=2&pdf_header=2







09/05/2013 7 PAPERLESS PRETRIAL ORDER. THIS ORDER has been entered upon thefiling of the complaint. Plaintiff's counsel is hereby ORDERED to forward to alldefendants, upon receipt of a responsive pleading, a copy of this order. It is furtherORDERED that S.D. Fla. L.R. 16.1 shall apply to this case and the parties shallhold a scheduling conference no later than twenty (20) days after the filing of thefirst responsive pleading by the last responding defendant, or within sixty (60) daysafter the filing of the complaint, whichever occurs first. However, if all defendantshave not been served by the expiration of this deadline, Plaintiff shall move for anenlargement of time to hold the scheduling conference, not to exceed 120 daysfrom the filing of the Complaint. Within ten (10) days of the schedulingconference, counsel shall file a joint scheduling report. Failure of counsel to file ajoint scheduling report within the deadlines set forth above may result in dismissal,default, and the imposition of other sanctions including attorney's fees and costs.The parties should note that the time period for filing a joint scheduling report isnot tolled by the filing of any other pleading, such as an amended complaint orRule 12 motion. The scheduling conference may be held via telephone. At theconference, the parties shall comply with the following agenda that the Courtadopts from S.D. Fla. L.R. 16.1: (1) Documents (S.D. Fla. L.R. 16.1.B.1 and 2) −The parties shall determine the procedure for exchanging a copy of or a descriptionby category and location of all documents and other evidence that is reasonablyavailable and that a party expects to offer or may offer if the need arises. Fed. R.Civ. P. 26(a)(1)(B). (a) Documents include computations of the nature and extentof any category of damages claimed by the disclosing party unless thecomputations are privileged or otherwise protected from disclosure. Fed. R. Civ. P.26(a)(1)(C). (b) Documents include insurance agreements which may be at issuewith the satisfaction of the judgment. Fed. R. Civ. P. 26(a)(1)(D). (2) List ofWitnesses − The parties shall exchange the name, address and telephone number ofeach individual known to have knowledge of the facts supporting the materialallegations of the pleading filed by the party. Fed. R. Civ. P. 26(a)(1)(A). Theparties have a continuing obligation to disclose this information. (3) Discussionsand Deadlines (S.D. Fla. L.R. 16.1.B.2) − The parties shall discuss the nature andbasis of their claims and defenses and the possibilities for a prompt settlement orresolution of the case. Failure to comply with this Order or to exchange theinformation listed above may result in sanctions and / or the exclusion ofdocuments or witnesses at the time of trial. S.D. Fla. L.R. 16.1.M. Telephonicappearances are not permitted for any purpose. Upon reaching a settlement in thismatter the parties are instructed to notify the Court by telephone and to file aNotice of Settlement within twenty−four (24) hours. Signed by Judge K. MichaelMoore on 9/5/2013. (nhl) (Entered: 09/05/2013)

10/01/2013 8 WAIVER OF SERVICE Returned Executed by Flo &Eddie, Inc.. Sirius XMRadio, Inc. waiver sent on 9/15/2013, answer due 11/14/2013. (Gordon, Jason)(Entered: 10/01/2013)

10/08/2013 9 NOTICE of Attorney Appearance by Edward Soto on behalf of Sirius XM Radio,Inc.. Attorney Edward Soto added to party Sirius XM Radio, Inc.(pty:dft). (Soto,Edward) (Entered: 10/08/2013)

10/08/2013 10 MOTION to Appear Pro Hac Vice for John R. Gerba, Consent to Designation, andRequest to Electronically Receive Notices of Electronic Filing. Filing Fee $ 75.00.Receipt # 66909. (ksa) (Entered: 10/09/2013)

10/08/2013 11 MOTION to Appear Pro Hac Vice for Todd D. Larson, Consent to Designation,and Request to Electronically Receive Notices of Electronic Filing. Filing Fee $75.00. Receipt # 66910. (ksa) (Entered: 10/09/2013)

10/08/2013 12 MOTION to Appear Pro Hac Vice for Michael S. Oberman, Consent toDesignation, and Request to Electronically Receive Notices of Electronic Filing.Filing Fee $ 75.00. Receipt # 66911. (ksa) (Entered: 10/09/2013)

10/08/2013 13 MOTION to Appear Pro Hac Vice for Benjamin E. Marks, Consent to Designation,and Request to Electronically Receive Notices of Electronic Filing. Filing Fee $75.00. Receipt # 66912. (ksa) (Entered: 10/09/2013)

10/08/2013 14 MOTION to Appear Pro Hac Vice for R. Bruce Rich, Consent to Designation, andRequest to Electronically Receive Notices of Electronic Filing. Filing Fee $ 75.00.Receipt # 66913. (ksa) (Entered: 10/09/2013)









10/09/2013 15 MOTION to Change Venue and Supporting Memorandum of Law by Sirius XMRadio, Inc.. Responses due by 10/28/2013 (Attachments: # 1 Affidavit of EdwardSoto, # 2 Exhibit 1 − Complaint in Cal Superior Court, # 3 Exhibit 2 − Complaintin SDNY, # 4 Exhibit 3 − Volman biography, # 5 Errata 4 − Volman personalwebsite, # 6 Exhibit 5 − Volman twitter website, # 7 Exhibit 6 − Record CollectorNews article, # 8 Exhibit 7 − MyNorthwest article, # 9 Exhibit 8 − Kaylan twitterwebsite, # 10 Exhibit 9 − Kaylan personal website, # 11 Affidavit of TerrenceSmith)(Soto, Edward) (Entered: 10/09/2013)

10/09/2013 16 MOTION to Stay Proceedings Pending Resolution of its Motion to Transfer bySirius XM Radio, Inc.. Responses due by 10/28/2013 (Soto, Edward) (Entered:10/09/2013)

10/09/2013 17 Corporate Disclosure Statement by Sirius XM Radio, Inc. (Soto, Edward) (Entered:10/09/2013)

10/10/2013 18 PAPERLESS ORDER. THIS CAUSE came before the Court upon Defendant'sMotions to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filings 10 11 12 13 14 . UPONCONSIDERATION of the Motions, the pertinent portions of the record, and beingotherwise fully advised in the premises, it is ORDERED AND ADJUDGED thatthe Motions 10 11 12 13 14 are GRANTED. John R. Gerba, Todd D. Larson,Michael S. Oberman, Benjamin E. Marks, and R. Bruce Rich may appear Pro HacVice in this matter. The Clerk of the Court shall provide electronic notification ofall electronic filings to [email protected], [email protected],[email protected], [email protected] [email protected]. Signed by Judge K. Michael Moore on 10/10/2013. (nhl)(Entered: 10/10/2013)

10/21/2013 19 MOTION to Appear Pro Hac Vice for Bruce S. Meyer, Consent to Designation,and Request to Electronically Receive Notices of Electronic Filing. Filing Fee $75.00. Receipt # 67627. (ksa) (Entered: 10/22/2013)

10/23/2013 20 PAPERLESS ORDER. THIS CAUSE came before the Court on Defendant'sMotion to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filings 19 . UPONCONSIDERATION of the Motion, the pertinent portions of the record, and beingotherwise fully advised in the premises, it is ORDERED AND ADJUDGED thatthe Motion 19 is GRANTED. Bruce S. Meyer may appear Pro Hac Vice in thismatter. The Clerk of the Court shall provide electronic notification of all electronicfilings to [email protected]. Signed by Judge K. Michael Moore on10/23/2013. (nhl) (Entered: 10/23/2013)

10/23/2013 21 Plaintiff's MOTION for Extension of Time to File Response/Reply as to 15MOTION to Change Venue and Supporting Memorandum of Law and Motion toStay Pending Resolution of Motion to Transfer by Flo &Eddie, Inc.. (Gordon,Jason) (Entered: 10/23/2013)

10/24/2013 22 PAPERLESS ORDER. THIS CAUSE came before the Court upon Plaintiff'sMotion for Extension of Time to Respond to Motion to Transfer Venue and Motionto Stay 21 . UPON CONSIDERATION of the Motion, the pertinent portions of therecord, and being otherwise fully advised in the premises, it is hereby ORDEREDAND ADJUDGED that the Motion 21 is GRANTED IN PART AND DENIED INPART. Plaintiff may respond on or before October 28, 2013. Signed by Judge K.Michael Moore on 10/24/2013. (nhl) (Entered: 10/24/2013)

10/24/2013 Set/Reset Deadlines as to 16 MOTION to Stay Proceedings Pending Resolution ofits Motion to Transfer, 15 MOTION to Change Venue and SupportingMemorandum of Law. Responses due by 10/28/2013. (See DE 22.) (wc) (Entered:10/24/2013)

10/28/2013 23 RESPONSE to Motion re 15 MOTION to Change Venue and SupportingMemorandum of Law filed by Flo &Eddie, Inc.. Replies due by 11/7/2013.(Attachments: # 1 Exhibit Exhibit A, # 2 Exhibit Exhibit B)(Gordon, Jason)(Entered: 10/28/2013)







































10/28/2013 24 RESPONSE in Opposition re 16 MOTION to Stay Proceedings PendingResolution of its Motion to Transfer filed by Flo &Eddie, Inc.. (Gordon, Jason)(Entered: 10/28/2013)

11/04/2013 25 REPLY Memorandum in Further Support of 16 MOTION to Stay ProceedingsPending Resolution of its Motion to Transfer filed by Sirius XM Radio, Inc.. (Soto,Edward) Modified text on 11/5/2013 (asl). (Entered: 11/04/2013)

11/05/2013 26 REPLY to Response to Motion re 15 MOTION to Change Venue and SupportingMemorandum of Law filed by Sirius XM Radio, Inc.. (Attachments: # 1 Exhibit A− Factors Relevant to Transfer)(Soto, Edward) (Entered: 11/05/2013)

11/14/2013 27 Defendant's MOTION to Dismiss 1 Complaint, Defendant Sirius XM's PartialMotion to Dismiss Plaintiff's Complaint and Supporting Memorandum of Law bySirius XM Radio, Inc.. Responses due by 12/2/2013 (Attachments: # 1 Exhibit A −Revision of Copyright Laws Hearing Before the Select Subcomm, # 2 Exhibit B −Authorizing a Composer's Royalty in Revenues, # 3 Exhibit C − EconomicConditions in the Performing Arts)(Soto, Edward) (Entered: 11/14/2013)

11/14/2013 28 Joint SCHEDULING and Discovery REPORT − Rule 16.1 by Flo &Eddie, Inc.(Attachments: # 1 Exhibit Proposed Joint Scheduling Order)(Gordon, Jason)Modified text on 11/18/2013 (asl). (Entered: 11/14/2013)

11/18/2013 29 PAPERLESS ORDER OF REFERRAL TO MEDIATION. Trial having been set inthis matter, pursuant to Federal Rule of Civil Procedure 16 and Southern DistrictLocal Rule 16.2, it is ORDERED AND ADJUDGED as follows: 1. All parties arerequired to participate in mediation. The mediation shall be completed no later thansixty (60) days before the scheduled trial date. 2. Plaintiff's counsel, or anotherattorney agreed upon by all counsel of record and any unrepresented parties, shallbe responsible for scheduling the mediation conference. The parties are encouragedto avail themselves of the services of any mediator on the List of CertifiedMediators, maintained in the office of the Clerk of this Court, but may select anyother mediator. The parties shall agree upon a mediator and file a Notice ofMediator Selection within fifteen (15) days from the date of this Order. If there isno agreement, lead counsel shall notify the Clerk of Court in writing within fifteen(15) days from the date of this Order, and the Clerk shall designate a mediator fromthe List of Certified Mediators, which designation shall be made on a blind rotationbasis. 3. A place, date and time for mediation convenient to the mediator, counselof record, and unrepresented parties shall be established. If the parties cannot agreeto a place, date, and time for the mediation, they may motion the Court for an orderdictating the place, date, and time. 4. The appearance of counsel and each party orrepresentatives of each party with full authority to enter in a full and completecompromise and settlement is mandatory. If insurance is involved, an adjuster withauthority up to the policy limits or the most recent demand, whichever is lower,shall attend. 5. All discussions, representations and statements made at themediation conference shall be confidential and privileged. 6. At least ten (10) daysprior to the mediation date, all parties shall present to the mediator a brief writtensummary of the case identifying issues to be resolved. Copies of these summariesshall be served on all other parties. 7. The Court may impose sanctions againstparties and/or counsel who do not comply with the attendance or settlementauthority requirements herein or who otherwise violate the terms of this Order. Themediator shall report non−attendance and may recommend imposition of sanctionsby the Court for non−attendance. 8. The mediator shall be compensated inaccordance with the standing order of the Court entered pursuant to Rule 16.2.B.6,or on such basis as may be agreed to in writing by the parties and the mediatorselected by the parties. The cost of mediation shall be shared equally by the partiesunless otherwise ordered by the Court. All payments shall be remitted to themediator within 30 days of the date of the bill. Notice to the mediator ofcancellation or settlement prior to the scheduled mediation conference must begiven at least two (2) full business days in advance. Failure to do so will result inimposition of a fee for one hour. 9. If a full or partial settlement is reached in thiscase, counsel shall promptly notify the Court of the settlement in accordance withLocal Rule 16.2.F, by the filing of a notice of settlement signed by counsel ofrecord within ten (10) days of the mediation conference. Thereafter, the partiesshall forthwith submit an appropriate pleading concluding the case. 10. Within five(5) days following the mediation conference, the mediator shall file a Mediation
















Report indicating whether all required parties were present. The report shall alsoindicate whether the case settled (in full or in part), was continued with the consentof the parties, or whether the mediator declared an impasse. 11. If mediation is notconducted, the case may be stricken from the trial calendar, and other sanctionsmay be imposed. Signed by Judge K. Michael Moore on 11/18/2013. (nhl)(Entered: 11/18/2013)

11/18/2013 30 PAPERLESS ORDER SCHEDULING TRIAL IN MIAMI. This case is now setfor trial commencing the two−week trial period of September 22, 2014 at 9 a.m. inCourtroom 13−1, (thirteenth floor) United States Courthouse, 400 North MiamiAvenue, Miami, Florida. All parties are directed to report to the calendar call onSeptember 18, 2014 at 2 p.m., at which time all matters relating to the scheduledtrial date may be brought to the attention of the Court. A final pretrial conferenceas provided for by Rule 16, Fed. R. Civ. P., and Rule 16.1(C), S.D. Fla. L.R., isscheduled for September 9, 2014 at 11 a.m. A bilateral pretrial stipulation and allother pretrial preparations shall be completed NO LATER THAN FIVE DAYSPRIOR TO THE PRETRIAL CONFERENCE. All motions to amend the pleadingsor to join additional parties must be filed by the later of forty−five (45) days afterthe date of entry of this Order, or forty−five(45) days after the first responsivepleading by the last responding defendant. Any and all pretrial motions, includingmotions for summary judgment, must be filed no later than sixty (60) days prior tothe trial date. Responses to summary judgment motions must be filed no later thanfourteen (14) days after service of the motion, and replies in support of the motionmust be filed no later than seven (7) days after service of the response, with bothdeadlines computed as specified in Rule 6, Fed. R. Civ. P. All discovery shall becompleted seventy (70) days prior to the date of trial. The failure to engage indiscovery pending settlement negotiations shall not be grounds for continuance ofthe trial date. All exhibits must be pre−marked, and a typewritten exhibit listsetting forth the number and description of each exhibit must be submitted at thetime of trial. For a jury trial, counsel shall prepare and submit proposed juryinstructions to the Court. For a non−jury trial, the parties shall prepare and submitto the Court proposed findings of fact and conclusions of law fully supported bythe evidence which counsel expects the trial to develop and fully supported bycitations to law. The proposed jury instructions or the proposed findings of fact andconclusions of law shall be submitted to the Court no later than five (5) businessdays prior to the scheduled trial date. Final Pretrial Conference set for 9/9/201411:00 AM in Miami Division before Judge K. Michael Moore. Jury Trial set for9/22/2014 09:00 AM in Miami Division before Judge K. Michael Moore. CalendarCall set for 9/18/2014 02:00 PM in Miami Division before Judge K. MichaelMoore. Signed by Judge K. Michael Moore on 11/18/2013. (nhl) (Entered:11/18/2013)

12/02/2013 31 Plaintiff's MOTION for Extension of Time to File Response to Defendant's PartialMotion to Dismiss the Complaint re 27 Defendant's MOTION to Dismiss 1Complaint, Defendant Sirius XM's Partial Motion to Dismiss Plaintiff's Complaintand Supporting Memorandum of Law by Flo &Eddie, Inc.. Responses due by12/19/2013 (Waldman, Glen) (Entered: 12/02/2013)

12/03/2013 32 PAPERLESS ORDER. THIS CAUSE came before the Court upon Plaintiff'sMotion for Extension of Time to Respond to Motion to Dismiss 31 . UPONCONSIDERATION of the Motion, the pertinent portions of the record, and beingotherwise fully advised in the premises, it is hereby ORDERED ANDADJUDGED that the Motion 31 is GRANTED. Plaintiff may respond on or beforeDecember 9, 2013. Signed by Judge K. Michael Moore on 12/3/2013. (nhl)(Entered: 12/03/2013)

12/03/2013 Reset Deadlines per 32 Order as to 27 Defendant's MOTION to Dismiss 1Complaint, Defendant Sirius XM's Partial Motion to Dismiss Plaintiff's Complaintand Supporting Memorandum of Law. Responses due by 12/9/2013 (asl) (Entered:12/03/2013)

12/03/2013 33 MOTION for Extension of Time to Designate Mediator by Flo &Eddie, Inc..Responses due by 12/20/2013 (Gordon, Jason) (Entered: 12/03/2013)

12/04/2013 34 NOTICE by Flo &Eddie, Inc. of Filing of Order Denying Defendant's Motion toTransfer Venue Filed in Related Case Pending in the Central District of California











in Support of Plaintiff's Response to Motion to Transfer Venue (Attachments: # 1Exhibit Exhibit A)(Gordon, Jason) (Entered: 12/04/2013)

12/04/2013 35 PAPERLESS ORDER. THIS CAUSE came before the Court upon Plaintiff'sMotion for Extension of Time to Designate Mediator 33 . UPONCONSIDERATION of the Motion, the pertinent portions of the record, and beingotherwise fully advised in the premises, it is hereby ORDERED ANDADJUDGED that the Motion 33 is GRANTED. The Parties may designate amediator on or before December 10, 2013. Signed by Judge K. Michael Moore on12/4/2013. (nhl) (Entered: 12/04/2013)

12/05/2013 36 AMENDED COMPLAINT against All Defendants, filed by Flo &Eddie, Inc..(Attachments: # 1 Exhibit Exhibit A, # 2 Exhibit EXhbiit B)(Gordon, Jason)(Entered: 12/05/2013)

12/06/2013 37 PAPERLESS ORDER. THIS CAUSE came before the Court upon the Defendant'sMotion to Dismiss 27 . This Motion is mooted by the filing of the AmendedComplaint 36 . Consequently, upon consideration of the Motion, the pertinentportions of the Record, and being otherwise fully advised in the premises, it ishereby ORDERED AND ADJUDGED that the Defendants' Motion 27 is DENIEDAS MOOT. Signed by Judge K. Michael Moore on 12/6/2013. (nhl) (Entered:12/06/2013)

12/10/2013 38 NOTICE by Flo &Eddie, Inc. of Mediator Designation (Gordon, Jason) (Entered:12/10/2013)

12/13/2013 39 Defendant's MOTION for Leave to File Excess Pages by Sirius XM Radio, Inc..(Soto, Edward) (Entered: 12/13/2013)

12/18/2013 40 WITHDRAWAL of Motion by Sirius XM Radio, Inc. re 39 Defendant's MOTIONfor Leave to File Excess Pages filed by Sirius XM Radio, Inc. (Soto, Edward)(Entered: 12/18/2013)

12/23/2013 41 Defendant's ANSWER and Affirmative Defenses to Amended Complaint by SiriusXM Radio, Inc.. (Soto, Edward) (Entered: 12/23/2013)

12/23/2013 42 MOTION to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filing for Henry Gradstein. Filing Fee$ 75. Receipt # 70936. (cw) (Entered: 12/27/2013)

12/23/2013 43 MOTION to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filing for Maryann R. Marzano.Filing Fee $ 75. Receipt # 70935. (cw) (Entered: 12/27/2013)

12/23/2013 44 MOTION to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filing for Robert E. Allen. Filing Fee$ 75. Receipt # 70934. (cw) (Entered: 12/27/2013)

12/30/2013 45 PAPERLESS ORDER. THIS CAUSE came before the Court on Plaintiff's Motionsto Appear Pro Hac Vice, Consent to Designation, and Request to ElectronicallyReceive Notices of Electronic Filings 42 43 44 . The instant Motions have beenfiled by Movant Glen H. Waldman. However, the Movant has included electronic,rather than an original signatures on the Motions. Section 5J of the Court'sCM/ECF Administrative Procedures requires a motion to appear pro hac vice be"filed in the conventional manner." See also CM/ECF Admin. P. § 2B.Conventionally filed documents must include original signatures, as an "s/"signature is used only for electronically filed documents. See id. at § 3J. Becausethe proper CM/ECF Administrative Procedures and Local Rules were not followed,the Court will not grant the Motions. UPON CONSIDERATION of the Motions,the pertinent portions of the record, and being otherwise fully advised in thepremises, it is ORDERED AND ADJUDGED that the Motions 42 43 44 areDENIED. Signed by Judge K. Michael Moore on 12/30/2013. (nhl) (Entered:12/30/2013)

12/30/2013 Attorney Maryann R. Marzano; Robert E. Allen and Henry Gradstein terminatedper 45 Order. Notice of Termination delivered by US Mail to Robert Allen, HenryGradstein, Maryann Marzano. (asl) (Entered: 12/31/2013)

























01/07/2014 Attorneys Maryann R. Marzano representing Flo &Eddie, Inc. (Plaintiff); Robert E.Allen representing Flo &Eddie, Inc. (Plaintiff) and Henry Gradstein representingFlo &Eddie, Inc. (Plaintiff) Activated. (ksa) (Entered: 01/07/2014)

01/07/2014 46 Amended MOTION to Appear Pro Hac Vice, Consent to Designation, and Requestto Electronically Receive Notices of Electronic Filing for Henry Gradstein. FilingFee $ 75.00. Receipt # 70936. (ksa) (Entered: 01/07/2014)

01/07/2014 47 Amended MOTION to Appear Pro Hac Vice, Consent to Designation, and Requestto Electronically Receive Notices of Electronic Filing for Maryann R. Marzano.Filing Fee $ 75.00. Receipt # 70935. (ksa) (Entered: 01/07/2014)

01/07/2014 48 Amended MOTION to Appear Pro Hac Vice, Consent to Designation, and Requestto Electronically Receive Notices of Electronic Filing for Robert E. Allen. FilingFee $ 75.00. Receipt # 70934. (ksa) (Entered: 01/07/2014)

01/08/2014 49 PAPERLESS ORDER. THIS CAUSE came before the Court on Plaintiff's Motionsto Appear Pro Hac Vice, Consent to Designation, and Request to ElectronicallyReceive Notices of Electronic Filings 46 47 48 . UPON CONSIDERATION of theMotions, the pertinent portions of the record, and being otherwise fully advised inthe premises, it is ORDERED AND ADJUDGED that the Motions 46 47 48 areGRANTED. Henry Gradstein, Maryann R. Marazno, and Robert E. Allen mayappear Pro Hac Vice in this matter. The Clerk of the Court shall provide electronicnotification of all electronic filings to [email protected],[email protected], and [email protected]. Signed by Judge K.Michael Moore on 1/8/2014. (nhl) (Entered: 01/08/2014)

01/10/2014 50 PAPERLESS ORDER. THIS CAUSE came before the Court upon DefendantSirius XM Radio Inc.'s Motion to Transfer Venue to the United States DistrictCourt for the Southern District of New York 15 . Plaintiff Flo &Eddie, Inc.responded 23 and Defendant replied 26 . Plaintiff has filed three similar actionsconcerning rights to pre−1972 sound recordings in this Court, the Southern Districtof New York, and the Central District of California. Mot., at 2−3. Defendant seeksto transfer all three actions to New York. Id. The Parties do not dispute that theinstant action may have been brought in New York. See 28 U.S.C. § 1404(a); Mot.,at 5; Resp., at 3. Accordingly, this Court must apply a multi−factor test todetermine whether transfer is appropriate. See Global Innovation Tech. v. AcerAm. Corp., 634 F. Supp. 2d 1346, 1348 (S.D. Fla. 2009). This Court finds that,with two exceptions, the factors are neutral and do not favor either Florida or NewYork. This Court finds that the factor of Plaintiff's choice of forum favors Florida,the location in which the instant action was filed. This Court further finds that thefactor of trial efficiency and the interests of justice favors transfer to New York,where a similar action is pending. However, the California court has deniedDefendant's Motion for Transfer, thereby diminishing the utility of transfer to NewYork. See Order Denying Mot. to Transfer Venue, Case No. 13−5693, D.E. 43(C.D. Cal. Dec. 3, 2013). On these facts, Defendant has failed to meet its burden toestablish that this action should be transferred. UPON CONSIDERATION of theMotion, the pertinent portions of the record, and being otherwise fully advised inthe premises, it is hereby ORDERED AND ADJUDGED that the Motion 15 isDENIED. Signed by Judge K. Michael Moore on 1/10/2014. (nhl) (Entered:01/10/2014)

01/13/2014 51 PAPERLESS ORDER. THIS CAUSE came before the Court upon Defendant'sMotion to Stay Pending Resolution of Motion to Transfer 16 . This Court hasdenied Defendant's Motion to Transfer. See Paperless Order 50 . Consequently,upon consideration of the Motion, the pertinent portions of the Record, and beingotherwise fully advised in the premises, it is hereby ORDERED ANDADJUDGED that Defendant's Motion 16 is DENIED AS MOOT. Signed by JudgeK. Michael Moore on 1/13/2014. (nhl) (Entered: 01/13/2014)

01/14/2014 52 NOTICE OF UNAVAILABILITY by Flo &Eddie, Inc. for dates of 2/6/14 −2/9/14; 3/21/14 − 3/24/14 (Waldman, Glen) (Entered: 01/14/2014)

01/28/2014 53 MOTION for Reconsideration re 30 Scheduling Order,,,,,,,,,, (Motion forConference to Reconsider Scheduling Order and Supporting Memorandum of Law)by Sirius XM Radio, Inc.. (Attachments: # 1 Exhibit A − Jan. 10, 2014 MinuteEntry)(Soto, Edward) (Entered: 01/28/2014)




















01/30/2014 54 NOTICE by Flo &Eddie, Inc. of Intention to File Response to Defendant, SiriusXM Radio, Inc.'s Motion for a Conference to Reconsider the Scheduling Order(Waldman, Glen) (Entered: 01/30/2014)

02/07/2014 55 RESPONSE in Opposition re 53 MOTION for Reconsideration re 30 SchedulingOrder,,,,,,,,,, (Motion for Conference to Reconsider Scheduling Order andSupporting Memorandum of Law) filed by Flo &Eddie, Inc.. (Attachments: # 1Exhibit Exhibit A, # 2 Exhibit Exhibit B)(Waldman, Glen) (Entered: 02/07/2014)

02/07/2014 57 MOTION to Appear Pro Hac Vice, Consent to Designation, and Request toElectronically Receive Notices of Electronic Filing for Harvey Wayne Geller.Filing Fee $ 75.00. Receipt # 73560. (ksa) (Entered: 02/13/2014)

02/12/2014 56 REPLY to Response to Motion re 53 MOTION for Reconsideration re 30Scheduling Order,,,,,,,,,, (Motion for Conference to Reconsider Scheduling Orderand Supporting Memorandum of Law) filed by Sirius XM Radio, Inc.. (Soto,Edward) (Entered: 02/12/2014)

02/14/2014 58 PAPERLESS ORDER. THIS CAUSE came before the Court on Plaintiff's Motionto Appear Pro Hac Vice, Consent to Designation, and Request to ElectronicallyReceive Notices of Electronic Filings 57 . UPON CONSIDERATION of theMotion, the pertinent portions of the record, and being otherwise fully advised inthe premises, it is ORDERED AND ADJUDGED that the Motion 57 isGRANTED. Harvey Wayne Geller may appear Pro Hac Vice in this matter. TheClerk of the Court shall provide electronic notification of all electronic filings [email protected]. Signed by Judge K. Michael Moore on 2/14/2014. (nhl)(Entered: 02/14/2014)

02/20/2014 59 PAPERLESS ORDER. THIS CAUSE came before the Court upon Defendant'sMotion for Conference to Reconsider Scheduling Order 53 . Plaintiff responded inopposition 55 and Defendant replied 56 . UPON CONSIDERATION of theMotion, the pertinent portions of the record, and being otherwise fully advised inthe premises, it is hereby ORDERED AND ADJUDGED that the Motion 53 isDENIED. Signed by Judge K. Michael Moore on 2/20/2014. (nhl) (Entered:02/20/2014)
















MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN (SBN 49087) [email protected] MARC E. MAYER (SBN 190969) [email protected] EMILY F. EVITT (SBN 261491) [email protected] 11377 West Olympic Boulevard Los Angeles, CA 90064-1683 Telephone: (310) 312-2000 Facsimile: (310) 312-3100

Attorneys for Plaintiffs

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SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

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CAPITOL RECORDS, LLC, a Delaware limited liability corporation; SONY MUSIC ENTERTAINMENT, a Delaware partnership; UMG RECORDINGS, INC., a Delaware corporation; WARNER MUSIC GROUP CORP., a Delaware corporation; and ABKCO MUSIC & RECORDS, INC., a New York corporation,

Plaintiffs,

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SIRIUS XM RADIO INC., a Delaware corporation; and DOES 1 through 10, inclusive,

Defendants.

CASE NO. BC 520981

Judge: Honorable John Shepard Wiley

NOTICE OF MOTION AND MOTION OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15,1972;

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

[Request for Judicial Notice and Appendix of Non-California Authorities Filed Concurrently Herewith]

Hearing Information:

Location: Dept. 311 Date: May 14,2014 Time: 10:00 a.m.

File Date: September 11, 2013 Trial Date: none set

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MOTION FOR JURY INSTRUCTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

Mitchell

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1 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:

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3 PLEASE TAKE NOTICE that, on May 14, 2014 at 10:00 a.m., or as soon thereafter as

4 the matter may be heard by the Honorable John Shepard Wiley in Department 311 of the above-

5 captioned Court, located at Central Civil West Courthouse, 600 South Commonwealth Ave., Los

6 Angeles, CA 90005, Plaintiffs Capitol Records, LLC, Sony Music Entertainment, UMG

7 Recordings, Inc., Warner Music Group Corp., and ABKCO Music & Records, Inc. will and

8 hereby do move the Court to adopt the following instruction to be given to a jury at the trial of this

9 action:

10 The owner of a sound recording "fixed" (i.e., recorded) prior to February 15, 1972, possesses a property interest and exclusive ownership rights in that sound recording. This property interest and the ownership rights under California law include the exclusive right to publicly perfolin, or authorize others to publicly perform, the sound recording by means of digital transmission — whether by satellite transmission, over the Internet, through mobile smartphone applications, or otherwise.

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16 As set forth in the attached Memorandum of Points and Authorities, the foregoing jury

17 instruction is warranted by California Civil Code Section 980 and California common law,

18 including (but not limited to) Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D.

19 Cal. 2010); ii&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977); and Capitol Records, Inc.

20 v. Erickson, 2 Cal. App. 3d 526 (1969).

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22 This motion is made pursuant to the Stipulated Briefing Schedule filed by the parties on

23 January 16, 2014, and the Court's Order thereon, entered January 27, 2014.

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25 This motion is based on this Notice of Motion, the attached Memorandum of Points and

26 Authorities, any reply that may be filed in support of this motion, the concurrently filed Appendix

27 of Non-California Authorities, the complete files and records in this action, any facts of which the

Mitchell 28 Silberberg & Knupp LLP

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MOTION FOR JURY INSTRUCTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT 5836169.1/11224-00127

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Court may take judicial notice under California Evidence Code §§ 451 and 452 (including the

2 materials contained in the concurrently filed Request for Judicial Notice), and any other further

3 argument or evidence that Plaintiffs may present at or before the hearing on the motion.

DATED: February 3,2014 MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN MARC E. MAYER EMILY F. EVITT

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By: Russell J. Frac an

F-4---utA4/1e/v\-7/110/

Attorneys for laintiffs

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5836169.1/11224-001 7

2 MOTION FOR JURY INSTRUCTION AND


TABLE OF CONTENTS

Page

Introduction 1

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4 I. PROPOSED JURY INSTRUCTION 3

II. PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAW 4

III. CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72 RECORDINGS THAT INCLUDES THE EXCLUSIVE RIGHT OF DIGITAL PUBLIC PERFORMANCE 5

A. The Case Law Establishes The Existence Of A Common Law Intangible Property Interest In Pre-72 Recordings. 5

B. The Policies And Principles Of California Law Confirm The Existence Of A Digital Performance Right In Pre-72 Recordings. 9

C. The Plain Language And Structure Of Civil Code Section 980 Confirm The Existence Of An Exclusive Digital Public Performance Right In Pre-72 Recordings 12

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14 D. Congress Has Recognized That A Digital Public Performance Right Is

Necessary To Protect Owners Of Sound Recordings 15

Conclusion 17

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Mitchell



Page(s)

CASES

A&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977) passim

A&M Records, Inc. v. Napster, 239 F.3d 1011 (9th Cir. 2001) 1

Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327 (1990) 10

Bonneville Int'l Corp. v. Peters, 153 F. Supp. 2d 763 (E.D. Pa. 2001) 16

Bonneville Intl Corp. v. Peters, 347 F.3d 485 (3d Cir. 2003) 1, 16

California School Employees Assn. v. Travis Unified School Dist., 156 Cal. App. 3d 242 (1984) 13

Capitol Records, Inc. v. Erickson, 2 Cal. App. 3d 526 (1969) passim

Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal. 2010) 5, 6, 8, 15 Order Granting Temporary Restraining Order 5 Preliminary Injunction 6 Temporary Restraining Order 5

Cassel v. Superior Court, 51 Cal. 4th 113 (2011) 13

Fnb Mortgage Corp. v. Pac. General Corp., 76 Cal. App. 4th 1116 (1999) 14

Geertz v. Ausonio, 4 Cal. App. 4th 1363 (1992) 14

Goldstein v. California, 412 U.S. 546 (1973) 4, 14, 17

Hollywood Screentest of America, Inc. v. NBC Universal, Inc., 151 Cal. App. 4th 631 (2007) 10

International News Service v. Associated Press, 248 U.S. 215 (1918) 1, 9, 10

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1 TABLE OF AUTHORITIES (continued)

2 Page(s)

3 Lane v. Whitaker,

4 50 Cal. App. 2d 327 (1942) 13

5 Law Offices of Mathew Higbee v. Expungement Assistance Services,

6 214 Cal. App. 4th 544 (2013) 11

7 Leader v. Cords, 182 Cal. App. 4th 1588 (2010) 14

8 Lone Ranger Television, Inc. v. Program Radio Corp.,

9 740 F.2d 718 (9th Cir. 1984) 7

10 Lopez v. Superior Court, 50 Cal. 4th 1055 (2010) 14 11

12 Metropolitan Opera Ass 'n v. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (N.Y. Sup. Ct. 1950) 7, 11

13 Ojala v. Bohlin,

14 178 Cal. App. 2d 292 (1960) 11

15 Pineda v. Williams-Sonoma Stores, Inc.,

16 51 Cal. 4th 524 (2011) 14

17 Smith v. Paul, 174 Cal. App. 2d 744 (1959) 12

18 Williams v. Weisser,

19 273 Cal. App. 2d 726 (1969) 12, 13

20 WorldMark, The Club v. Wyndham Resort Development Corp.,

21 187 Cal. App. 4th 1017 (2010) 15

22 STATUTES

23 17 U.S.C. § 102(a)(7)

24 §106 13

25 § 114(a) 15 § 301(c) 4

26 California Civil Code

27 §4 14

Mitchell Silberberg & Knupp LLP

5836169.1/11224-00127

111


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Page(s)

§654 13 § 980 passim

Fla. Stat. 543.02 (enacted 1941) 14

Laws of Florida, 1977, c. 77-440, § 1 14

N.C. Gen. Stat. § 66-28 (enacted 1939) 14

S.C. Code 39-3-510 (enacted 1939; previously codified at §§ 6641, 66-101) 14

OTHER AUTHORITIES

13 B. E. Witkin, Summary of California Law, §§ 46, 47 (10th ed. 2005) 12

6 W. F. Patry, Patry On Copyright, § 18:55 (2013 ed.) 4

H.R. Conf. Rep. No. 105-796, at 79 (1998) 16

H.R. Rep. No. 92-487 (1971) 11 No. 104-274 (1995) 16

S. Rep. No. 104-128 (1995) 16

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5836169.1711224-00127

iv MOTION FOR JURY INSTRUCTION AND


Introduction

2 Defendant Sirius XM Radio Inc. ("Sirius XM") has built a multi-billion dollar business on

3 transmitting sound recordings to the public. Every day, Sirius XM exploits, for commercial gain,

4 many hundreds, if not thousands, of Plaintiffs' sound recordings that were "fixed" (i.e., recorded)

5 before February 15, 1972 ("Pre-72 Recordings"), by transmitting high-quality digital versions of

6 those recordings to more than 25 million paying customers.' In fact, Sirius XM unabashedly seeks

7 to attract users to its service by offering channels dedicated to Pre-72 Recordings (including

8 1940s, 1950s, and 1960s channels) and by using Pre-72 Recordings to promote its channels, such

9 as by using classic Rolling Stones recordings to advertise the "Deep Tracks" channel and, just last

10 week, highlighting the works of the late singer/songwriter Pete Seeger on Sirius XM's "The

11 Village" and "Outlaw Country" channels. Notwithstanding the bounty that Sirius XM is receiving

12 from its unfettered use of some of the most iconic sound recordings of all time — including

13 recordings by artists such as the Beatles, the Rolling Stones, Led Zeppelin, The Supremes, Bob

14 Dylan, and hundreds of others — it refuses to pay the artists who created those cultural treasures,

15 and those who own the rights to them, any portion of the millions of dollars Sirius XM makes each

16 year from those Pre-72 Recordings. In addition to being fundamentally unfair, Sirius XM's

17 conduct violates California common law and statutes grounded in the century-old maxim that "one

18 may not reap where [it] has not sown." International News Service v. Associated Press, 248 U.S.

19 215, 239-40 (1918) ("INS").

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21 ' Sirius XM describes its service as follows: "Thanks to those satellites high in the sky, you can enjoy Sirius XM Satellite Radio almost anywhere — within the 48 contiguous United States, the

22 District of Columbia and Puerto Rico (with some limitations), hundreds of miles out into the Atlantic and Pacific Oceans, the Gulf of Mexico, Caribbean Sea and the Great Lakes."

23 https://listenercare.siriusxm.corn/app/answers/detail/a id/3570 (last visited Feb. 3, 2014). Sirius XM has now expanded its services beyond satellite radio. Sirius XM's website describes its

24 digital service, MySXM, as an Internet radio feature "so you can enjoy it on your computer or with a Sirius XM app for your iPhoneC, iPadS, iPod® touch or compatible Android device." See

25 http://www.siriusxm.com/mysxm (last visited Feb. 3, 2014).

26 2 Sound recordings can be digitally transmitted by satellite, over the Internet, and over mobile networks. "Real time" Internet transmissions are known as "streaming" transmissions. Bonneville

27 Intl Corp. v. Peters, 347 F.3d 485, 489 (3d Cir. 2003). Alternatively, music files may be distributed via digital download, which is a way "to receive information, typically a file, from

Mitchell 28 another computer to yours." A&M Records, Inc. v. Napster, 239 F.3d 1011, n. 1 (9th Cir. 2001). Silberberg &

1 Knupp LLP

5836169.1/11224-00127

1


This motion asks the Court to recognize a basic legal principle: the exclusive intellectual

property rights that California law grants to the owners of Pre-72 Recordings are broad and

adaptable, and include the right to publicly perform Pre-72 Recordings by digital transmission,

whether by satellite, over the Internet, through smartphone applications, or otherwise. For over 40

years, California law explicitly has recognized the existence of a common law property right in

Pre-72 Recordings. This exclusive property right, which is necessary to protect and encourage the

investment of time, money and creative effort involved in providing these unique recordings to the

public, was written into Section 980 of the California Civil Code in 1982, which states, in

unqualified terms, that the ownership rights of Pre-72 Recordings are "exclusive ... as against all

persons."

The property right in Pre-72 Recordings has for many years been exploited by the creators

and owners of those recordings by reproduction and physical distribution to the public (i.e., on

vinyl records, audio tapes, and CDs). The methods by which consumers enjoy music, and by

which sound recording owners and artists distribute and are paid for that music, have changed, but

the property exploited is the same. The same music now is widely accessed by means of digital

audio transmissions such as those that are the foundation of Sirius XM's business. These

transmissions enable businesses like Sirius XM to provide paying subscribers located anywhere in

the United States (and beyond) high-quality recordings through car radios, desktop and laptop

computers, smartphones, tablets, and other connected devices. Sirius XM's own representations

that it currently has over 25 million paying subscribers confirm this change in consumer habits in

listening to music. In 2012, Sirius XM's hardware was in two out of every three new cars sold,

and its business generated more than $3.4 billion.' Put simply, Sirius XM is using Pre-72

Recordings to provide access to the same music that Plaintiffs created, own, and have the right to

sell to the public, whether on CDs, digital copies, or digital transmissions. That Sirius XM is

publicly performing those recordings via digital transmission, rather than selling a download or a

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See Sirius XM Satellite Radio Proxy Statement and 2012 Annual Report, available at http://investor.siriusxm.com/annuals.cfm (last visited Feb. 3, 2014); Sirius XM Satellite Radio Corporate Overview, available at http://www.siriusxrn.com/corporate (last visited Feb. 3, 2014).



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physical copy, does not change the fact that it appropriates for itself the value of Plaintiffs'

property.

The requested jury instruction does not implicate any proposed affirmative defenses that

Sirius XM may later assert in these proceedings. Nor does this motion ask the Court to address

the ultimate proof of a claim for violation of a digital public performance right in Pre-72

Recordings. The only issue before the Court is recognizing the existence of a digital performance

right under California law.' As set forth below, the existence of a digital perfoimance right in Pre-

72 Recordings as part of the exclusive rights conferred by California law is confirmed by caselaw

extending over 40 years; by the policies that underpin California common law theories of

misappropriation, conversion, and unfair competition; by the plain language, structure, and intent

of California Civil Code Section 980; and by the very same market considerations that in 1995

drove Congress to amend the Copyright Act (which, unlike California law, previously specifically

excluded a performance right in sound recordings) to give sound recording owners a digital

performance right in their federally copyrighted post-72 recordings. These authorities, whether

taken individually or collectively, establish conclusively that there exists a broad intangible

property right in Pre-72 Recordings that includes the valuable right to perform these recordings

digitally. Accordingly, the Court should grant this motion and adopt Plaintiffs' proposed jury

instruction.

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I. PROPOSED JURY INSTRUCTION

Plaintiffs respectfully request that the Court adopt the following jury instruction:

The owner of a sound recording "fixed" (i.e., recorded) prior to February 15, 1972, possesses a property interest and exclusive ownership rights in that sound recording. This property interest and the ownership rights under California law include the exclusive right to publicly perform, or authorize others to publicly perform, the sound recording by means of digital transmission — whether by

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Plaintiffs also claim that Sirius XM is liable for copying thousands of Plaintiffs' Pre-72 Recordings to its servers or satellites without authorization. There is no dispute that California law recognizes the exclusive right to reproduce copies of Pre-72 Recordings. See A&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). Sirius XM's violations of Plaintiffs' reproduction right are not part of this motion and will be addressed at a later time.



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1 satellite transmission, over the Internet, through mobile smartphone applications, or otherwise.

2

II. PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAW

In 1971, Congress passed the Sound Recording Amendment to the 1909 Copyright Act.

This amendment granted certain federal protections to sound recordings "fixed" on or after

February 15, 1972 ("Post-72 Recordings"). 5 Congress' extension of federal copyright protection

to such sound recordings, however, did not disturb the pre-existing state law regimen. Instead, the

Sound Recording Amendment expressly preserved state law protection for Pre-72 Recordings.

See 17 U.S.C. § 301(c) ("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.") (emphasis added).

Section 301(c) of the Copyright Act does not limit the extent or nature of the protection

that states can grant to Pre-72 Recordings. To the contrary, Congress expressly left existing state

law intact, and further allowed the states to retain, adopt, and continue to develop common law

and statutory protection for Pre-72 Recordings as they saw fit. Thus, Congress empowered the

states to provide full protection for any unauthorized and uncompensated exploitation of Pre-72

Recordings. See Goldstein v. California, 412 U.S. 546 (1973) (California had broad power to

protect Pre-72 Recordings that are not covered by the federal Copyright Act); see generally 6 W.

F. Patry, Patry On Copyright, § 18:55 at 18-198 (2013 ed.) ("Section 301(c) is directed toward

material (pre-1972 sound recordings) which Congress has expressly told the states they may

protect.... States are thus free to extend pre-1972 sound recordings the full panoply of rights

granted original works of authorship by the Federal Copyright and beyond (for example, a

performance right...)"). As explained below, California provides a valuable, intangible property

right in the performances embodied in Pre-72 Recordings that includes the exclusive right to use

(and authorize others to use) Pre-72 Recordings by digitally transmitting them.

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The protection for sound recordings "fixed" after February 15, 1972, later was codified in the 1976 Copyright Act, which lists "sound recordings" as a "work of authorship" protected by federal copyright law. See 17 U .S.C. § 102(a)(7).



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III. CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72 RECORDINGS THAT INCLUDES THE EXCLUSIVE RIGHT OF DIGITAL PUBLIC PERFORMANCE

A. The Case Law Establishes The Existence Of A Common Law Intangible Property Interest In Pre-72 Recordings.

California case law supports the existence of a digital performance right in Pre-72

Recordings under theories of unfair competition, misappropriation, and conversion.

Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal. 2010), is the only

reported decision applying California law to the digital performance of Pre-72 Recordings. The

defendants were the owners of websites (bluebeat.com and basebeat.com) that transmitted and

distributed sound recordings, including a large number of Pre-72 Recordings (most notably

recordings by the Beatles), to members of the public, both by digital download and by digital

streaming, without authorization from the owners of the recordings. The plaintiffs, six affiliated

record labels, sued, alleging that the defendants had engaged in federal copyright infringement

with respect to the plaintiffs' Post-72 Recordings and had violated state law with respect to the

plaintiffs' Pre-72 Recordings. Specifically, the plaintiffs alleged that the defendants had engaged

in common law misappropriation, conversion, and unfair competition and had violated California

Civil Code Section 980 (discussed at Section III.C. below), which provides that "[t]he author of an

original work of authorship consisting of a sound recording initially fixed prior to February 15,

1972, has an exclusive ownership therein ....." (emphasis added).

The case initially was assigned to Judge John Walter who issued both a temporary

restraining order and preliminary injunction, finding that "by offering ... digital streaming

transmissions of Plaintiffs' Recordings, Defendants' actions can cause irreparable damage to the

perceived value of Plaintiffs' music and to Plaintiffs' digital distribution strategies and

relationships." See Order Granting Temporary Restraining Order, Case No. 09-8030 JST at 6

(Docket No. 13); Temporary Restraining Order, Case No. 09-8030 JST (Docket No. 14) at 4

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("TRO"); Preliminary Injunction, Case No. 09-8030 JST (Docket No. 25) at 411 1(b).6 The TRO and

Preliminary Injunction enjoined the defendants from "directly or indirectly infringing in any

manner any right in any and all sound recordings originally fixed in a tangible medium of

expression prior to February 15, 1972, in which any Plaintiff.., owns or controls an exclusive

right under state or common law (the 'Pre-1972 Sound Recordings'), including without limitation

by directly or indirectly copying, reproducing, downloading, distributing, communicating to the

public, uploading, linking to, transmitting, publicly performing, or otherwise exploiting in any

manner any of Plaintiffs' Pre-1972 Sound Recordings..." TRO at 4; Preliminary Injunction at 2

(emphasis added).

Several months later, the BlueBeat case was transferred to Judge Josephine Tucker who,

after the completion of discovery, granted summary judgment to the plaintiffs, holding that the

defendants "reproduced, sold, and publicly performed the pre-72 recordings without proper

authorization" (emphasis added), and that "[for these actions, [defendants are] liable for

misappropriation, unfair competition, and conversion." BlueBeat, 765 F. Supp. 2d at 1206. Thus,

two judges concluded that defendants had violated the plaintiffs' rights, including by digitally

performing their Pre-72 Recordings publicly.

BlueBeat relied on, and was a natural result of, the two seminal California cases addressing

common law rights in Pre-72 Recordings — Capitol Records, Inc. v. Erickson, 2 Cal. App. 3d 526

(1969) and il&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). In Erickson, the Court of

Appeal held that the production, distribution, and sale of tape cartridges that copied the

performances embodied in plaintiff's recordings gave rise to a claim for unfair competition

because:

Capitol expends substantial effort, skill and money in selecting performing artists and obtaining the exclusive right to record their performances, in mechanically reproducing their performances on discs and tapes of the highest quality, and in promoting the sale of the tapes and discs.... [Defendant] unfairly appropriates artistic performances produced by Capitol's efforts, and [defendant] profits

6 Copies of these documents are included in the Appendix of Non-California Authorities filed concurrently herewith and subject to judicial notice. See Request for Judicial Notice, filed concurrently herewith.



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thereby to the disadvantage of Capitol. Such conduct by [defendant] is unfair competition.... 2 Cal. App. 3d at 537•7

Erickson was followed by and expanded in Heilman, which held that making and

distributing unauthorized copies of the performances embodied in plaintiffs' Pre-72 Recordings

constituted unfair competition and also misappropriation and conversion. Heilman, 75 Cal. App.

3d at 564 (duplicating Pre-1972 Recordings and selling them for profit "presents a classic example

of the unfair business practice of misappropriation of the valuable efforts of another. Such

conduct unquestionably constitutes unfair competition....").

These cases recognized the basic proposition that there exists a property right in, and

common law protection for, Pre-72 Recordings. Heilman, 75 Cal. App. 3d at 570 ("[R]ecorded

performances are [plaintiff record company's] intangible personal property."); Erickson, 2 Cal.

App. 3d at 537-38 (copying and distributing plaintiff's Pre-72 Recordings "appropriates artistic

performances produced by [plaintiff's] efforts" and defendant "had appropriated the product itself

— performances embodied on the records."); see Lone Ranger Television, Inc. v. Program Radio

Corp., 740 F.2d 718, 725 (9th Cir. 1984) (plaintiff had an "intangible property interest in the

performances on its tapes" of scripts broadcast over the radio); see also Metropolitan Opera Ass 'n

v. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (N.Y. Sup. Ct. 1950), aff'd, 107 N.Y.S.2d

795 (N.Y. App. Div. 1951) (per curiam) ("[T]o refuse the groups who expend time, effort, money,

and great skill in producing these artistic performances, the protection of giving them a property

right in the resulting artistic creation would be contrary to existing law, inequitable, and repugnant

to the public interest.").

These cases protected the valuable intangible property in the recorded perfolinances in Pre-

72 Recordings (not the tangible tapes in which the intangible recordings were embodied).

Defendants in those cases were selling, and their customers were buying, the ability to listen to

' The Pre-72 Recording found protectable and sold to the public in Erickson was "Goin' Out of My Head" by the Lettermen. 2 Cal. App. 3d at 529. Sirius XM also transmits recordings by the Letteimen without authorization or payment. See Complaint Schedule A; see also Heilman, 75 Cal. App. 3d at 560 n.5 (listing some of the recorded performances at issue here: "We've Only Just Begun" by the Carpenters and "You Were On My Mind" by We Five. See Complaint, Schedule A).



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Mitchell 28 Silberberg Knupp LLP

and enjoy the recorded perfoimances in Pre-72 Recordings. In Erickson and Heilman, defendants

accomplished that end by copying and distributing "hard copies" (i.e., tape recordings) of Pre-72

Recordings. That conduct violated the exclusive rights of the owners of those Pre-72 Recordings.

Digital audio transmission is just another means of providing customers with access to the same

Pre-72 Recordings that they could obtain and enjoy by other commercial means. The intangible

property appropriated and used is the same, and the harm to the owners is the same. There is no

factual or legal reason to carve out Sirius XM's means of commercial use — digital audio

transmission — from the established exclusive property rights of owners of Pre-72 Recordings.

These exclusive rights should apply regardless of the means by which a defendant uses Pre-72

Recordings and sells these recordings to the public.

Collectively, Erickson, Heilman, and BlueBeat applied the well-developed elements of

California common law causes of action for misappropriation, unfair competition, and conversion

to Pre-72 Recordings. The BlueBeat court summarized the elements of these claims as applied to

the copying, distribution, and digital public performance of Pre-72 Recordings as follows:

For a successful misappropriation claim, a plaintiff must show that (1) the plaintiff has invested substantial time and money in development of its ... property; (2) the defendant has appropriated the [property] at little or no cost; and (3) the plaintiff has been injured by the defendant's conduct.... Under California Civil Code § 980(a)(2), the author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein ... against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior sound recording.

For an unfair competition claim under California Business and Professions Code § 17200, plaintiff must show anything that can properly be called a business practice and that at the same time is forbidden by law.... Section 17200 borrows violations from other laws by making them independently actionable as unfair competitive practices ... [and] a practice may be deemed unfair even if not specifically proscribed by some other law. ... Under California Business and Professions Code § 17200, unfair competition ... include[s] any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising ....

Finally, for a conversion claim, a plaintiff has to show ownership or right to possession of property, wrongful disposition of the property



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1 right and damages. BlueBeat, 765 F. Supp. 2d at 1205 (citations and quotations omitted). 8

2

These legal principles apply to the unauthorized exploitation by digital transmission of

performances embodied in Pre-72 Recordings every bit as much as they apply to the unauthorized

reproduction or distribution of the same performances embodied in Pre-72 Recordings. Nothing

in the case law has negated the existence of a digital performance right in Pre-72 Recordings, or

has limited or restricted an owner's property interest in Pre-72 Recordings to physical or digital

reproduction or distribution rights.

B. The Policies And Principles Of California Law Confirm The Existence Of A Digital Performance Right In Pre-72 Recordings.

The decisions in Erickson and Heilman to confirm ownership rights in Pre-72 Recordings

were premised on established common law principles, embodying California public policy. These

cases recognized that a defendant may not "gain substantial profit" by "circumvent[ing] the

necessity of expending skill and money in acquiring the artists and recording their performances,"

and that providing a return to those who do expend "skill and money" encourages further

investment and invention. Erickson, 2 Cal. App. 3d at 537-38. The courts in both cases supported

their conclusions with a line of unfair competition cases, including the seminal decision in INS,

248 U.S. 215 (1918). These and other cases confirm that the valuable performances in Pre-72

Recordings should be and are protected from appropriation or use by digital transmission.

In INS, the parties (INS and the Associated Press ("AP")) were competitors in the

gathering and publication of news, which they sold to newspapers for an annual subscription or

membership fee. AP alleged that INS appropriated AP's news through a variety of means,

including by copying news items from early editions of AP's member papers and copying and

disseminating the substance of AP's articles to the public. The Court held that AP was entitled to

protect an intangible property interest in its timely collection and distribution of its news pieces as

against their appropriation (by publication) by INS:

Plaintiffs expect to prove all the elements of a violation of these causes of action; however, the issue here is the existence of the right, not its violation.



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[T]o both [parties], news matter, however little susceptible of ownership or dominion in the absolute sense, is stock in trade, to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it, as for any other merchandise. Regarding the news, therefore, as but the material out of which both parties are seeking to make profits at the same time and in the same field, we hardly can fail to recognize that for this purpose, and as between them, it must be regarded as quasi property, irrespective of the rights of either as against the public....

[D]efendant, by its very act, admits that it is taking material that has been acquired by complainant as the result of organization and the expenditure of labor, skill, and money, and which is salable by complainant for money, and that defendant in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of complainant's members is appropriating to itself the harvest of those who have sown. Stripped of all disguises, the process amounts to an unauthorized interference with the normal operation of complainant's legitimate business precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not; with special advantage to defendant in the competition because of the fact that it is not burdened with any part of the expense of gathering the news. The transaction speaks for itself, and a court of equity ought not to hesitate long in characterizing it as unfair competition in business. 248 U.S. at 236, 239-40.

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The basic concepts and policies espoused by INS — namely, that one may not "reap where

it has not sown" by profiting from the product of skill, labor and money of another — were adopted

virtually verbatim by the Court in Erickson, relying extensively on INS. See 2 Cal. App. 3d at

531-33. The INS doctrine is firmly embedded in California law and the policies it articulates are a

precise fit to this case. See, e.g., Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327,

1342 (1990) (listing elements of misappropriation cause of action and citing INS); Hollywood

Screentest of America, Inc. v. NBC Universal, Inc., 151 Cal. App. 4th 631, 650 (2007) (elements

of misappropriation cause of action include "the defendant has appropriated the 'thing' at little or

no cost, such that the court can characterize defendant's actions as 'reaping where it has not

sown'."); see also Metropolitan Opera, 101 N.Y.S. 2d at 490 (unfair competition by recording and

selling copies of radio broadcasts and "taking material that has been acquired by complainant as a

result of organization and the expenditure of labor, skill, and money, and which is salable by

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complainant for money, and that defendant in appropriating it and selling it as its own is

endeavoring to reap where it has not sown....").

It follows that the common law necessarily must, and does, adapt to keep pace with and

meet technological changes and developments that create new ways to "reap where one has not

sown." See, e.g., Ojala v. Bohlin, 178 Cal. App. 2d 292, 301 (1960) ("The legal concept of unfair

competition has evolved as a broad and flexible doctrine with a capacity for further growth to meet

changing conditions. . . ."); see also Law Offices of Mathew Higbee v. Expungement Assistance

Services, 214 Cal. App. 4th 544, 551 (2013) ("[w]ith passage of time and accompanying epochal

changes in industrial and economic conditions, the legal concept of unfair competition broadened

appreciably."). As technology and circumstances have evolved, the common law governing Pre-

72 Recordings also has evolved, and the scope of rights has taken shape. This flexibility to adapt

to new technologies and new circumstances was demonstrated in Erickson, where the court

applied traditional common law principles to the copying and distribution of Pre-72 Recordings

that were fixed in a then-new medium, tape cartridges. Erickson was decided in response to tape

recording technology that changed the playing field by enabling the widespread, unauthorized

copying and distribution to the public of tape recorded copies of sound recordings to the public

without paying the owners. 2 Cal. App. 3d at 528; see H.R. Rep. No. 92-487 at 19 (1971)

(Statement of Chaitinan, Committee on the Judiciary: "The widespread availability and use of

phonograph record and tape-playing machines, particularly the comparatively inexpensive cassette

or cartridge tape players, give added impetus to piracy of sound recordings.").

New technological developments tap into new sources of value inherent in an owner's

intellectual property. In the present environment, what was true for unlawful duplication and sale

of Pre-72 Recordings as described by Erickson in 1969, is just as true today for digital

transmission of Pre-72 Recordings. It is unfair for others to take the value belonging to the owner

of that property without authorization or compensation. The precise means by which a defendant

appropriates and uses that property interest is not the issue. Rather, the issue is that (1) the

plaintiff has invested "effort, skill and money" in its endeavor, by virtue of which, the plaintiff has



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28 Mitchell Silberberg & Knupp LLP

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created something of value, and (2) the defendant has appropriated and profited from that valuable

property. Erickson, 2 Cal. App. 3d at 537. That is the case whether the value is realized by the

sale of CDs, as in Erickson, or, as with Sirius XM, by the sale of subscriptions for digital

transmissions of those same recordings. By populating its channels with many of Plaintiffs' most

valuable recordings, Sirius XM has engaged in precisely the type of "reaping without sowing"

articulated in Erickson and INS. Indeed, many of the channels to which Sirius XM sells access

would not exist were it not for Plaintiffs' Pre-72 Recordings. Sirius XM had no hand in creating

these recordings, yet profits handsomely from them.

C. The Plain Language And Structure Of California Civil Code Section 980 Confirm The Existence Of An Exclusive Digital Public Performance Right In Pre-72 Recordings.

California common law copyright, codified in Civil Code Section 980, provides a separate

basis for a state law digital performance right in Pre-72 Recordings. Historically, that statute was

worded broadly to confirm "exclusive ownership" rights in various types of common law

property. See generally 13 B. E. Witkin, Summary of California Law, §§ 46, 47 (10th ed. 2005).

Its scope has been interpreted expansively. See, e.g., Smith v. Paul, 174 Cal. App. 2d 744, 746-58

(1959) (then Civil Code Section 980(b) applied to architectural designs, plans, and specifications,

even though not specifically mentioned); Williams v. Weisser, 273 Cal. App. 2d 726, 730 (1969)

(then Civil Code Section 980(a) applied to professors' lectures). In that context, in 1982

California added protection for Pre-72 Recordings by statute when it amended Civil Code Section

980 to explicitly provide comprehensive, exclusive rights to owners of Pre-72 Recordings:

The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior sound recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording. Civ. Code § 980(a)(2) (emphasis added).

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When it was amended, this new Section 980(a)(2) continued to use the same broad

language as in previous iterations, providing for "exclusive ownership" in Pre-72 Recordings "as



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against all persons." The plain language of the statute does not limit in any way the scope of the

"exclusive" rights that are reserved to owners of Pre-72 Recordings. The inclusive statutory

language was neither inadvertent nor imprecise. It tracked terms that have been defined in

California law for over 100 years. See Civ. Code § 654 (defining "Property" as "The ownership

of a thing is the right of one or more persons to possess and use it to the exclusion of others ...

Mlle thing of which there may be ownership is called property.") (emphasis added); id. § 679

("The ownership of property is absolute when a single person has the absolute dominion over it,

and may use it or dispose of it according to his pleasure....") (emphasis added); see also, e.g.,

Lane v. Whitaker, 50 Cal. App. 2d 327, 330 (1942) ("[O]wnership is the right of a person to

possess and use a thing to the exclusion of others."). These terms had been applied specifically to

define the meaning of "exclusive ownership" as used in an earlier version of Section 980:

There may be ownership of such products of labor or skill as the composition of an author and of rights created by statute (Civ. Code § 655). The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others. The thing of which there may be ownership is called property. (Civ. Code § 654).... A product of the mind is property. It is an intangible, incorporeal right." Johnson v. Twentieth Century Film Corp., 82 Cal. App. 2d 796, 807-08 (1947) (citing former Civ. Code § 980).

Years later, when the legislature enacted Section 980(a)(2), it used the same statutorily defined

teims to provide that the owner of a Pre-72 Recording has the right to "possess and use it to the

exclusion of others" and that the ownership of that property was "absolute."

This plain language of Section 980(a)(2) makes clear its intent and purpose to give owners

of Pre-72 Recordings the sole right to use the product of their "labor or skill." See California

School Employees Assn. v. Travis Unified School Dist., 156 Cal. App. 3d 242, 247 (1984) ("We

are required to give effect to statutes according to the usual, ordinary import of the language

employed in framing them."). There is no basis for the Court to impose exceptions in Section

980(a)(1) where none exist. Cassel v. Superior Court, 51 Cal. 4th 113, 124 (2011) ("Judicial

construction, and judicially crafted exceptions, are permitted only where due process is implicated,

or where literal construction of a statute would produce absurd results."). When the Legislature

chose to draft Section 980(a)(2), it pointedly did not, as it surely could have, construct the statute



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to enumerate limited, specific rights accorded to the owners of sound recordings — unlike the

structure of the federal Copyright Act. See 17 U.S.C. § 106 (listing exclusive rights of copyright

owners). Rather, the statute employed language that provided ownership rights that were not

tethered to specific enumerated uses. It made ownership rights broad and provided for "exclusive

ownership" in order to most effectively protect the investment, creativity, and commercial

exploitation of those performances.' Lopez v. Superior Court, 50 Cal. 4th 1055, 1063 (2010)

(courts should apply "the construction that comports most closely with the apparent intent of the

Legislature, with a view to promoting rather than defeating the general purpose of the statute....").

Section 980 is to be liberally construed to effectuate its purpose of protecting the

commercial value created and contributions made by owners of Pre-72 Recordings by affording

them exclusive ownership rights to what was, and is, a "large industry in California." Goldstein,

412 U.S. at 571; see Cal. Civ. Code § 4 ("The [Civil Code] establishes the law of this state

respecting the subjects to which it relates, and its provisions are to be liberally construed with a

view to effect its objects and to promote justice."); Pineda v. Williams-Sonoma Stores, Inc., 51

Cal. 4th 524, 530 (2011) ("courts should liberally construe remedial statutes in favor of their

protective purpose"); see also, e.g., Leader v. Cords, 182 Cal. App. 4th 1588, 1597 (2010) (a

remedial statute, i.e., "one which provides a means for the enforcement of a right or the redress of

a wrong," must be liberally construed). The fact that the technology now used to exploit Pre-72

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19 9 The only "exception" made a part of Section 980 was the "independent fixation of other sounds" (i.e., "cover" recordings or re-recordings that are made by others and do not use the performances on the original recording). Geertz v. Ausonio, 4 Cal. App. 4th 1363, 1370 (1992) ("We presume the Legislature included all the exceptions it intended to create."). Had the California legislature intended that other exceptions be applied to the broad rights provided to sound recording owners, it would have done so. Fnb Mortgage Corp. v. Pac. General Corp., 76 Cal. App. 4th 1116, 1133 (1999) ("where exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed, absent a discernible and contrary legislative intent.").

On the other hand, other states did what California chose not to do — expressly exclude by statute public performance rights in Pre-72 Recordings. At the time Civil Code Section 980(a)(2) was adopted, at least three states had statutes that denied any common law performance right in sound recordings. See N.C. Gen. Stat. § 66-28 (enacted 1939) (abrogating common law rights in Pre-72 Recordings for commercial use of recorded performances after initial sale of recording); S.C. Code 39-3-510 (enacted 1939; previously codified at §§ 6641, 66-101) (same); Fla. Stat. 543.02 (enacted 1941) ("[A]ll asserted common law rights" in recorded performances embodied in sound recordings are "abrogated and expressly repealed" after initial sale). The Florida statute later was repealed, effective July 1, 1977. See Laws of Florida, 1977, c. 77-440, § 1.



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Mitchell


Recordings through digital transmission did not exist in 1982 when Section 980(a)(2) was enacted

in no way deprives Plaintiffs of their exclusive right to exploit (or authorize others to exploit) their

property using this technology, as the BlueBeat court recognized. 765 F. Supp. 2d at 1205; see,

e.g., WorldMark, The Club v. Wyndham Resort Development Corp., 187 Cal. App. 4th 1017, 1036

(2010) (statute requiring disclosure of "address" includes e-mail addresses, stating "courts must be

sufficiently receptive to the notion of adapting legal principles to address societal changes.... This

is a particularly apt formulation of the standard in cases of emerging technologies lest our laws be

interpreted only in light of yesterday's accomplishments"). Owners of Pre-72 Recordings invest

their time, creativity, and money to make and provide their product to the public. The right to

exploit the value they have created could not be any more clear or any more justifiable.

D. Congress Has Recognized That A Digital Public Performance Right Is Necessary To Protect Owners Of Sound Recordings.

As discussed above, the digital transmission to the public of Pre-72 Recordings as part of a

commercial venture exploits a valuable property right protected under California law. In addition,

Congress's analysis of the digital performance right under federal law is highly instructive, and

further illustrates the wisdom of applying California law to digital technologies such as those used

by Sirius XM. Prior to 1995, federal law, unlike California law, expressly denied a performance

right in sound recordings. See 17 U.S.C. § 114(a). In 1995, Congress amended the Copyright Act

by the Digital Performance Right in Sound Recordings Act ("DPRA"). The DPRA conferred on

the owners of Post-72 Recordings the exclusive right to publicly perform these recordings by

digital audio transmission (including by satellite transmissions or over the Internet). When it

enacted the DPRA, Congress noted the impact of current technology on the marketplace for sound

recordings and required services like Sirius XM to obtain consent and pay for the right to

reproduce and digitally perform Post-72 Recordings, i.e. all sound recordings within the purview

of the Copyright Act:

Trends within the music industry, as well as the telecommunications and information services industries, suggest that digital transmission of sound recordings is likely to become a very important outlet for the performance of recorded music in the near future.... These new



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digital transmission technologies may permit consumers to enjoy performances of a broader range of higher-quality recordings than has ever before been possible.... [C]urrent copyright law is inadequate to address all of the issues raised by these new technologies dealing with the digital transmission of sound recordings and musical works and, thus, to protect the livelihoods of the recording artists, songwriters, record companies, music publishers and others who depend upon revenues derived from traditional record sales. S. Rep. No. 104-128, at 14 (1995) ("S. Rep.").

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As Congress repeatedly recognized, new technologies "affect the ways in which ...

creative works are used" (id. at 10) and "Whese new technologies also may lead to new systems

for the electronic distribution of phonorecords...." H.R. Rep. No. 104-274, at 12. Congress was

not "unmindful of the possibility that technological developments could well cause substantial

changes in existing systems for public delivery of sound recordings." S. Rep. 104-128, at 11.

Accordingly, Congress's expressed "purpose" was to "ensure that performing artists, record

companies, and others whose livelihood depends upon effective copyright protection for sound

recordings will be protected as new technologies affect the way in which their creative works are

used." Id. at 10. More specifically, the digital performance right was the result of "a concern on

the part of Congress to protect record companies and recording artists from the danger of reduced

record sales due to technological advances enabling high-quality copying by a large number of

listeners." Bonneville Intl Corp. v. Peters, 153 F. Supp. 2d 763, 778-79 (E.D. Pa. 2001), aff'd

347 F.3d 485 (2003). As the Bonneville court explained, "[t]he motivating force behind Congress'

creation of the limited public performance right was the desire to protect record companies and

recording artists from a reduction of record sales threatened by technological developments,

specifically interactive and subscription services made possible by the emergence of digital audio

services capable of delivering high-quality transmissions of sound recordings." Id. at 767, citing

S. Rep. at 14-15; H.R. Rep. No. 104-274 at 5-9, 12-13. Again, in 1998, in enacting the Digital

Millennium Copyright Act (commonly known as the "DMCA"), Congress reiterated its objective

"to ensure that recording artists and record companies will be protected as new technologies affect

the ways in which their creative works are used." H.R. Conf. Rep. No. 105-796, at 79 (1998).

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16 MOTION FOR WRY INSTRUCTION AND


Mitchell


These same considerations — namely, to protect the property rights of record companies

and recording artists from new ways in which their creative works are used commercially,

specifically, digital transmission — apply to and provide further support for the existence of a

digital performance right under California law. The amendments to the Copyright Act enacted by

the DPRA were driven by the need to adapt the statute to technological change. However, unlike

the Copyright Act, which previously excluded performance rights for sound recordings, California

has long provided evolving and flexible common law protection to intellectual property, including

Pre-72 Recordings, and broad, exclusive statutory protection specifically to Pre-72 Recordings.

Thus, both California Civil Code Section 980 and California common law accommodate and

include a digital performance right in Pre-72 Recordings. That property right is made all the more

valuable and necessary by the ability to offer high-quality transmissions of Pre-72 Recordings to

the public.

There is no basis or authority to construe California law to provide less protection to digital

transmissions of Pre-72 Recordings than federal law does to Post-72 Recordings, especially when

California traditionally has, if anything, provided greater protection for sound recordings than has

federal law. See, e.g., Goldstein, 412 U.S. at 546 (affirming California protection for sound

recordings at a time when no federal protection existed). In practical terms, there is no legal or

logical reason why Sirius XM should have to pay, for example, for the right to digitally transmit to

the public a Justin Bieber recording but not pay for most of the iconic recordings of the Beatles or

the Rolling Stones, or, for that matter, to pay for the right to transmit the Rolling Stones' "Start

Me Up" (1981) but not their "(I Can't Get No) Satisfaction" (1965).

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Conclusion

California common law and Civil Code Section 980 both provide that unauthorized

exploitation of performances embodied in Pre-72 Recordings violates the exclusive rights of their

owners. Whether such exploitation is by the sale of CDs, digital downloads, or digital

transmissions is not the point. The digital transmission of Pre-72 Recordings to the public is the

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equivalent of copying and distributing those recordings to the public. Failing to compensate for

digital transmissions causes the same harm and loss of revenue as does unauthorized distribution

of CDs or unauthorized downloading of digital copies embodying those sound recordings. Such

commercial exploitation of Pre-72 Recordings without authorization violates a fundamental right

to control the use of property and "unfairly appropriates artistic performances produced by

[plaintiff's] effort, and [defendant] profits thereby to the disadvantage of [plaintiff]." Erickson, 2

Cal. App. 3d at 537. By publicly performing Pre-72 Recordings owned by Plaintiffs by means of

a digital audio transmission without authorization or compensation, Sirius XM is misappropriating

Plaintiffs' exclusive property interests under California law. Plaintiffs ask the Court to accept and

adopt their proposed jury instruction in its entirety.

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DATED: February 3, 2014 Respectfully submitted,

MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN MARC E. MAYER EMILY F. EVITT

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Russell J. Fr an Attorneys forTlaintiffs

fr.;1-7--Ztitiev"Pt4.27 7Aile49 16

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By:

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Mitchell


PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

I am employed in the County of Los Angeles, State of California, I am over the age of eighteen years and am not a party to this action; my business address is Mitchell Silberberg & Knupp LLP, 11377 West Olympic Boulevard, Los Angeles, CA 90064-1683, and my business email address is [email protected] .

On February 3, 2014, I served a copy of the foregoing document(s) described as NOTICE OF MOTION AND MOTION OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15,1972; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT on the interested parties in this action at their last known address as set forth below by taking the action described below:

SEE ATTACHED SERVICE LIST

BY ELECTRONIC SERVICE: I served the above-mentioned document electronically using the CaseAnywhere website email service on the parties listed at the email addresses in the attached Service List, and, to the best of my knowledge, the transmission was complete and without error in that I did not receive an electronic notification to the contrary.

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14 I declare under penalty of perjury under the laws of the State of California that the above is true and correct.

15 Executed on February 3, 2014, at Los Angeles, C lifornia.

Desiree Cabrera

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Mitchell


19 5803405.1 PROOF OF SERVICE

SERVICE LIST

Fred R. Puglisi Valerie E. Alter Jay Ramsey Kent Raygor Sheppard Mullin Richter & Hampton LLP 1901 Avenue of the Stars, Suite 1600 Los Angeles, CA 90067 Phone: 310-228-3733 Fax: 310-228-3933 E-mails: [email protected] ; [email protected] ; [email protected] ; [email protected] Attorneys for Defendant Sirius XM Radio Inc.

R. Bruce Rich Benjamin E. Marks Todd Larson John Gerba , Bruce Meyer Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Phone: 212-310-8029 Fax: 212-310-8007 E-mails: bruce.rich weil.com ; [email protected] ; [email protected] ; [email protected] ; [email protected] Attorneys for Defendant Sirius XM Radio Inc.

Michael S. Oberman Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036 Phone: 212-715-9100 Fax: 212-715-8000 E-mail: [email protected] Attorneys for Defendant Sirius XM Radio Inc.

20 PROOF OF SERVICE

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Mitchell


5803405.1

2/20/2014 LASC - Case Summary

http://www.lasuperiorcourt.org/civilcasesummarynet/ui/popupCaseSummary.aspx 1/3

Case Summary

Please make a note of the Case Number.

Click here to access document images for this case. If this link fails, you may go to the Case Document Images site and search using the case number displayedon this page.

Case Number: BC520981CAPITOL RECORDS LLC ET AL VS SIRIUS XM RADIO INC

Filing Date: 09/11/2013Case Type: Other Commercial/Business Tort (General Jurisdiction)Status: Pending

Cases Related: BC517032 on 10/04/2013

Future Hearings

05/14/2014 at 10:00 am in department 311 at 600 South Commonwealth Ave., Los Angeles, CA 90005Conference-Case Management(PLAINTIFFS' MOTION FOR A JURYINSTRUCTION)

Documents Filed | Proceeding Information

Parties

ABKCO MUSIC & RECORDS INC. - Plaintiff/Petitioner

CAPITOL RECORDS LLC - Plaintiff/Petitioner

DOES 1 THROUGH 10 - Defendant/Respondent

MITCHELL SILBERBERG & KNUPP LLP - Attorney for Plaintiff/Petitioner

SHEPPARD MULLIN RICHTER AND HAMPTON - Attorney for Defendant/Respondent

SIRIUS XM RADIO INC. - Defendant/Respondent

SONY MUSIC ENTERTAINMENT - Plaintiff/Petitioner

UMG RECORDINGS INC. - Plaintiff/Petitioner

WARNER MUSIC GROUP CORP. - Plaintiff/Petitioner

Case Information | Party Information | Proceeding Information

Please make a note of the Case Number.

Click here to access document images for this case. If this link fails, you may go to the Case Document Images site and search using the case number displayedon this page.

Documents Filed (Filing dates listed in descending order)

02/03/2014 Motion (OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCERIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15, 1972; MEMORAN- DUM OF POINTS AND

https://www.lasuperiorcourt.org/onlineservices/civilImages/externalAppLink.aspx?casenumber=BC520981

https://www.lasuperiorcourt.org/onlineservices/civilImages/externalAppLink.aspx?casenumber=BC520981



AUTHORITIES IN SUPPORT)Filed by Attorney for Plaintiff/Petitioner

02/03/2014 Request for Judicial Notice (IN SUPPORT OF PLAINTIFFS' MOTION FOR JURY INSTRUCTIONREGARDING A DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15,1972 )Filed by Attorney for Plaintiff/Petitioner

02/03/2014 Miscellaneous-Other (APPENDIX OF NON-CALIFORNIA AUTHORI TIES CITED IN SUPPORT OFMOTION OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCE RIGHT IN PRE-72 SOUND RECORDINGS RECEIVED)Filed by Attorney for Plaintiff/Petitioner

01/31/2014 Notice of Continuance (RE: CASE MANAGEMENT CONFERENCE 05/14/14 )Filed by Attorney for Defendant/Respondent

01/27/2014 Report-Status (JOINT STATUS REPORT RE: STIPULATED BRIEFING SCHEDULE FORPLAINTIFFS' MOTION FOR JURY INSTRUCTION AND ORDER THEREON )Filed by Attorney for Plaintiff/Petitioner

01/16/2014 Report-Status (JOINT RE: SITPULATED BRIEFING SCHEDULE FOR PLAINTIFFS' MOTION FORJURY INSTRUCTION )Filed by Attorney for Plaintiff/Petitioner

11/25/2013 Order (granting application for admission of John R. Gerba as counsel pro hac vice on behalf ofdefendant conformed copy mailed)Filed by Attorney for Defendant/Respondent

11/22/2013 Order (granting application for admission of Bruce S. Meyer as counsel pro hac vice on behalf ofdefendant conformed copy mailed)Filed by Attorney for Defendant/Respondent

11/18/2013 Order (granting application for admission of R. Bruce Rich as counsel pro hac vice on behalf ofdefendant conformed copy mailed)Filed by Attorney for Defendant/Respondent

11/18/2013 Order (granting application for admission of Benjamin E. Marks as counsel pro hac vice on behalfof defendant conformed copy mailed)Filed by Attorney for Defendant/Respondent

11/18/2013 Order (granting application for admission of Todd D. Larson as counsel pro hac vice on behalf ofdefendant conformed copy mailed)Filed by Attorney for Defendant/Respondent

11/18/2013 Report-StatusFiled by Attorney for Plaintiff/Petitioner

11/13/2013 Application-Pro Hac Vice ( FOR JOHN R.GERBA )Filed by Attorney for Defendant/Respondent

11/13/2013 Application-Pro Hac Vice (TODD D. LARSON )Filed by Attorney for Defendant/Respondent

11/13/2013 Application-Pro Hac Vice (BRUCE S MEYER )Filed by Attorney for Defendant/Respondent

11/12/2013 Application-Pro Hac Vice (FOR AN PRO HAC VICE RE BENJAMIN E. MARKS )Filed by Attorney for Defendant/Respondent

11/12/2013 Application-Pro Hac Vice ( RE R. BRUCE RICH )Filed by Attorney for Defendant/Respondent



10/11/2013 Notice (RE: OF ORDER RE RELATED CASES )Filed by Attorney for Plaintiff/Petitioner

10/11/2013 Ntc and Acknowledgement of Receipt (PARTY SERVED: SIRIUS XM RADIO INC )Filed by Attorney for Plaintiff/Petitioner

10/04/2013 Notice (OF REASSIGNMENT )Filed by Attorney for Pltf/Petnr

10/04/2013 OSC-Failure to File Proof of ServFiled by Clerk

10/04/2013 Notice-Case Management ConferenceFiled by Clerk

10/04/2013 Notice (of case reassignment )Filed by Attorney for Plaintiff/Petitioner

09/25/2013 CCP 170.6 Application FiledFiled by Attorney for Pltf/Petnr

09/11/2013 Complaint

09/11/2013 Notice-Related Cases ( with case number bc517032 )Filed by Attorney for Pltf/Petnr

Case Information | Party Information | Documents Filed

Proceedings Held (Proceeding dates listed in descending order)

01/30/2014 at 08:30 am in Department 311, JOHN SHEPARD WILEY JR, PresidingNon-Appearance (Case Review) - Completed

11/25/2013 at 08:30 am in Department 311, JOHN SHEPARD WILEY JR, PresidingStatus Conference - Completed

10/04/2013 at 08:30 am in Department 311, JOHN SHEPARD WILEY JR, PresidingOrder Re: Related Cases - Completed

10/01/2013 in Department 25, Mary Ann Murphy, PresidingAffidavit of Prejudice - Court Disqualifies Self

Case Information | Party Information | Documents Filed | Proceeding Information

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK --------------------------------------- IN RE PETITION OF PANDORA MEDIA, INC. --------------------------------------- Related to UNITED STATES OF AMERICA, Plaintiff v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS, Defendant. ---------------------------------------

X : : : : : : : : : : : : : : : : X

12 Civ. 8035 (DLC)

41 Civ. 1395 (DLC)

OPINION & ORDER

For applicant Pandora Media, Inc.: Kenneth L. Steinthal Joseph R. Wetzel King & Spalding, LLP 101 Second Street, Suite 2300 San Francisco, CA 94105

For ASCAP:

Jay Cohen Lynn B. Bayard Darren W. Johnson Paul, Weiss, Rifkind, Wharton & Garrison, LLP 1285 Avenue of the Americas New York, New York 10019 DENISE COTE, District Judge:

Pandora Media, Inc. (“Pandora”) provides internet radio

services. In 2010, Pandora sought a blanket, through to the

audience, license from the American Society of Composers, Authors

Case 1:12-cv-08035-DLC Document 70 Filed 09/17/13 Page 1 of 30

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& Publishers (“ASCAP”) for a five year period beginning January

1, 2011. Through this motion for summary judgment, Pandora

argues that the antitrust consent decree under which ASCAP

operates requires ASCAP to license Pandora to perform for five

years all of the works in the ASCAP repertory as of January 1,

2011, even though certain music publishers beginning in January

2013 have purported to withdraw from ASCAP the right to license

their compositions to “New Media” services such as Pandora.

Because the language of the consent decree unambiguously requires

ASCAP to provide Pandora with a license to perform all of the

works in its repertory, and because ASCAP retains the works of

“withdrawing” publishers in its repertory even if it purports to

lack the right to license them to a subclass of New Media

entities, Pandora’s motion for summary judgment is granted.

BACKGROUND

The following facts are undisputed or taken in the light

most favorable to ASCAP. Pandora is company that provides

streaming internet radio services using songs licensed from

artists and their agents and licensees. ASCAP is a “performing

rights organization” (“PRO”) composed of voluntary writer and

publisher-members, which exists in part to facilitate licensing

of artists’ works to third parties. ASCAP collects license fees

on behalf of its 460,000 members from third parties.


3

The ASCAP Consent Decree

Since 1941, ASCAP has been operating under a consent decree

stemming from a Department of Justice antitrust lawsuit that

alleged monopolization of performance rights licenses. Since

then, ASCAP has been governed by this consent decree, which has

been modified from time to time. The most recent version of the

consent decree was issued in 2001 and is known as the Second

Amended Final Judgment (“AFJ2”). See United States v. Am. Soc’y

of Composers, Authors & Publishers, Civ. No. 41-CV-1395, 2001 WL

1589999 (S.D.N.Y. June 11, 2001).

In an attempt to ameliorate the anti-competitive concerns

raised by ASCAP’s consolidation of music licenses, AFJ2 restricts

how ASCAP may issue licenses in a variety of ways. First, AFJ2

provides a mechanism whereby a judge on the United States

District Court for the Southern District of New York (the “rate

court”) will determine a reasonable fee for ASCAP licenses when

ASCAP and an applicant for a license cannot reach an agreement.

See AFJ2 § IX(D).

AFJ2 also sets out the characteristics of the licenses ASCAP

issues. “The AFJ2 defines four types of licenses: blanket

licenses, per-program licenses, per-segment licenses, and

through-to-the-audience licenses.” Broad. Music, Inc. v. DMX

Inc., 683 F.3d 32, 36 (2d Cir. 2012) (citation omitted). Three

of the provisions create categories of licenses, which are


4

distinguished in how user fees to ASCAP are calculated. See AFJ

§§ II(E), II(J), II(K).1

AFJ2 also contains a provision preventing ASCAP from

discriminating in pricing or with respect to other terms or

conditions between similarly situated licensees. AFJ2 § IV(C).

And AFJ2 contains two provisions which prohibit ASCAP from

denying a blanket license of all of the musical compositions in

its repertory to any entity making a request therefor. AFJ2 §§

VI, IX(E). These last two provisions are at the center of the

parties’ dispute and will govern the disposition of this motion.

Importantly, these license categories

do not affect the scope of the ASCAP music repertory available to

a licensee. All of the license types contemplate that the user

will have access to ASCAP’s entire repertory. See AJF2 §§ VI,

II(K); Columbia Broad. Sys., Inc. v. Am. Soc. of Composers,

Authors & Publishers, 620 F.2d 930, 933 (2d Cir. 1980) (noting,

in reference to the prior AFJ, which distinguished between

blanket and per-program licenses, that “both types of licenses

permit the user to perform any music in the ASCAP repertory”).

1 AFJ2 Section II(S) also creates a “Through-to-the-Audience License” (“TTTA”) category. A TTTA license can be issued under any of the three license payment structures, and is characterized by the licensee’s right “to distribute the copyrighted materials to the cable and satellite [or other] companies (which distribution is considered one performance for purposes of copyright law) and further permits the cable and satellite [or other] companies to distribute the music to the public (deemed a separate performance).” United States v. Broad. Music, Inc., 316 F.3d 189, 191 (2d Cir. 2003) (interpreting the same provision in the BMI consent decree).


5

Pandora’s Licensing History with ASCAP

On July 11, 2005, Pandora and ASCAP first entered into a

license agreement to allow Pandora to stream music from ASCAP’s

repertory. Five years later, on October 28, 2010, Pandora sent a

letter to ASCAP terminating its 2005 license agreement and

applying for a new license, pursuant to the terms of AFJ2, to run

from January 1, 2011 through December 31, 2015. Upon making a

written request to ASCAP, Pandora obtained, pursuant to AFJ2 §

V’s requirement that “ASCAP is hereby ordered and directed to

issue, upon request, a through-to the audience license to . . .

[inter alia] an on-line user,” the right to perform all of the

compositions in ASCAP’s repertory for that period, with only the

proper payment rates to be determined, either through negotiation

or by the rate court. Unable to agree with ASCAP on the proper

price for the license, on November 5, 2012, Pandora filed with

this Court a petition for determination of reasonable licensing

fees pursuant to AFJ2. See AFJ2 § IX. The litigation to

determine the proper fee (“rate proceeding”) is presently

ongoing. Trial is scheduled to occur on December 4, 2013.

ASCAP’s April 2011 Compendium Rule Change

In September 2010, music publisher EMI advised ASCAP that it

intended to withdraw from ASCAP for all purposes. Before EMI’s

resignation took effect ASCAP began to explore a proposal to

allow members to withdraw from ASCAP only the right to license


6

works to a class of “New Media” users. In March 2011, ASCAP

notified the Department of Justice of its consideration of such a

proposal. And in April 2011, ASCAP’s board adopted a resolution

to amend the Compendium Rules (“Compendium Modification”) to

allow members to withdraw from ASCAP its rights to license their

music to New Media outlets, while allowing ASCAP to retain the

right to license those works to other outlets. ASCAP Compendium

Rule 1.12.1 provides that “[a]ny ASCAP Member may modify the

grant of rights made to ASCAP . . . by withdrawing from ASCAP the

right to license the right of public performance of certain New

[M]edia Transmissions.” The modified Compendium defines “New

Media Services” -- i.e., entities which make “New Media

Transmissions” and which would be purportedly subject to a

decrease in their ASCAP rights as the result of publisher

withdrawals -- as

[A]ny standalone offering by a ‘Music User’ by which a New Media Transmission of musical compositions is made available or accessible (i) exclusively by means of the Internet, a wireless mobile telecommunications network, and/or a computer network and (ii) to the public, whether or not, in exchange for a subscription fee, other fee or charge.

In the Compendium Modification, ASCAP provided that it would

“continue to have the right to license works only to those New

Media Services which are licensed under Licenses-in-Effect on the

Effective Date of the Membership Modification, and only for the

duration of such Licenses-in-Effect.” ASCAP also provided that

ASCAP could still license to certain smaller New Media users the


7

works of withdrawing publishers under a so called “Standard

Services” licensing agreement, so long as those users fit certain

criteria and accepted ASCAP’s terms. And ASCAP also continues to

perform administrative royalty distribution services even with

respect to withdrawn rights for at least one of the withdrawing

publishers on a contractual basis.

Publisher Withdrawals of New Media Licensing Rights from ASCAP

Subsequent to ASCAP’s Compendium change, but after Pandora

made its October 28, 2010 request for a blanket ASCAP license to

begin on January 1, 2011, several music publishers withdrew their

New Media licensing rights from ASCAP. The first such publisher

was EMI, which announced withdrawal of its New Media licensing

rights from ASCAP in May 2011.

Upon learning of EMI’s withdrawal of its new media licensing

rights from ASCAP, Pandora began to negotiate separately with EMI

for a license to its catalog.2

2 ASCAP argues that these negotiations provide evidence that Pandora understood that AFJ2 allows for narrowing of Pandora’s consent decree license. Pandora counters that it only entered into separate negotiations to avoid any potential claim for copyright infringement and “massive damages.” These arguments are addressed below.

During the course of those

negotiations, EMI’s music catalog was purchased by Sony

(hereinafter “Sony/EMI”). Pandora completed an agreement with

Sony/EMI to license its catalog in June 2012. Subsequently,

other major publishers, including Warner Brothers Group,

Universal Music Publishing Group, and BMG, announced their


8

intentions to withdraw their New Media licensing rights from

ASCAP as well. Pandora then also engaged those publishers in

licensing negotiations.

On July 1, 2013, Pandora filed this motion for summary

judgment. It seeks a determination that “ASCAP publisher

‘withdrawals’ [of New Media rights] during the term of Pandora’s

consent decree license do not affect the scope of the ASCAP

repertory subject to that license.” On September 5, 2013 the

Court scheduled oral argument and set out seven questions for

counsel for Pandora and ASCAP to address.3

Oral argument was

held on September 11.

3 The seven questions set out for oral argument were: 1) Whether a musical composition which ASCAP has the right to license to traditional media users, but not to new media users, constitutes a “work[] in the ASCAP repertory” in the meaning of [AFJ2]; 2) Whether, in the AFJ2 § (II)(C)’s definition of “ASCAP repertory” as “those works the right of public performance of which ASCAP has or hereafter shall have the right to license at the relevant point in time,” the phrase “right to license” means the right to license to any user, or the right to license to a specific applicant; 3) Whether the term “works” as used throughout the AFJ2 means “compositions” or rights in compositions; 4) Whether AFJ2 § VI prohibits ASCAP from accepting partial assignment of public performance licensing rights in a composition, and requires ASCAP to license either all public performance rights in a composition or no rights in a composition; 5) Whether, to the extent there is any ambiguity in the terms of the AFJ2, the Court may look beyond the four corners of the consent decree to its purpose; 6) Whether, if appropriate to look to the purpose of the AFJ2, the AFJ2’s purpose weighs in favor or against granting this motion; and 7) How, if at all, any narrowing of the scope of Pandora’s rights to the ASCAP repertory would affect the Court’s rate determination for the period of January 1, 2011 through December 31, 2015.


9

DISCUSSION

A motion for summary judgment may be granted only if the

submissions of the parties, taken together, “show[] that there is

no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

In deciding whether a party is entitled to summary judgment a

court “must view the evidence in the light most favorable to the

non-moving party and draw all reasonable inferences in its

favor.” Sologub v. City of New York, 202 F.3d 175, 178 (2d Cir.

2000). The substantive law governing the case will identify

those issues that are material, and “[o]nly disputes over facts

that might affect the outcome of the suit under the governing law

will properly preclude the entry of summary judgment.” Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1987). Thus, in order

to decide whether to grant summary judgment, a court must

determine (1) whether a genuine factual dispute exists based on

the admissible evidence in the record, and (2) whether the facts

in dispute are material based on the substantive law at issue.

Consent decrees “reflect a contract between the parties (as

well as a judicial pronouncement), and ordinary rules of contract

interpretation are generally applicable.” Doe v. Pataki, 481

F.3d 69, 75 (2d Cir. 2007). “[D]eference is to be paid to the

plain meaning of the language of a decree.” United States v.

Broadcast Music, Inc., 275 F.3d 168, 175 (2d Cir. 2001) (citation


10

omitted). But “when faced with unclear language in a consent

decree, a court of equity may, in construing the provision,

consider the purpose of the provision in the overall context of

the judgment at the time the judgment was entered.” Id. “[A]

consent decree is an order of the court and thus, by its very

nature, vests the court with equitable discretion to enforce the

obligations imposed on the parties.” United States v. Local 359,

United Seafood Workers, 55 F.3d 64, 69 (2d Cir. 1995).

A. AFJ2 Provisions Relevant to this Motion

AFJ2 imposes restrictions on ASCAP’s control over how it

licenses the works in its repertory. This motion is about

whether any provisions of AFJ2 prevent ASCAP from withdrawing

from Pandora the permission to use works whose New Media

licensing rights have purportedly been withdrawn from ASCAP

publishers pursuant to the Compendium Modification. The core of

the parties’ briefing focuses on two AFJ2 provisions, and the

Decree’s definition of the “ASCAP repertory,” and it is helpful

to note those provisions, along with the definition of this key

term, at the outset.

Section VI of AFJ2 (“Section VI”) reads, in relevant part,

as follows: “Licensing. ASCAP is hereby ordered and directed to

grant to any music user making a written request therefor a non-

exclusive license to perform all of the works in the ASCAP

repertory.” “Music user” is defined in Section II(G) of AFJ2 as


11

“any person that (1) owns or operates an establishment or

enterprise where copyrighted musical compositions are performed

publically, or (2) is otherwise directly engaged in giving public

performances of copyrighted musical compositions.”

Section IX(E) of AFJ2 (“Section IX(E)”) provides in relevant

part that “[p]ending the completion of any [rate] negotiations or

proceedings, the music user shall have the right to perform any,

some or all of the works in the ASCAP repertory to which its

application pertains. . . .” And AFJ2 § II(C) (“Section II(C)”)

defines “ASCAP repertory” as “those works the right of public

performance of which ASCAP has or hereafter shall have the right

to license at the relevant point in time.”

Pandora argues principally that Sections VI and IX(E)

mandate that any publisher New Media licensing rights withdrawals

from ASCAP do not affect the scope of its consent decree license

because both Sections require ASCAP to grant a continuing license

to perform “all of the works in the ASCAP repertory” pending rate

proceedings or negotiations. ASCAP disagrees.

B. The Meaning of “works in the ASCAP repertory” in AFJ2

Key to resolving this motion is determining the proper

meaning of the term “works in the ASCAP repertory” in AFJ2.

Section VI of AFJ2 is unambiguous in requiring ASCAP to grant to

“any music user making a written request therefor a non-exclusive

license to perform all of the works in the ASCAP repertory,” AFJ2


12

§ VI (emphasis added).4

ASCAP argues that “’ASCAP repertory’ refers only to the

rights in musical works that ASCAP has been granted by its

members as of a particular moment in time.” Pandora argues that

“ASCAP repertory” is a “defined term[] articulated in terms of

‘works’ or ‘compositions,’ as opposed to in terms of a

gerrymandered parcel of ‘rights.’” Pandora is correct.

And Section IX(E) is likewise clear in

requiring that “[p]ending the completion of any [rate]

negotiations or proceedings” following a music user’s application

to ASCAP for a license, that music user “shall have the right to

perform any, some or all of the works in the ASCAP repertory to

which its application pertains.” AFJ2 § IX(E) (emphasis added).

Stated more specifically, the question is whether AFJ2 conceives

of the atomic unit of the “ASCAP repertory” in terms of musical

compositions, or in terms of ASCAP’s right to license musical

compositions to particular types of purchasers. The parties

disagree on this question.

A few principles guide the interpretation of the term “works

in the ASCAP repertory” in AFJ2. First, in interpreting the

meaning of terms in a consent decree, plain meaning takes

precedence over imputed purpose. See, e.g., Broadcast Music,

Inc., 275 F.3d at 175. The Supreme Court has emphasized that

courts should be reluctant to look beyond text to purpose,

4 It is undisputed that Pandora has made a proper written request for a license in the meaning of Section VI.


13

because a “decree itself cannot be said to have a purpose; rather

the parties have purposes, generally opposed to each other, and

the resultant decree embodies as much of those opposing purposes

as the respective parties have the bargaining power and skill to

achieve.” United States v. Armour & Co., 402 U.S. 673, 681-82

(1971). At oral argument, counsel for ASCAP agreed that

“[t]here’s a lot of case law that says decrees don’t have

purposes. Decrees are agreements. They can’t be stretched

beyond their terms.” Consequently, determination of the meaning

of the terms in AFJ2 must be discerned “within [AFJ2’s] four

corners, and not by reference to what might satisfy the purposes

of the parties to it.” Firefighters Local Union No. 1784 v.

Stotts, 467 U.S. 561, 574 (1984).

Applying these principles to the question at hand, it is

clear that the “ASCAP repertory” is defined in terms of “works”

and not “individual rights” in works with respect to classes of

potential licensees. Section II(C) provides that “’ASCAP

repertory’ means those works the right of public performance of

which ASCAP has or hereafter shall have the right to license at

the relevant point in time.” AFJ2 § II(C) (emphasis added). See

also United States v. Am. Soc. of Composers, Authors, Publishers,

627 F.3d 64, 68 (2d Cir. 2010) (In re Application of

RealNetworks, Inc. et al.) (“A blanket license is a license that

gives the licensee the right to perform all of the works in the


14

repertory”). Section II(C) does not define “ASCAP repertory” in

terms of rights held by ASCAP to license works to particular

classes of licensees. Rather, the natural reading of Section

II(C)’s definition of “ASCAP repertory” as consisting of “works

the right of performance ASCAP has . . . the right to license” is

that it means that the ASCAP repertory consists of works the

right to which ASCAP has the ability to license at all. See

Broadcast Music, Inc., 275 F.3d at 175 (“deference is to be paid

to . . . the normal usage of the terms selected”).

This natural reading of the term “ASCAP repertory” is

entirely consistent with Second Circuit ASCAP and Copyright

caselaw. That caselaw has employed the term “repertory” in

reference to compositions and not rights in compositions. See,

e.g., Major League Baseball Properties, Inc. v. Salvino, Inc.,

542 F.3d 290, 321 (2d Cir. 2008) (“users want . . . access to any

and all of the repertory of compositions”) (emphasis

added)(citation omitted); United States v. Am. Soc. of Composers,

Authors & Publishers, 32 F.3d 727, 728 (2d Cir. 1994) (In re

Application of Karmen)(“ASCAP, with three million songs in its

repertory”) (emphasis added); Gershwin Pub. Corp. v. Columbia

Artists Mgmt., Inc., 443 F.2d 1159, 1160 (2d Cir. 1971)

(discussing “musical compositions in the ASCAP repertory”)

(emphasis added).

A remaining question is whether the term “works,” as used in


15

Section II(C), and in Sections VI’s and IX(E)’s uses of the term

“works in the ASCAP repertory,” is susceptible of an

interpretation defining it in terms of “rights” within

compositions rather than the “compositions” themselves. But

Pandora is correct that “works” means musical compositions and

not rights with respect to those compositions.

Section § II(U) of AFJ2 defines “work” as “any copyrighted

musical composition.” This definition is express and conclusive.

There is no reference to “rights in works” within the four

corners of the consent decree. The meaning of “works” in AFJ2 is

not ambiguous and it is consequently unnecessary to look beyond

the text to extrinsic evidence. See E.E.O.C. v. Local 40, Int'l

Ass'n of Bridge, Structural & Ornamental Iron Workers, 76 F.3d

76, 80 (2d Cir. 1996) (“Extrinsic evidence should only be

considered when the decree itself is ambiguous”).

The origin of this definition is not hard to discern. In

ordinary usage the word “work” in the musical context means a

composition and not a right in a composition. See e.g.,

Webster’s II New Riverside Dictionary 1327 (1984) (defining

“work” as “[s]omething that has been done, made, or performed as

a result of one’s occupation, effort, or activity”). The term

“works” in AFJ2 has its origin in Copyright law, and it is clear

from Copyright caselaw that works means “compositions” in that

context. And “where contracting parties use terms and concepts


16

that are firmly rooted in federal law, and where there are no

explicit signals to the contrary, we can presume that the

prevailing federal definition controls.” CGS Indus., Inc. v.

Charter Oak Fire Ins. Co., 720 F.3d 71, 78 (2d Cir. 2013)

(citation omitted). Section 102 of the Copyright Act refers to

“works of authorship fixed in any tangible medium of expression .

. . from which they can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or

device.” 17 U.S.C. § 102(a). This definition is inconsistent

with a reading of works that defines the word in terms of

“rights.” And the Supreme Court has referred to a “work” as the

“translat[ion] [of] an idea into a fixed, tangible expression.”

Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 737

(1989). Compositions, but not rights in compositions, are able

to be “fixed” in “tangible medium[s] of expression.” ASCAP

conceded this definition of “works” at oral argument.

Because “works” in AFJ2 means “composition[s]” and not

“rights in compositions”, and because it is undisputed that the

terms of ASCAP’s Compendium Modification of April 2011 permit

ASCAP to retain the right to license the works of the withdrawing

publishers for non–New Media purposes, those compositions remain

“works in the ASCAP repertory” within the meaning of Sections VI

and IX(E) of AFJ2. In fact, ASCAP retains the right under the

“Standard Services” agreement to license the works of withdrawing


17

publishers even to certain smaller New Media licensees. Thus,

the works remain in every facet of the ASCAP repertory.

C. Sections VI and IX(E) of AFJ2, and Pandora’s Rights

Having determined that “works” in AFJ2 means musical

compositions, and that those musical compositions remain “in the

ASCAP repertory” so long as ASCAP retains any licensing rights

for them, it remains only to apply the clear language of Sections

VI and IX(E) of AFJ2 to decide this motion. Section VI

establishes the scope of a music user’s rights to works in the

ASCAP repertory following a “written request therefor” as

extending to “all of the works in the ASCAP repertory.” AFJ2 §

VI. Section IX(E) is in accord with Section VI in providing that

“[p]ending the completion of any [rate] negotiations or

proceedings, the music user shall have the right to perform any,

some or all of the works in the ASCAP repertory to which its

application pertains.” AFJ2 § IX(E). Sections VI and IX(E) of

AFJ2 consequently mandate that Pandora’s license to perform ASCAP

compositions during the five year term of its license extends to

“all” of ASCAP’s repertory and is unaffected by any new media

licensing rights withdrawals by ASCAP publishers.

It is worth noting that ASCAP has the continuing ability to

grant Pandora the right to use those musical compositions whose

New Media licensing rights were purportedly withdrawn from ASCAP.

Section 1.12.5 of the Compendium of ASCAP Rules and Regulations


18

provides that “ASCAP shall continue to have the right to license

[works subject to New Media licensing rights withdrawals] only to

those [N]ew [M]edia Services which are licensed under Licenses-

in-Effect on the Effective Date of the Membership Modification.”

And whether ASCAP had negotiated this preservation of rights or

not, under the terms of AFJ2 ASCAP did not have the right to

permit the partial withdrawals of rights at issue and thereby

acquiesce to a regime in which some music users could not obtain

full public performance rights to works in the ASCAP repertory.

D. ASCAP’s Arguments as to the Text of AFJ2

ASCAP argues that “the term ‘ASCAP repertory’ as used in

Sections VI and IX(E) of the AFJ2 refers only to the rights in

musical works that ASCAP has been granted by its members as of a

particular moment in time” and that “[n]othing in the definition

of ‘ASCAP repertory’ suggests otherwise.” But this

interpretation is in direct conflict with AFJ2 Section II(C)’s

definition of “ASCAP repertory.” Section II(C) does not refer to

“rights in musical works” but rather to “works the right of

performance of which ASCAP has the right to license at the

relevant point in time.” AFJ2 § II.C (emphasis added). ASCAP

undisputedly presently has the “right to license” any of the

works in question to all non-New Media licensees and to some New

Media licensees even following withdrawal of certain New Media

licensing rights. Therefore those works remain in the ASCAP


19

repertory and AFJ2 requires that ASCAP license them.

ASCAP’s argument is predicated on the Copyright doctrine of

“divisibility of rights” within a copyrighted work. It is true

that “[t]he Copyright Act confers upon the owner of a copyright a

bundle of discrete exclusive rights, each of which may be

transferred or retained separately by the copyright owner.”5

E. ASCAP’s Argument as to the History of “Licenses-in-Effect” Provisions

United States v. Am. Soc. of Composers, Authors, Publishers, 627

F.3d at 71. But while the Copyright Act allows rights within

works to be alienated separately in general, AFJ2 imposes

restrictions beyond those imposed by the Copyright Act on ASCAP.

AFJ2 Sections VI and IX(E) deny ASCAP the power to refuse to

grant public performance rights to songs to particular users

while, at the same time, retaining the songs in question in its

repertory.

ASCAP points to the fact that AFJ2 removed an express

“licenses-in-effect” provision from the previous iteration of the

ASCAP consent decree, known as the 1950 Amended Final Judgment.

See Amended Final Judgment, United States v. American Society of

5 The divisibility doctrine is codified throughout the copyright law. See, e.g., 17 U.S.C. §§ 106, 201(d), 501(b). For example, Section 106 enumerates a series of rights with respect to a work assignable by a copyright owner (including, inter alia, the right of reproduction and the right of performance). And Section 201(d)(2) provides that “[a]ny of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred . . . and owned separately.” 17 U.S.C. § 201(d)(2).


20

Composers, Authors and Publishers, Civ. No. 13-95, 1950 Tr. Cas.

¶ 62,595, § IV(G) (S.D.N.Y. 1950) (hereinafter “AFJ”). ASCAP

argues that this removal demonstrates that the parties to AFJ2 --

the Department of Justice and ASCAP -- intended for ASCAP to be

free to decrease the scope of a user’s license even during the

pendency of a rate proceeding. ASCAP also submits a 2001

memorandum from the Department of Justice (“2001 DOJ Memorandum”)

submitted to the rate court prior to the entry of AFJ2 providing

its justification for the removal of the express licenses-in-

effect provision in AFJ2.

The history ASCAP presents does not prove what ASCAP would

like it to prove. Rather, the 2001 DOJ Memorandum demonstrates

that the concern driving the removal of the express licenses-in-

effect provision from AFJ2 was that ASCAP members wishing to

withdraw from ASCAP entirely should not be subject to existing

licenses-in-effect. The 2001 DOJ memorandum justifies the

removal of that provision by virtue of the fact “the provision

had the unforeseen consequence of preventing members who wanted

to leave ASCAP from being able to take their catalogs with them

when they joined a competing PRO.” An understanding that the

removal of the express license-in-effect provision was driven by

a concern that a publisher would be inhibited from joining a

competing PRO to ASCAP is compatible with the general pro-

competitive goal of the consent decrees governing ASCAP. Here,


21

music publishers are attempting to withdraw licensing rights from

ASCAP with respect to only some uses of their music while

remaining in ASCAP, and the pro-competitive rationale of

facilitating the ability of artists to move between different

PROs that spurred the removal of the express license in effect

provision from AFJ2 is inapposite.

ASCAP also makes the related argument that Pandora’s consent

decree license may be narrowed because of the inclusion in AFJ2

of § XI(B)(3)(c) (“Section XI(B)(3)(c)”), which provides that

“for any member who resigns from ASCAP, ASCAP is enjoined and

restrained from requiring that member to agree that the

withdrawal of such works be subject to any rights or obligations

existing between ASCAP and its licensees.” AFJ2 at *10. ASCAP

argues that even though Section XI(B)(3)(c) is not yet operative

because AFJ2 § XI(C) requires that a “substantially identical

provision” be entered in the case of United States v. Broadcast

Music, Inc., No. 64 Civ. 3787 (S.D.N.Y), and that such a

provision has not yet been entered in that case, the other

sections of AFJ2 should be read in the light of the Department of

Justice’s attempt to include Section XI(B)(3)(c) in AFJ2.

ASCAP’s argument, in effect, is that the inclusion of this

provision in AFJ2, even if inoperative, evinces intent by DOJ and

ASCAP to protect the freedom of copyright holders who are members

of ASCAP to divide the rights in their works as they see fit.


22

This argument is misplaced. First, the text of Section

XI(B)(3)(c) restricts its application to “member[s] who resign

from ASCAP.” None of the members who are withdrawing some of

their New Media licensing rights from ASCAP are resigning from

ASCAP. Moreover, the 2001 DOJ Memorandum reinforces that Section

XI(B)(3)(c) was inserted in AFJ2 for the same reason that the

express licenses-in-effect provision of the prior AFJ was

removed: in order to allow publishers who were leaving ASCAP

entirely to take their catalogues with them to join competing

PROs. Further, this is also the only reading of the decision to

remove the express license-in-effect provision from AFJ that is

consistent with the “all works in the ASCAP repertory” language

of Sections VI and IX of AFJ2. To adopt ASCAP’s position would

be to endorse the untenable proposition that Section XI(B)(3)(c)

was intended to allow publishers to deprive certain existing

licensees of individually chosen works while keeping those works

in the ASCAP repertory, even in the face of Sections VI’s and

IX’s mandates that ASCAP license “all of the works in the ASCAP

repertory” to any entity making a request therefor.

ASCAP also makes the argument that even if a license-in-

effect provision did exist in AFJ2, such a provision would be

irrelevant for purposes of this motion because, according to

ASCAP, Pandora is merely an “applicant” for a license and not a

“licensee.” For this reason, ASCAP objects to the use of the


23

term “consent decree license” to describe Pandora’s AFJ2 rights.

But while ASCAP draws a semantic line between so called

“applicants” –- i.e., according to ASCAP, entities that have

applied for an ASCAP blanket license and who await rate court

adjudication –- and “licensees” –- i.e., according to ASCAP,

entities that have negotiated final licensing agreements -- ASCAP

does not provide any evidence of a substantive difference in the

rights of “applicants” and “licensees” under AFJ2 with respect to

ASCAP’s repertory during the pendency of a rate court proceeding.

Section IX(E)’s requirement that “[p]ending the completion

of a [rate court proceeding], the music user shall have the right

to perform any, some or all of the works in the ASCAP repertory

to which its application pertains” makes clear that there could

be no substantive difference relevant to this motion. “All”

means all. So whether ASCAP purports to categorize Pandora as an

“applicant” or a “licensee,” Pandora’s right to perform the

compositions in the ASCAP repertory extends to all of ASCAP’s

repertory and ASCAP may not narrow that right by denying Pandora

the right to play the songs of publishers who have withdrawn new

media licensing rights from certain songs while keeping the songs

in ASCAP’s repertory to be licensed for performance by other

music users.


24

F. Pandora’s Conduct

ASCAP also argues that Pandora’s conduct in obtaining

separate licenses from withdrawing publishers following the

Compendium Rule change provides evidence for ASCAP’s position

that AFJ2 permits the withdrawal of publishers’ new media rights

from ASCAP to narrow the scope of Pandora’s consent decree

license. This argument is without merit. While courts will

consider parties’ conduct that occurs subsequent to the formation

of a contract to guide interpretation of terms, only the conduct

of parties to the contract is relevant. See, e.g., IBJ Schroder

Bank & Trust Co. v. Resolution Trust Corp., 26 F.3d 370, 374 (2d

Cir. 1994)(“courts have looked to the conduct of the parties in

resolving ambiguities in contractual language”) (emphasis added);

11 Williston on Contracts § 32:14 (4th ed.) (“the parties' own

practical interpretation of the contract -- how they actually

acted, thereby giving meaning to their contract during the course

of performing it -- can be an important aid to the court)

(emphasis added). As a matter of logic it is unclear how the

conduct of a non-party to a contract –- as Pandora is with

respect to the AFJ2 consent decree –- could, on its own, bear on

the proper interpretation of the terms negotiated by other

parties. In the one case ASCAP cites for the proposition that

post-contract formation conduct may influence a court’s

interpretation of the contract terms the relevance of a non-


25

party’s conduct was primarily predicated on the reaction to that

conduct by a party to the initial agreement. See Wardair can.,

Inc. v. Fla. Dep’t of Revenue, 477 U.S. 1, 12 (1986). Pandora is

not a party to AFJ2 and its actions cannot guide the proper

interpretation of AFJ2’s terms.6

G. ASCAP’s Argument as to AFJ2 Section IV

At oral argument, ASCAP argued that AFJ2 § IV’s (“Section

IV”) prohibition on ASCAP acquiring exclusive rights in a

composition is the only place in AFJ2 speaking to “the scope of

the rights that have to be granted by an ASCAP member to ASCAP,”

and that the absence in Section IV of any express requirement

that ASCAP license to all applicants any song in its repertory

cuts against granting this motion.

Before addressing this specific argument it is worth noting

that ASCAP’s effort to define the question in this motion as

whether and in what provision AFJ2 restricts copyright holders is

misplaced. AFJ2 only restricts ASCAP; it does not restrict

copyright holders directly. Obviously, a restriction on ASCAP

has an ancillary impact on how copyright holders may use ASCAP,

but this is the case with respect to third parties any time an

entity is regulated by a consent decree.

ASCAP’s objection fails even if it is construed to contend

that Section IV would be the natural place for the licensing

6 In any event, Pandora’s argument that its actions were the result of commercial necessity is plausible.


26

requirement at issue here because that is where the restrictions

on ASCAP’s freedom to make licensing decisions are found. The

argument fails because the requirements in Sections VI and IX(E)

are affirmative requirements, and not prohibitions. Section IV

is entitled “Prohibited Conduct” and is consequently concerned

with prohibiting conduct by ASCAP rather than with enforcing

affirmative obligations. The affirmative obligations imposed by

AFJ2 are found in other sections. See, e.g., Sections VI; VII;

VIII; IX. The requirement that ASCAP license “all of the works

in the ASCAP repertory” would be out of place in Section IV.

It is also possible that the absence of any express

provision is explained by the fact that ASCAP has never tried to

accept only partial licensing rights before. It is certainly

imaginable that in 2001 DOJ and ASCAP simply did not contemplate

the specific change in the Compendium Modification and

consequently did not place an express prohibition in Section IV.

But even if DOJ and ASCAP failed in 2001 to contemplate the

specific ASCAP rule change at issue here, such a failure is

immaterial when the language of Sections VI and IX(E) so clearly

forecloses ASCAP’s ability to narrow Pandora’s license here.


27

H. ASCAP’s Argument as to Section II(1)(c) of the 1941 Consent Decree At oral argument, ASCAP also pointed to Section II(1)(c) of

the 1941 ASCAP consent decree (the version prior to AFJ) in

support of its position. That section provided in relevant part

that “[n]othing herein contained shall be construed as preventing

[ASCAP] from regulating the activities of its members . . . by

prohibiting the members from issuing exclusive licenses to

commercial users of music.” United States of America v. American

Society of Composers, Authors and Publishers, No. 13-94 (March 4,

1941). ASCAP contends that because this provision was removed

at the entry of AFJ, ASCAP publisher-members are now free to

issue exclusive licenses to commercial users and that this right

is what ASCAP is recognizing with its Compendium Modification.

This argument is unpersuasive. The fact that ASCAP cannot

prohibit its members from granting exclusive licenses to music

users without going through ASCAP is irrelevant to the question

of whether ASCAP must grant any music user a license to perform a

work once that work is in its repertory. Moreover, everybody

agrees that a publisher-member of ASCAP may withdraw a

composition from the ASCAP repertory entirely. Any prohibition

on ASCAP banning exclusive licensing is entirely consistent with

AFJ2 permitting the total withdrawal of a song from ASCAP’s

repertory.


28

I. Request by ASCAP and Publishers for Department of Justice Participation ASCAP and non-party publishers EMI, Sony, and Universal have

asked that the Court invite the participation of the Department

of Justice (“DOJ”) before resolving this motion.7

7 Participation by DOJ is permitted by AFJ § IX(I) (“Section IX(I)”) which provides that “[p]ursuant to its responsibility to monitor and ensure compliance with [AFJ2] the United States may participate fully in any proceeding brought under this section IX.”

But because

consent decree interpretation is a matter of law for a court, and

because AFJ2 §§ II(C), II(U), VI, and IX(E) are not ambiguous

such that DOJ participation would be helpful to clarify the

meaning of any terms, the Court has declined to solicit its

participation. “Language whose meaning is otherwise plain does

not become ambiguous merely because the parties urge different

interpretations in the litigation. An unambiguous provision of

the contract should be given its plain and ordinary meaning and

the contract should be construed without reference to extrinsic

evidence.” Olin Corp. v. Am. Home Assur. Co., 704 F.3d 89, 99

(2d Cir. 2012) (citation omitted); see also Hunt Ltd. v.

Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989)

(“The court is not required to find the language ambiguous where

the interpretation urged by one party would strain the contract

language beyond its reasonable and ordinary meaning.”) (citation

omitted). Even if DOJ were to “urge [a] different

interpretation[] in the litigation” the unambiguous language of


29

AFJ2 would still control. Olin Corp., 704 F.3d at 99.

J. Pandora’s Section IV.C Discrimination Argument

Finally, Pandora argues that allowing ASCAP to deny Pandora

a continuing blanket license during the pendency of the rate

proceeding while granting such licenses to other entities, such

as terrestrial radio stations with online presences,

impermissibly “discriminates . . . between licensees similarly

situated” in violation of AFJ2 Section IV.C. Pandora argues in

the alternative that even if the question of whether ASCAP is

actually discriminating against “similarly situated” entities

presents a genuine issue of material fact improper for resolution

on a summary judgment motion, that ASCAP is improperly

circumventing the Court’s review of the question by

“prejudg[ing]” the “similarly situated” inquiry by allowing

withdrawing publishers to narrow the scope of Pandora’s license

during the rate proceeding. ASCAP disputes Pandora’s claims and

presents in its briefing a detailed argument as to why the

entities in question are not similarly situated for purposes of

AFJ2 Section IV.C. But having resolved this motion on the clear

text of AFJ2 Sections VI and IX(E) it is unnecessary to resolve

the fact-intensive question of whether Pandora is similarly

situated to any entities treated differently by ASCAP. And it is

likewise unnecessary to resolve Pandora’s “prejudging” argument.


30

CONCLUSION

Pandora’s July 1, 2013 motion for summary judgment that

ASCAP publisher withdrawals of New Media licensing rights during

the term of Pandora’s five year license beginning on January 1,

2011 do not affect the scope of the ASCAP repertory subject to

that license is granted.

SO ORDERED:

Dated: New York, New York September 17, 2013

__________________________________ DENISE COTE United States District Judge


OORIGINAL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

x BROADCAST MUSIC, INC.,

USDC ｓｄｾｙ＠DOCL:\U::\T ELECTRO\IC \tLY FILED DOC#:

ＭＭＭＭＭＭＭＭｾｾｾＭＭＭDATE FILED: )J/)9//3

I

Petit iorler, 13 C 4037 (LLS)

against Related to 64 Civ. 3787 (LLS)

OPINION & ORDER

PANDORA MEDIA, INC.,

SONY/ATV MUSIC PUBLISHING LLC, EMI MUSIC PUBLISHING, UNIVERSAL MUSIC PUBLISHING, INC.

Intervenors.

-x

This case grows out of a series of "withdrawalsu of digital

s, by music publishers affiliated with Broadcast Music Inc

("BMIU) from Pandora Media, Inc. ("PandoraU ) and other "New

Media Services." BMI's petition seeks an order exercising the

Court's rate setting authority under article XIV of the BMI

Consent Dec , sett e music license terms and fees

after giving effect to the withdrawals, for performances of the

remainder of the compositions in BMI's ory.

1 United States v. Broadcast Mus c Trade Cas. (CCH) ｾ＠

71,941 (S.D.N.Y. 1966), Trade Cas. (CCH) , 71,378 (S.D.N.Y. 1994).

1 -

United States v. Broadcast Music, Inc Doc. 61

Dockets.Justia.com

http://dockets.justia.com/docket/new-york/nysdce/1:1964cv03787/58544/

http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:1964cv03787/58544/61/

http://dockets.justia.com/

Moving for partial summary judgment, Pandora argues that

the withdrawals are ineffectual, because the antitrust consent

decree which BMI s requires BMI to of r a license

to Pandora to perform all of the compositions in the BMI

repertory as of January I, 2013, de te the fact that certain

music publishers have by agreement wi BMI withdrawn from BMI

the right to license their composit to so called "New a

Servicesu such as

However, the BMI Consent Decree res BMI to offer

a license to perform all of the compositions in its

When BMI no longer is authorized by music publisher

copyright holders to license their compositions to Pandora and

New Media Services, those composit are no longer el le

for inclusion in BMI's ory. BMI can no longer license

theIT. to Pandora or any other applicant.

ngly, Pandora's motion for summary judgment is

denied.

BACKGROUND

BMI is a nonprofit performing rights organization ("PRO")

that licenses nonexclusive rights of ic ormance to a

variety of music users on behalf of affiliates who are the music

compositions' copyright holders. BMI's affiliates se

approximately 600,000 composers, songwriters and music

2 -

publ ishers, and BMI' s consists mate 7.5

mill on musi compositions.

Pandora lS a streaming internet o service that plays

music compositions Ii directly ir copyright

holders, or through BMI and other PROs.

A. THE BMI CONSENT DECREE

BMI's ability to license public performance r s of

ts musical repertory is governed by the Consent Decree settl ng

t santitrus suit brought the United States. An amendment

to the BMI Consent Decree e ishes s Court as a "rate

court, If which sets fees for licenses when BMI and applicants

cannot agree on a reasonable fee. BMI Consent Decree Art. XIII.

The Decree also s cert conditions and requirements on

BMI's issuance of licenses.

Sect on VTI(B) of the BMI Consent Decree states in relevant

"De shall, upon t request of any unl censed

aster, license the r s publi to perform l S

ory by broadcasting on either a per program or per

programming od basis, at defendant's option. 1f

Section IX(C) of the BMI Consent Decree states:

De endant shal not, connection with any ffer to license it the public performance of musi compositions by music users other than ste2..S I re use to offer a license at a price or prices to be fixed by defendant with ｴｾ･＠ consent of the copyr etor for the performance of such specific (i.e., per

3

compositions, use which 1 be sted by ::.1:1e prospect licensee.

Although not icitly mentioned in the BMI Consent

Decree, "Traditionally, the BMI's license of choice has been a

'blanket license,' a license that s the licensee access to

3MI's entire ory in exchange for an annual United

States v. Broadcast Music

2001) . As defined by Section II(C) of the BMI Consent Decree,

\\'!Jefendant's ory' means those compositions, the right of

public of which defendant has or fter shall

the right to 1 icense or icense." BMI Consent Decree

Art. II (C) .

Section VIII des: "Def 11 not enter into,

ze as valid or perform any performing rights license

agreement whi shall result in disc nating in rates or terms

between licensees simil situated."

Section XIV (A) states:

ect to all provisions of this Final defendant shall, within nlne (90) days of its receipt of a written application from an applicant for a license for the right of public performance of any, some or all of the compositions in defendant's repertory, advise the applicant in writing of the fee which it deems reasonable for the license requested.

If BMI and an applicant cannot agree on a 1 icense fee,

either may apply to s Court for the rmination of a

reasonable license fee. Id.

4

B. DEALINGS BETWEEN BMI & PANDORA

On June 30, 2005, Pandora and EMI entered into a standard

01 t form license agreement which allowed Pandora to stream

all music compositions in EMI's repertory. Kennedy Decl. ｾｾ＠

8 9. In 2012, Pandora determined that the terms of this license

were no ｬｯｾｧ･ｲ＠ appropriate ｦｯｾ＠ its iness, and terminated it

effective December 31, 2012. Id. ｾ＠ 9. After the parties failed

to iate a new type of license, Pandora filed a written

cation with EMI for a f year bl license inning

January I, 2013, id., which it may later wholly or partly

withdrawn. While the parties were in iations, EMI fi ed

its pet tion with the Court for ion of reasonable

license fees on June 13, 2013 . No.1). EMI and Pandora

have negot ed erim icense fees to be in ef from

January I, 2013 until the parties negotiate an agreed ｾ｡ｴ･＠ or

the Court issues a final setting license terms and fees.

EMI Petition ｾ＠ 55.

C. PUBLISHER WITHDRAWALS OF NEW MEDIA LICENSING RIGHTS FROM BMI

Effective I, 2013, EMI allowed its affiliate

publishers (the intervenors and others) to elect D tal Rights

Withdrawal and modi their affil ion agreements to excl

EMI's right to license "New Media Transmissions by New Media

- 5

Services,u 2 hereinafter re to as "New Media licensi

rights." Guidelines gital s thdrawal

1 sn), available at ht ://www.bmi.

The Digital Rights Withdrawal Addendum to BM-'s publisher affiliation provides the following definitions:

1. Definitions.

a. A "New Media Transmission" shall mean:

1. a digital audio transmission that, addit to requiring a public performance license, also

res the music user to comply with the license requirements 17 U.S.C. § 114, § 115 and/or § 106(1);

11. a gital transmission of a music video or user-uploaded video (i.e., a vi uploaded to the service by the enduser) that, in addition to requiring a public license, also

res that the ce, in order to offer the music video or useruploaded vi on or via the

ce, obtain a license directly from the owner or administrator of the ghts the musical composition(s) embodied therein for s other than the right of public performance (e.g., synchronization or mechanical rights) and/or

111. a digital transmission made from a tal music file either (a) uploaded by an enduser to the server and/or (b) matched from a file on end-user's or device to a digita music file on the server (such server, in either case, often re to as either the "cloud" or a "locker").

b. "New Media ServiceD shall mean a standa one service by which New Media Transmissions of musical compositions are made available or accessible (i) marily by means of the Internet, a wireless mobile telecommunications network, and/or acomputer network and (ii) to the public, whether or not, in

6

com/entry/guidel s for_digit _rights_withdrawal (As of

September 16 1 2013). The modification was set in an

addendum which states:

This addendum ("Addendum") to the publisher affiliation will confirm the understanding of BMI and

("Publisher") with respect to Publi IS sire to withdraw the right to license certain digital transmissions (the "New Media Transmissions" as defined below) of musical works licensed to BMI (the "Publisher Works" as defined below) .

DiMona Decl' l Ex. G I D ital Rights Withdrawal Addenduml p.

The ies (BMI and publisher) Accepted and Agreed:

For the avoi of doubt I as of the Effective Date of Withdrawal I Publisher shall have the exclusive right to license New Media Transmissions of Identified Interests and Corresponding Interests in Publisher Repertoire Relatl

Repertoire and Administered Repertoire and BMI shall no longer have any right to license New Media Transmissions of Identified Interests and Corresponding Interests repertoire for the nder of Term.

l

Id. at p. 3.

BMI public announced:

s withdrawal does not affect any of BMI I s other licensing act ies. It does not affect BMI I S right to license traditional broadcast I e and satellite transmissions l or their related new media transmissions. BMI cont s to have the right to license I other dig al uses I even for publishers that have withdrawn from BMI the I ted digital rights defined above for new media services.

for a subscription feel other fee or i and whether or not such offering includes exposure to advertisements before during and/or after thel

transmission of such compositions .

7

Scope of Digital Rights Withdrawal, available at

http://www.bmi.com/licensing/entry/drw (as of July

2013) Composit lic to BMI from affiliates other

ｴｾ｡ｮ＠ t withdrawing ishers are unaf cted,

"Cata"ogs that are subject to Di ta Rights Withdrawal

wi : be restored to the BMI re if they are acquired

or newly admi st by an Affiliate that has not e ected

igital Rights Withdrawal." de:ines p. 2.

In September 2012, Sony/EMI3 became the first publisher to

announce its planned withdrawal of New Media licensing rights

from BMI. 's Motion p. 9. Pandora negotiated direct

licenses with Sony/EMI for the year 2013. Kennedy Decl. ｾ＠ 10.

On November I, 2013, filed this motion for ia:

summary judgment. Pandora seeks a determination that, as the

compositions are held in BMI's , BMI must offer to

Pandora without to publishers' ative withdrawals

of BMI's right to do so.

Sony/EMI and fellow publisher Universal Music Publi

Group's motions to intervene in t s case were granted on

November 4, 2013 (Dkt. No. 28).

3"Sony/EMI" refers to the corrbined catalogs of Sony and EMIj Sony/ATV became the administrator of EMI's catalog in July 2012.

- 8

http://www.bmi.com/licensing/entry/drw

DISCUSSION

Pandora argues the publisher withdrawals do not affect

the scope of its license, and points to Sections VIII(A)

XIV{A) of the BMI Consent Decree whi ire BMI to grant a

continuing license to perform "all of the compositions in the

defendant's repertoryH rate proceedings or iations.

The BMI Consent Decree res t all compositions in the BMI

be offered to all applicants.

Under Section XIV of the BMI Consent Decree, when an

applicant requests a license for "any, some or all of the

compositions in defendant's repertory," BMI must grant a license

for performance of the requested composit which may range

from "anyH (a piece" license) to "all" (a blanket license).

Under the BMI Consent Decree, these opt ions are open to

icants with fees that do not discriminate betweenl

icants simil situated. By plac a composition in the

BMI repertory, the affiliate routinely authorizes its inclusion

in blanket licenses of BMI's whole to all applicants.

But if the withdrawal of its authority to do so by some

affi iates with to compositions for which they own or

ladmi ster the ghts is within those affiliateS ghts,

BMI cannot offer New Media licensing rights for those

compositions to New Media app icants, including f BMI

cannot offer those compositions to New Media applicants, their

9

1

avail lity does not meet the standards of the BMI Consent

:Jecree, and t cannot be held in BMI's repertory. Since they

are not in BMI's repertory, BMI cannot deal in or license those

compositions to anyone.

As copyright holders, the publishers may divide their

copyrights pursuant to Section 106 of the Copyright Act, 17

U.S.C. § 106, which provides:

Subject to sections 107 through 122, the owner of copyr under this title has the exclusive rights to do and to authorize any of the lowing:

(3) to distribute copies or phonorecords of the copyr ed work to the public by sale or other transfer of ownership, or by rental, lease, or lendingi

(4) in the case of literary, musical, dramatic, choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform t copyrighted work publiclYi

(5 ) in the case sound recordings, to perform the work publicly by means of a digital oed

The publ ishers are priviI to license, or not license, the

performance of their compositions as see fit. In the

exercise of that right the publi have with BMI to

withdraw their New Media performance licensing rights from

Pandora and New Media Services. is well within their power

as copyright holders. See United States v. Am Soc' of

A.uthors & Publ ishers In re ication of Yahoo!

- 10

Inc. 627 F.3d 64, 71 (2d Cir. 2010) ("The Copyright Act

confers upon t owner of a copyright a bundle of screte

exclus ghts, which may be ';:ransfe or retained

ely by the copyright owner. If) (citing and ing New

York Times Co. v. Tasini, 533 U.S. 483 (2001)) Buffalo Broad.

Co . v. Am. Soc' ers Authors & Publishers, 744 F. 2d

917, 920 (2d Cir. 1984) ("The ａ｣ｾ＠ specifical accords the

copyright owner the right to authorize ｯｾｨ･ｲｳ＠ to use the various

rights recognized by the Act, including the performing right and

the reproduction right, and to convey t se rights ely." )

(citing Copyright Act). Thus, the copyright holders have the

r ｾｯ＠ withdraw from BMI ｩｾｳ＠ authority ｾｯ＠ license the

performance of their compositions by the New Media Services.

It is the BMI Consent Decree the antitrust law) which

rest ｣ｾ＠ BMI ng In its yory compositions which

it can no longer offer to the New Media Services, who were up

until recent accepted as timate, qualified, licensed and

performing those works. BMI's repertory consists of

compositions whose performance BMI "has the right to license or

icense" i it "shal upon the request of any unlicensed

broadcaster, license the rights publicly to perform its

ory" . BMI Consent Decree Arts. II(C) i VII{B). When

ions of t ght are withdrawn, the affected compositions

- 11

ac

are no longer eligible membership in BMI's rtory, and it

cannot include them in a blanket license or license them at all.

BMI contends that its long-standing inability to license

the "grand right" (the right of public dramatic performance)

shows that t lS no universal to licenses to perform

all the compositions in its repertory. BMI Brief pp. 6 9. But

BMI has never offered grand er s. All applicants are

treated equally: BMI cannot licenses for grand theater

performances to anybody. They are a commodi in which BMI does

not deal. In contrast, New Media I icensing rights have until

recently been of to any and 1 applicants; they have been

by, licensed to and exercised by the New Media

Services, and (exc for those now withdrawn by some publishers

from New Media applicants) the affected compositions are still

offered by BMI to all applicants other than New ｾ･､ｩ｡Ｎ＠ Indeed,

the withdrawal guidelines themselves recognize that when a

withdrawing publisher's catalog is transferred to another

affiliate who has not withdrawn their compositions from New

Media Services, compositions in the transferred catalog are

"restored to the BMI re." Guidel s p. 2. Thus, the

"grand r s" example has no analog in, and nothing to do with

the ssues in this case.

It is sirr.ilarly imrr.aterial that BMI cannot offer certain

synchronization rights (the to license musical

- 12

composit ions in conj unct with visual images) or rights for

jukebox licenses and noncommerci broadcasters, which are

statutorily excluded from BMI's purview because of t operation

the ght Act, 17 U.S.C. §§ 116, 118. The publishers are

free to license these rights to all music users. But BMI s

not of , nor has it ever offered, these rights to anybody.

BMI and the intervenors argue nothing in the BMI

Consent Decree prevents BMI from agree not to serve

particular customers. That puts matters backwards. Nothing in

the Consent Decree settling this antitrust case can be read to

allow one with BMI's market power to re to deal th certain

of its icants. The copyright law necessarily gives that

privil to the intervenors, but BMI cannot combine with them

by holding its ory compositions that come th an

invitation to a boycott attached. 4

The Department of Justice has submitted its views, which ore creation of any dable inconsistency between s

decision and the ier one of the Honorable se Cote, U.S.D.J., I ition of Pandora Media Inc., No. 12 Civ. 8035 (DLC) , slip. op. (S.D.N.Y. . 17, 2013). The inconsistency is just a difference of view of the power of the application of Section 106 and the copyright holders' rights under the Copyright Law, and will be resolved the Court of

Is for the Second Circuit or decree amendment procedures, or managed commercially.

- 13

CONCLUSION

Pandora's motion is ed. relevant compositions are

not within ｂｾｉＧｳ＠ ory, and it lacks the power to license

them to any applicant, lc.ding Pandora.

Nothing in this opinion af ts t right of licensees to

cont to perform withdrawn compositions under sently

existing licenses. They were legal when made, and the rights

they ed are not to be altered retroact y. As far as

this ru.L is concerned, t cont according to their terms

until ir expiration.

So ordered.

Dated: New York, New York December 18, 2013

t",."j I.. ｾｴＮＮＮｊ［ＬＮ＠LOUIS L. STANTON

U.S.D.J.

14 -

72715.1 1

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

SOUNDEXCHANGE, INC. Civil Action No. ___ Plaintiff, v.

COMPLAINT SIRIUS XM RADIO INC. Defendant. JURY TRIAL DEMANDED


1. Under the Copyright Act, entities such as Defendant Sirius XM Radio Inc.

(“Sirius XM”) benefit from a statutory license for the rights necessary to digitally perform sound

recordings protected by federal copyright. As a result of this license, these entities can digitally

transmit sound recordings to their millions of paying subscribers without fear of copyright

infringement. But the statutory license is not free: the Copyright Act requires licensees to pay

royalties for the use of copyright owners’ valuable original content. By regulation, those

royalties must be paid to SoundExchange, Inc. (“SoundExchange”), a non-profit organization

authorized to collect digital performance and related royalties and distribute them to performing

artists and copyright owners.

2. Sirius XM is the country’s only satellite digital audio radio service (“SDARS”).

The royalties that Sirius XM must pay under the statutory license are set periodically in

regulations prescribed by the federal Copyright Royalty Board (“CRB”). For the time period

2007-2012, the amount that Sirius XM was required to pay was the product of two numbers: (1)

a percentage set by the CRB (the “royalty rate”); and (2) Sirius XM’s “Gross Revenues” as

Case 1:13-cv-01290-RJL Document 1 Filed 08/26/13 Page 1 of 17

72715.1 2

defined by the CRB. Thus, Sirius XM’s Gross Revenues were the royalty base against which its

royalty obligations were to be calculated.

3. The CRB’s regulations define Gross Revenues broadly. They also set forth

exactly what Sirius XM may exclude from Gross Revenues for the purpose of calculating its

royalty obligation.

4. Starting from at least January 1, 2007, and until December 31, 2012 (the “relevant

time period”), Sirius XM systematically underpaid SoundExchange for the statutory license.

Rather than paying a percentage of Gross Revenues as that term is defined in the federal

regulations, Sirius XM devised its own definition of Gross Revenues – a definition that

substantially reduced its royalty payments to SoundExchange. Sirius XM’s definition

improperly reduced its reported Gross Revenues in three ways. First, from January 1, 2007 until

December 31, 2012, Sirius XM improperly reduced its Gross Revenues by an amount

purportedly attributable to performances of sound recordings fixed prior to February 15, 1972

(“pre-1972 sound recordings”). Second, from at least October 2008, Sirius XM excluded from

its reported Gross Revenues the incremental revenue it received from the difference in price

between its standard package (which includes both music and talk channels) and its “Sirius XM

Premier” package (which includes all the content in the standard package as well as certain

additional all-talk channels).1 Third, Sirius XM and its legal predecessor excluded all revenue

derived from its Family Friendly and Mostly Music packages even though those packages

contained many channels broadcasting recordings covered by the statutory license.

1 Sirius XM, the product of a merger between formerly-separate Sirius and XM services, continues to offer separately-branded Sirius Premier and XM Premier packages, as well as a co-branded package (Sirius XM Premier). On information and belief, Sirius XM has been erroneously excluding incremental subscription revenue from all three packages in the same manner. For simplicity, this Complaint uses “Sirius XM Premier” to refer to all three packages.


72715.1 3

5. None of Sirius XM’s unilateral amendments to the exclusions and deductions to

the definition of Gross Revenues was permitted under federal law. SoundExchange now brings

this action to recover the royalty amounts Sirius XM has underpaid as a result.

JURISDICTION AND VENUE

6. This is a civil action seeking damages under the Copyright Act, 17 U.S.C. § 101,

et seq.

7. This Court has original subject matter jurisdiction over Copyright Act claims

pursuant to 28 U.S.C. §§ 1331 and 1338(a).

8. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(1) and (b)(2).

Defendant Sirius XM resides in this District, and a substantial part of the events giving rise to

this suit have occurred in this District.

9. This Court has personal jurisdiction over Sirius XM because Sirius XM (i) resides

in this District; (ii) has substantial contacts within the United States, including in this District;

and (iii) has transacted business throughout the United States, including in this District.

PARTIES

10. Plaintiff SoundExchange, Inc. is an independent nonprofit organization organized

and existing under the law of the State of Delaware, with its headquarters at 733 10th Street,

N.W., 10th Floor, Washington, DC 20001. The CRB has designated SoundExchange as the sole

entity in the United States to collect digital performance royalties from statutory license users

and to distribute those royalties to performing artists and copyright owners. Specifically,

SoundExchange is charged by regulation with administering the statutory license, see, e.g., 17

U.S.C. § 114(e)(1); 37 C.F.R. § 380.4; id. at § 370.3, collecting and distributing statutory

royalties, 17 U.S.C. § 114(e)(1); id., and enforcing the terms of the statutory license, see 17


72715.1 4

U.S.C. § 114(g)(3). Pursuant to this authority, SoundExchange collects statutory royalties from

satellite radio, Internet radio, cable TV music channels, and other types of services for

transmission of sound recordings, and distributes those royalties to artists and record companies.

11. Defendant Sirius XM Radio Inc. is a corporation organized and existing under the

law of the State of Delaware, with its principal place of business located at 1221 Avenue of the

Americas, 36th Floor, New York, NY 10020. Sirius XM also has offices in Washington, D.C.,

and studio facilities throughout the country. Sirius XM is the only operator of an SDARS.

FACTUAL ALLEGATIONS

A. The Statutory Framework for the Licensing of Digital Performance Rights

12. Section 106 of the Copyright Act grants the owner of a copyright in a sound

recording the exclusive right to perform and reproduce “the copyrighted work publicly by means

of a digital audio transmission.” 17 U.S.C. § 106(6).

13. In turn, Congress granted various entities, including SDARS, a “statutory

license,” 17 U.S.C. §§ 112; 114(d)(2), to render these digital public performances of copyrighted

sound recordings. Copyright owners are unable to withhold this license, which allows Sirius XM

to publicly perform all covered recordings (by transmitting them to its millions of paying

subscribers) without fear of copyright infringement.

14. The federal statutory license, however, is not free. Rather, in the event that

copyright owners and SDARS are unable to agree on the license’s royalty rates and terms, the

Copyright Act requires the CRB to “determine reasonable rates and terms of royalty payments”

for the statutory license. 17 U.S.C. § 114(f)(1)(A). The Copyright Act provides that the CRB-

set rates “shall . . . be binding on all copyright owners of sound recordings and entities

performing sound recordings,” including Sirius XM. Id. § 114(f)(1)(B).


72715.1 5

15. Since shortly after enactment of the statutory license, SoundExchange and its

predecessor have been designated by the CRB and its predecessors to collect and distribute

statutory royalties. Notice and Recordkeeping for Digital Subscription Transmissions, 63 Fed.

Reg. 34,289, 34,292-94 (June 24, 1998). The Copyright Act directs how those royalties are to be

distributed. 17 U.S.C. § 114(g)(2)(A)-(D). The Copyright Act also provides that a non-profit

agent such as SoundExchange may deduct certain costs from the royalty payments that it

distributes. These costs include costs the non-profit agent incurs in enforcing performance rights

subject to the statutory license. Id. at § 114(g)(3)(A)-(C).

16. On January 24, 2008, the CRB promulgated its regulations setting the license fees

that the SDARS would pay for 2007 to 2012. See Determination of Rates and Terms for

Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080,

4099 (Jan. 24, 2008) (“2007-2012 CRB Decision”). Those regulations remained in effect from

January 1, 2007 to December 31, 2012. The regulations prescribed (as they still do now) that

royalty payments were to be made to SoundExchange.

17. Under the CRB’s regulations, Sirius XM’s royalty fee was to be calculated as a

percentage of its Gross Revenues. Specifically, Sirius XM was to pay 6.0% of its Gross

Revenues for 2007 and 2008, 6.5% of its Gross Revenues for 2009, 7.0% of its Gross Revenues

for 2010, 7.5% of its Gross Revenues for 2011, and 8.0% of its Gross Revenues for 2012. 2007-

2012 CRB Decision, 73 Fed. Reg. at 4098.

18. The CRB promulgated regulations that defined “Gross Revenues” for purposes of

the royalty payment calculation. In relevant part, those regulations stated:

(1) Gross Revenues shall mean revenue recognized by [Sirius XM] in accordance with GAAP from the operation of an SDARS, and shall be comprised of the following:


72715.1 6

(i) Subscription revenue recognized by [Sirius XM] directly from residential U.S. subscribers for [Sirius XM’s] SDARS; and (ii) [Sirius XM’s] advertising revenues, or other monies received from sponsors, if any, attributable to advertising on channels other than those that use only incidental performances of sound recordings . . .

(3) Gross revenues shall exclude: . . .

(vi) Revenues recognized by [Sirius XM] for the provision of . . .

(B) Channels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings; . . . [and]

(D) Channels, programming, products and/or other services for which the performance of sound recordings and/or the making of ephemeral recordings is exempt from any license requirement or is separately licensed, including by a statutory license and, for the avoidance of doubt, webcasting, audio services bundled with television programming, interactive services, and transmissions to business establishments.

2007-2012 CRB Decision, 73 Fed. Reg. at 4102 (promulgating 37 C.F.R. § 382.11) (emphasis

added).

19. During the relevant time period, Sirius XM reported its Gross Revenues to

SoundExchange on a monthly basis. Using the royalty rates set forth by the CRB, Sirius XM

made payments for each month on the basis of its reported Gross Revenues.

B. Sirius XM’s Unauthorized Exclusions from “Gross Revenues”

1. Pre-1972 Sound Recordings

20. Sirius XM has taken the position that the federal statutory license does not cover

pre-1972 sound recordings, and on information and belief Sirius XM is not separately licensing


72715.1 7

the pre-1972 sound recordings from their owners, even though they are subject to common law

copyright or equivalent protection under state law.

21. The CRB’s regulations provide that Sirius XM’s “Gross Revenues” – the revenue

base on which Sirius XM’s royalty payments are calculated – include all revenue recognized by

Sirius XM from the operation of an SDARS, subject only to a limited number of exclusions.

None of the regulatory exclusions in effect during the relevant time period permitted Sirius XM

to reduce its reported Gross Revenues by an amount purportedly attributable to its performances

of pre-1972 sound recordings.

22. As relevant here, the CRB’s regulations permitted Sirius XM to exclude

“[r]evenues recognized by [Sirius XM] for the provision of,” among other things, “[c]hannels,

programming, products and/or other services for which the performance of sound recordings

and/or the making of Ephemeral Recordings is exempt from any license requirement or is

separately licensed, including by a statutory license and, for the avoidance of doubt, webcasting,

audio services bundled with television programming, interactive services, and transmissions to

business establishments.” 37 C.F.R. § 382.11 (paragraph (3) definition of Gross Revenues). The

reduction of Gross Revenues purportedly corresponding to Sirius XM’s performances of pre-

1972 sound recordings did not fall into this category.

23. On information and belief, during the relevant time period Sirius XM did not

recognize any revenue for the provision of channels, programming, products and/or services

featuring performances of pre-1972 sound recordings. Rather, Sirius XM simply estimated that a

certain percentage of its sound recording performances were of pre-1972 sound recordings, and it

reduced the Gross Revenues that it reported to SoundExchange by a corresponding percentage.

In its recent decision announcing royalty rates and terms for 2013 to 2017, the CRB stated that


72715.1 8

Sirius XM did not dispute it had reduced its reported Gross Revenues by between 10% and 15%

of its subscription revenue on the theory that it corresponded to performances of pre-1972 sound

recordings. Determination of Rates and Terms for Preexisting Subscription Services and

Satellite Digital Audio Radio Services (“2013-2017 CRB Decision”), 78 Fed. Reg. 23,054,

23,080 (Apr. 17, 2013).

24. In its decision announcing royalty rates and terms for 2013 to 2017, the CRB

confirmed that the regulations in effect between 2007 and 2012 did not permit Sirius XM to

exclude revenues purportedly attributable to performances of pre-1972 sound recordings. The

CRB acknowledged that “Sirius XM broadcasts pre-1972 recordings . . . and [between 2007 and

2012 has] . . . exclude[d] a portion of revenues from its Gross Revenues calculation for such

use.” 78 Fed. Reg. 23,054, 23,074. The CRB then continued unambiguously that “[t]he current

Gross Revenues definition does not expressly recognize such an exclusion, which is not

surprising given that there is no revenue recognition for the performance of pre-1972 works.” Id.

at 23,073; see also id. at 23,080. In fact, Sirius XM does not separately recognize any revenues

based on the specific types of music programming that Sirius XM plays or on the specific types

of music programming to which any particular user listens – which Sirius XM does not even

track. Because no revenue is separately recognized for the performances of pre-1972 sound

recordings, it was unlawful under the unambiguous regulations for Sirius XM to exclude from its

Gross Revenues any portion of its domestic subscription revenue that it felt was somehow

attributable to performances of pre-1972 sound recordings. The CRB added that “revenue

exclusion is not the proper means for addressing pre-1972 recordings. . . . To be allowable, a

deduction must be precise and the methodology transparent.” Id. at 23,073 (emphasis added).


72715.1 9

25. On information and belief, Sirius XM’s unauthorized reduction of its reported

Gross Revenues by amounts purportedly attributable to performances of pre-1972 sound

recordings led it to underpay SoundExchange by tens of millions of dollars.

2. Sirius XM Premier Package 26. Beginning at least as early as October 2008, Sirius XM began offering a premium

subscription option in addition to its basic package. First marketed to Sirius and XM subscribers

as “Best of Sirius” and “Best of XM,” the premium packages are now marketed as Sirius XM

Premier.

27. Sirius XM Select is Sirius XM’s basic satellite radio package, and includes access

to over 150 music and talk channels. Prior to a January 2012 price increase, Sirius XM Select

was offered for $12.95 a month. That price was raised after January 2012 to $14.49 per month.

28. The Sirius XM Premier package includes all of the music and talk channels

encompassed by the Sirius XM Select package. Over and above these channels, the Sirius XM

Premier package also includes a number of additional premium all-talk channels. Prior to the

January 2012 price increase, Sirius XM Premier was offered for $16.99 a month. That price was

raised after January 2012 to $17.99 a month.

29. The extra channels included in Sirius XM Premier are not an add-on offered for a

separate charge; rather, Sirius XM charges each subscriber a single undifferentiated amount –

$17.99 – for all of the channels included in the Sirius XM Premier package.

30. During the most recent CRB rate-setting proceeding, Sirius XM CFO David Frear

testified that, when determining the Gross Revenues reported to SoundExchange as the basis for

its royalty payment calculations, Sirius XM excluded $3.50 per month for every Sirius XM

Premier subscription. Thus, instead of including the full $17.99 per month for each Sirius XM


72715.1 10

Premier subscription, Sirius XM included in Gross Revenues only $14.49 per month for each

such subscription. Mr. Frear justified Sirius XM’s exclusion of the additional $3.50 increment

on the ground that the additional channels included in Sirius XM Premier “don’t have any . . .

channels involving sound recording performances.”

31. Sirius XM’s deduction of $3.50 per month for each Sirius XM Premier subscriber

directly contravened the CRB’s regulations regarding how Gross Revenues are to be calculated.

By regulation, Gross Revenues were to include “Subscription revenue recognized by [Sirius

XM] directly from residential U.S. Subscribers for [Sirius XM’s] SDARS.” 37 C.F.R. § 382.11

(definition of Gross Revenues paragraph (1)(i)). The regulations permit Sirius XM to exclude

“[r]evenues recognized by [Sirius XM] for the provision of . . . [c]hannels, programming,

products and/or other services offered for a separate charge where such channels use only

incidental performances of sound recordings.” Id. at §382.11 (definition of Gross Revenues

paragraph (3)(vi)).

32. Sirius XM’s exclusion of the price difference between Sirius XM Premier and

Sirius XM Select did not comport with the CRB’s regulations. The $3.50 difference between the

revenue that Sirius XM receives each month from a Sirius XM Premier subscriber, on the one

hand, and a Sirius XM Select subscriber, on the other, does not reflect any channel,

programming, product, or service “offered for a separate charge.” 37 C.F.R. §382.11 (definition

of Gross Revenues paragraph (3)(vi)(B)). It is merely the price difference between Sirius XM’s

basic product and its more expansive product. Nor, on information and belief, does Sirius XM

separately recognize revenues attributable to the price difference between Sirius XM Premier and

Sirius XM Select.


72715.1 11

33. As with Sirius XM’s pre-1972 Gross Revenues reduction, the CRB’s recent

decision setting royalty rates and terms confirmed that Sirius XM’s exclusion of Sirius XM

Premier incremental revenue is unauthorized. The statutory royalty rate was set based on the

understanding that it would be applied to a royalty base consisting substantially of subscriber

payments for mixed packages of music and non-music programming. The rate presumably

would have been higher if Sirius XM was authorized to allocate its package revenues. Thus, in

discussing when a revenue exclusion is appropriate for non-music packages, the CRB stressed

that “the exclusion is available only to the extent that the channels, programming, products

and/or other services are offered for a separate charge.” 2013-2017 CRB Decision, 78 Fed. Reg.

at 23,072 n.45.

34. Sirius XM’s exclusion of $3.50 per month for each Sirius XM Premier subscriber

since January 2012 (and its exclusion of $4.04 per month prior to January 2012) has resulted in

an underpayment of millions of dollars to SoundExchange during the relevant time period.

3. New XM Products

35. Prior to the July 2008 merger between Sirius and XM, XM began offering two

new products to its subscribers, Family Friendly and Mostly Music. Both of these packages

continue to be offered by Sirius XM today and, as seen in Sirius XM’s advertising, both

packages contain numerous channels dedicated solely to the broadcast of sound recordings.

36. The Family Friendly package offers listeners access to most of Sirius XM’s music

and talk channels, excluding those with an adult theme. The Mostly Music package, as the name

suggests, offers access to channels covering “commercial-free music from nearly every genre” in

addition to a number of talk channels.


72715.1 12

37. As with its other offerings that combine music and talk channels, Sirius XM does

not separately recognize the revenue derived from music and non-music channels contained in

the Family Friendly and Mostly Music packages.

38. Sirius XM excluded from Gross Revenues the revenue recognized from

subscription packages, including its Family Friendly and Mostly Music packages, even though

these packages contain channels that broadcast recordings covered by the statutory license and

do not fall into any of the exclusions identified in the CRB regulations. Sirius XM’s

unauthorized exclusion of this revenue from Gross Revenues resulted in an underpayment of

approximately one million dollars or more to SoundExchange during the relevant time period.

C. Sirius XM’s Non-Payment of Late Fees

39. In the federal regulations promulgated as part of the 2007-2012 CRB Decision,

the Copyright Royalty Judges provided that “a licensee shall pay a late fee of 1.5% per month, or

the highest lawful rate, whichever is lower, for any payment and/or statement of account

received by [SoundExchange] after the due date. Late fees shall accrue from the due date until

payment and statement of account are received by [SoundExchange].” 37 C.F.R. § 382.13(d);

see also 74 Fed. Reg. 40614, 40616; See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

40. For at least the years ending December 31, 2007, 2008, and 2009, Sirius XM and

its predecessor entities repeatedly failed to make timely royalty payments and submit timely

statements of account to SoundExchange. These untimely submissions were made not only for

Sirius XM’s satellite radio service, but also for Sirius XM’s webcasting service and other

platforms. See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

41. When those payments were finally made, Sirius XM failed to include the

additional late fee payments due to SoundExchange under the regulations. That failure extended


72715.1 13

to all of Sirius XM’s platforms. SoundExchange is thus owed millions of dollars in late

payments from the period 2007 to 2009.

COUNT ONE (Violation of 37 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Reduction of Revenue Purportedly Corresponding to Use of Pre-1972 Sound Recordings)

42. SoundExchange incorporates by reference paragraphs 1 to 41 as if fully set forth

herein.

43. The Copyright Act provides a statutory license for the digital performance rights

in sound recordings and the making of ephemeral reproductions to facilitate the licensee’s

performance of those recordings. 17 U.S.C. §§ 112, 114. Because Sirius XM has chosen to rely

on that statutory license, it must make royalty payments to SoundExchange at the rates set by the

CRB. 37 C.F.R. § 382.13(a); see also 17 U.S.C. § 114(f)(1)(B).

44. Sirius XM’s payments to SoundExchange are calculated as a percentage of Sirius

XM’s Gross Revenues, a term defined in 37 C.F.R. § 382.11.

45. From at least January 1, 2007 until December 31, 2012, Sirius XM reduced its

reported Gross Revenues by an amount that it deemed attributable to performances of pre-1972

sound recordings. The CRB’s regulations did not permit this reduction.

46. This unauthorized reduction in reported Gross Revenues reduced the amounts that

Sirius XM paid to SoundExchange under the terms of the federal statutory license. The

unauthorized reduction in reported Gross Revenues, and consequent underpayment, contravened

the requirement in the relevant regulations that a “Licensee shall make the royalty payments due

under” the regulations to SoundExchange, 37 C.F.R. § 382.13(a), and the Copyright Act’s

statement that the CRB-determined rates are “binding on . . . entities performing sound

recordings” during the period when the rates are in effect. 17 U.S.C. § 114(f)(1)(B).


72715.1 14

47. Sirius XM’s improper actions have deprived SoundExchange of millions of

dollars of royalties to which SoundExchange was entitled under the CRB’s regulations.

COUNT TWO

(Violation of 34 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Partial Exclusion of Revenue From Sirius XM Premier Subscriptions)

48. Plaintiff incorporates by reference paragraphs 1 to 47 as if set forth herein.








51. Starting from at least October 2008, Sirius XM excluded from its reported Gross

Revenues an amount corresponding to the incremental revenue that it received as a result of

subscribers electing its Sirius XM Premier package rather than its standard package. That

exclusion was not authorized by the CRB’s regulations.

52. This unauthorized exclusion reduced the amounts that Sirius XM paid to

SoundExchange. The unauthorized exclusion, and consequent underpayment, contravened the

requirement in the relevant regulations that a “Licensee shall make the royalty payments due





72715.1 15



COUNT THREE

(Violation of 34 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Exclusion of Revenue From Family Friendly and Mostly Music Subscriptions)





on that statutory license, it must make royalty payments to SoundExchange at rates set by the

CRB. 17 U.S.C. § 114(f)(1)(B).



57. From at least January 1, 2008 until December 31, 2009, Sirius XM excluded from

its Gross Revenues the revenues it received from subscriptions to Family Friendly and Mostly

Music. That exclusion was not permitted by the CRB regulations.







59. Sirius XM’s improper actions have deprived SoundExchange of approximately

one million dollars or more to which SoundExchange was entitled under the CRB’s regulations.


72715.1 16

COUNT FOUR

(Violation of 37 C.F.R. § 382.13(d), 74 Fed. Reg. 40614, 40616, 37 C.F.R. § 383.4(a), and 37 C.F.R. § 384.4(e) – Failure To Make Late Fee Payments)

60. Plaintiff incorporates paragraphs 1 to 59 as if set forth herein.

61. 37 C.F.R. § 382.13(d) and related regulations provide that Sirius XM shall pay a

late fee of 1.5% per month for any SDARS payment or statement of account that is received by

SoundExchange after the due date. Other regulations set for late fees applicable to Sirius XM’s

other platforms. See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

62. For at least the years ending on December 31, 2007, 2008, and 2009, Sirius XM

repeatedly failed to make timely royalty payments or submit timely statements of account to

SoundExchange, yet when those payments were finally made it failed to pay the applicable late

fees.

63. Sirius XM’s improper failure to pay SoundExchange statutorily mandated late

fees have denied SoundExchange millions of dollars to which it is entitled under the CRB’s

regulations.


Plaintiff hereby demands a jury trial on all issues so triable.

PRAYER FOR RELIEF

WHEREFORE, SoundExchange respectfully prays for judgment against Sirius XM as

follows:

a. For compensatory damages not less than $50 million and up to $100 million or more in

such amounts to be determined at trial arising from Sirius XM’s underpayment of royalties as

required by the statutory license;

b. For appropriate late fees and interest;


72715.1 17

c. For SoundExchange’s costs, including reasonable attorney fees and costs and pursuant to

17 U.S.C. § 505; and

d. For any other relief the Court deems just and proper.

Dated: August 26, 2013 Respectfully submitted,

/s/ Michael B. DeSanctis

Michael B. DeSanctis (D.C. Bar #: 460961) Joshua M. Segal (D.C. Bar #: 975949) Ishan K. Bhabha (D.C. Bar #: 1015673) JENNER & BLOCK LLP 1099 New York Avenue NW Suite 900 Washington, DC 20001 (202) 639-6000 Counsel for Plaintiff SoundExchange, Inc.


72715.1 1


SOUNDEXCHANGE, INC. 733 10th Street, N.W., 10th Floor, Washington, DC 20001 Civil Action No. ___ Plaintiff, v.

COMPLAINT SIRIUS XM RADIO INC. 1221 Avenue of the Americas, 36th Floor, New York, NY 10020 Defendant. JURY TRIAL DEMANDED


1. Under the Copyright Act, entities such as Defendant Sirius XM Radio Inc.

(“Sirius XM”) benefit from a statutory license for the rights necessary to digitally perform sound

recordings protected by federal copyright. As a result of this license, these entities can digitally

transmit sound recordings to their millions of paying subscribers without fear of copyright

infringement. But the statutory license is not free: the Copyright Act requires licensees to pay

royalties for the use of copyright owners’ valuable original content. By regulation, those

royalties must be paid to SoundExchange, Inc. (“SoundExchange”), a non-profit organization

authorized to collect digital performance and related royalties and distribute them to performing

artists and copyright owners.

2. Sirius XM is the country’s only satellite digital audio radio service (“SDARS”).

The royalties that Sirius XM must pay under the statutory license are set periodically in


72715.1 2

regulations prescribed by the federal Copyright Royalty Board (“CRB”). For the time period

2007-2012, the amount that Sirius XM was required to pay was the product of two numbers: (1)

a percentage set by the CRB (the “royalty rate”); and (2) Sirius XM’s “Gross Revenues” as

defined by the CRB. Thus, Sirius XM’s Gross Revenues were the royalty base against which its

royalty obligations were to be calculated.

3. The CRB’s regulations define Gross Revenues broadly. They also set forth

exactly what Sirius XM may exclude from Gross Revenues for the purpose of calculating its

royalty obligation.

4. Starting from at least January 1, 2007, and until December 31, 2012 (the “relevant

time period”), Sirius XM systematically underpaid SoundExchange for the statutory license.

Rather than paying a percentage of Gross Revenues as that term is defined in the federal

regulations, Sirius XM devised its own definition of Gross Revenues – a definition that

substantially reduced its royalty payments to SoundExchange. Sirius XM’s definition

improperly reduced its reported Gross Revenues in three ways. First, from January 1, 2007 until

December 31, 2012, Sirius XM improperly reduced its Gross Revenues by an amount

purportedly attributable to performances of sound recordings fixed prior to February 15, 1972

(“pre-1972 sound recordings”). Second, from at least October 2008, Sirius XM excluded from

its reported Gross Revenues the incremental revenue it received from the difference in price

between its standard package (which includes both music and talk channels) and its “Sirius XM

Premier” package (which includes all the content in the standard package as well as certain

additional all-talk channels).1 Third, Sirius XM and its legal predecessor excluded all revenue

1 Sirius XM, the product of a merger between formerly-separate Sirius and XM services, continues to offer separately-branded Sirius Premier and XM Premier packages, as well as a co-branded package (Sirius XM Premier). On information and belief, Sirius XM has been


72715.1 3

derived from its Family Friendly and Mostly Music packages even though those packages

contained many channels broadcasting recordings covered by the statutory license.

5. None of Sirius XM’s unilateral amendments to the exclusions and deductions to

the definition of Gross Revenues was permitted under federal law. SoundExchange now brings

this action to recover the royalty amounts Sirius XM has underpaid as a result.

JURISDICTION AND VENUE

6. This is a civil action seeking damages under the Copyright Act, 17 U.S.C. § 101,

et seq.

7. This Court has original subject matter jurisdiction over Copyright Act claims

pursuant to 28 U.S.C. §§ 1331 and 1338(a).

8. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(1) and (b)(2).

Defendant Sirius XM resides in this District, and a substantial part of the events giving rise to

this suit have occurred in this District.

9. This Court has personal jurisdiction over Sirius XM because Sirius XM (i) resides

in this District; (ii) has substantial contacts within the United States, including in this District;

and (iii) has transacted business throughout the United States, including in this District.

PARTIES

10. Plaintiff SoundExchange, Inc. is an independent nonprofit organization organized

and existing under the law of the State of Delaware, with its headquarters at 733 10th Street,

N.W., 10th Floor, Washington, DC 20001. The CRB has designated SoundExchange as the sole

entity in the United States to collect digital performance royalties from statutory license users

and to distribute those royalties to performing artists and copyright owners. Specifically, erroneously excluding incremental subscription revenue from all three packages in the same manner. For simplicity, this Complaint uses “Sirius XM Premier” to refer to all three packages.


72715.1 4

SoundExchange is charged by regulation with administering the statutory license, see, e.g., 17

U.S.C. § 114(e)(1); 37 C.F.R. § 380.4; id. at § 370.3, collecting and distributing statutory

royalties, 17 U.S.C. § 114(e)(1); id., and enforcing the terms of the statutory license, see 17

U.S.C. § 114(g)(3). Pursuant to this authority, SoundExchange collects statutory royalties from

satellite radio, Internet radio, cable TV music channels, and other types of services for

transmission of sound recordings, and distributes those royalties to artists and record companies.

11. Defendant Sirius XM Radio Inc. is a corporation organized and existing under the

law of the State of Delaware, with its principal place of business located at 1221 Avenue of the

Americas, 36th Floor, New York, NY 10020. Sirius XM also has offices in Washington, D.C.,

and studio facilities throughout the country. Sirius XM is the only operator of an SDARS.

FACTUAL ALLEGATIONS

A. The Statutory Framework for the Licensing of Digital Performance Rights

12. Section 106 of the Copyright Act grants the owner of a copyright in a sound

recording the exclusive right to perform and reproduce “the copyrighted work publicly by means

of a digital audio transmission.” 17 U.S.C. § 106(6).

13. In turn, Congress granted various entities, including SDARS, a “statutory

license,” 17 U.S.C. §§ 112; 114(d)(2), to render these digital public performances of copyrighted

sound recordings. Copyright owners are unable to withhold this license, which allows Sirius XM

to publicly perform all covered recordings (by transmitting them to its millions of paying

subscribers) without fear of copyright infringement.

14. The federal statutory license, however, is not free. Rather, in the event that

copyright owners and SDARS are unable to agree on the license’s royalty rates and terms, the

Copyright Act requires the CRB to “determine reasonable rates and terms of royalty payments”


72715.1 5

for the statutory license. 17 U.S.C. § 114(f)(1)(A). The Copyright Act provides that the CRB-

set rates “shall . . . be binding on all copyright owners of sound recordings and entities

performing sound recordings,” including Sirius XM. Id. § 114(f)(1)(B).

15. Since shortly after enactment of the statutory license, SoundExchange and its

predecessor have been designated by the CRB and its predecessors to collect and distribute

statutory royalties. Notice and Recordkeeping for Digital Subscription Transmissions, 63 Fed.

Reg. 34,289, 34,292-94 (June 24, 1998). The Copyright Act directs how those royalties are to be

distributed. 17 U.S.C. § 114(g)(2)(A)-(D). The Copyright Act also provides that a non-profit

agent such as SoundExchange may deduct certain costs from the royalty payments that it

distributes. These costs include costs the non-profit agent incurs in enforcing performance rights

subject to the statutory license. Id. at § 114(g)(3)(A)-(C).

16. On January 24, 2008, the CRB promulgated its regulations setting the license fees

that the SDARS would pay for 2007 to 2012. See Determination of Rates and Terms for


4099 (Jan. 24, 2008) (“2007-2012 CRB Decision”). Those regulations remained in effect from

January 1, 2007 to December 31, 2012. The regulations prescribed (as they still do now) that

royalty payments were to be made to SoundExchange.

17. Under the CRB’s regulations, Sirius XM’s royalty fee was to be calculated as a

percentage of its Gross Revenues. Specifically, Sirius XM was to pay 6.0% of its Gross

Revenues for 2007 and 2008, 6.5% of its Gross Revenues for 2009, 7.0% of its Gross Revenues

for 2010, 7.5% of its Gross Revenues for 2011, and 8.0% of its Gross Revenues for 2012. 2007-

2012 CRB Decision, 73 Fed. Reg. at 4098.


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18. The CRB promulgated regulations that defined “Gross Revenues” for purposes of

the royalty payment calculation. In relevant part, those regulations stated:

(1) Gross Revenues shall mean revenue recognized by [Sirius XM] in accordance with GAAP from the operation of an SDARS, and shall be comprised of the following:

(i) Subscription revenue recognized by [Sirius XM] directly from residential U.S. subscribers for [Sirius XM’s] SDARS; and (ii) [Sirius XM’s] advertising revenues, or other monies received from sponsors, if any, attributable to advertising on channels other than those that use only incidental performances of sound recordings . . .

(3) Gross revenues shall exclude: . . .

(vi) Revenues recognized by [Sirius XM] for the provision of . . .



2007-2012 CRB Decision, 73 Fed. Reg. at 4102 (promulgating 37 C.F.R. § 382.11) (emphasis

added).

19. During the relevant time period, Sirius XM reported its Gross Revenues to

SoundExchange on a monthly basis. Using the royalty rates set forth by the CRB, Sirius XM

made payments for each month on the basis of its reported Gross Revenues.

B. Sirius XM’s Unauthorized Exclusions from “Gross Revenues”


72715.1 7

1. Pre-1972 Sound Recordings

20. Sirius XM has taken the position that the federal statutory license does not cover

pre-1972 sound recordings, and on information and belief Sirius XM is not separately licensing

the pre-1972 sound recordings from their owners, even though they are subject to common law

copyright or equivalent protection under state law.

21. The CRB’s regulations provide that Sirius XM’s “Gross Revenues” – the revenue

base on which Sirius XM’s royalty payments are calculated – include all revenue recognized by

Sirius XM from the operation of an SDARS, subject only to a limited number of exclusions.

None of the regulatory exclusions in effect during the relevant time period permitted Sirius XM

to reduce its reported Gross Revenues by an amount purportedly attributable to its performances

of pre-1972 sound recordings.

22. As relevant here, the CRB’s regulations permitted Sirius XM to exclude

“[r]evenues recognized by [Sirius XM] for the provision of,” among other things, “[c]hannels,

programming, products and/or other services for which the performance of sound recordings

and/or the making of Ephemeral Recordings is exempt from any license requirement or is

separately licensed, including by a statutory license and, for the avoidance of doubt, webcasting,

audio services bundled with television programming, interactive services, and transmissions to

business establishments.” 37 C.F.R. § 382.11 (paragraph (3) definition of Gross Revenues). The

reduction of Gross Revenues purportedly corresponding to Sirius XM’s performances of pre-

1972 sound recordings did not fall into this category.

23. On information and belief, during the relevant time period Sirius XM did not

recognize any revenue for the provision of channels, programming, products and/or services

featuring performances of pre-1972 sound recordings. Rather, Sirius XM simply estimated that a


72715.1 8

certain percentage of its sound recording performances were of pre-1972 sound recordings, and it

reduced the Gross Revenues that it reported to SoundExchange by a corresponding percentage.

In its recent decision announcing royalty rates and terms for 2013 to 2017, the CRB stated that

Sirius XM did not dispute it had reduced its reported Gross Revenues by between 10% and 15%

of its subscription revenue on the theory that it corresponded to performances of pre-1972 sound

recordings. Determination of Rates and Terms for Preexisting Subscription Services and

Satellite Digital Audio Radio Services (“2013-2017 CRB Decision”), 78 Fed. Reg. 23,054,

23,080 (Apr. 17, 2013).

24. In its decision announcing royalty rates and terms for 2013 to 2017, the CRB

confirmed that the regulations in effect between 2007 and 2012 did not permit Sirius XM to

exclude revenues purportedly attributable to performances of pre-1972 sound recordings. The

CRB acknowledged that “Sirius XM broadcasts pre-1972 recordings . . . and [between 2007 and

2012 has] . . . exclude[d] a portion of revenues from its Gross Revenues calculation for such

use.” 78 Fed. Reg. 23,054, 23,074. The CRB then continued unambiguously that “[t]he current

Gross Revenues definition does not expressly recognize such an exclusion, which is not

surprising given that there is no revenue recognition for the performance of pre-1972 works.” Id.

at 23,073; see also id. at 23,080. In fact, Sirius XM does not separately recognize any revenues

based on the specific types of music programming that Sirius XM plays or on the specific types

of music programming to which any particular user listens – which Sirius XM does not even

track. Because no revenue is separately recognized for the performances of pre-1972 sound

recordings, it was unlawful under the unambiguous regulations for Sirius XM to exclude from its

Gross Revenues any portion of its domestic subscription revenue that it felt was somehow

attributable to performances of pre-1972 sound recordings. The CRB added that “revenue


72715.1 9

exclusion is not the proper means for addressing pre-1972 recordings. . . . To be allowable, a

deduction must be precise and the methodology transparent.” Id. at 23,073 (emphasis added).

25. On information and belief, Sirius XM’s unauthorized reduction of its reported

Gross Revenues by amounts purportedly attributable to performances of pre-1972 sound

recordings led it to underpay SoundExchange by tens of millions of dollars.

2. Sirius XM Premier Package 26. Beginning at least as early as October 2008, Sirius XM began offering a premium

subscription option in addition to its basic package. First marketed to Sirius and XM subscribers

as “Best of Sirius” and “Best of XM,” the premium packages are now marketed as Sirius XM

Premier.

27. Sirius XM Select is Sirius XM’s basic satellite radio package, and includes access

to over 150 music and talk channels. Prior to a January 2012 price increase, Sirius XM Select

was offered for $12.95 a month. That price was raised after January 2012 to $14.49 per month.

28. The Sirius XM Premier package includes all of the music and talk channels

encompassed by the Sirius XM Select package. Over and above these channels, the Sirius XM

Premier package also includes a number of additional premium all-talk channels. Prior to the

January 2012 price increase, Sirius XM Premier was offered for $16.99 a month. That price was

raised after January 2012 to $17.99 a month.

29. The extra channels included in Sirius XM Premier are not an add-on offered for a

separate charge; rather, Sirius XM charges each subscriber a single undifferentiated amount –

$17.99 – for all of the channels included in the Sirius XM Premier package.

30. During the most recent CRB rate-setting proceeding, Sirius XM CFO David Frear

testified that, when determining the Gross Revenues reported to SoundExchange as the basis for


72715.1 10

its royalty payment calculations, Sirius XM excluded $3.50 per month for every Sirius XM

Premier subscription. Thus, instead of including the full $17.99 per month for each Sirius XM

Premier subscription, Sirius XM included in Gross Revenues only $14.49 per month for each

such subscription. Mr. Frear justified Sirius XM’s exclusion of the additional $3.50 increment

on the ground that the additional channels included in Sirius XM Premier “don’t have any . . .

channels involving sound recording performances.”

31. Sirius XM’s deduction of $3.50 per month for each Sirius XM Premier subscriber

directly contravened the CRB’s regulations regarding how Gross Revenues are to be calculated.

By regulation, Gross Revenues were to include “Subscription revenue recognized by [Sirius

XM] directly from residential U.S. Subscribers for [Sirius XM’s] SDARS.” 37 C.F.R. § 382.11

(definition of Gross Revenues paragraph (1)(i)). The regulations permit Sirius XM to exclude

“[r]evenues recognized by [Sirius XM] for the provision of . . . [c]hannels, programming,

products and/or other services offered for a separate charge where such channels use only

incidental performances of sound recordings.” Id. at §382.11 (definition of Gross Revenues

paragraph (3)(vi)).

32. Sirius XM’s exclusion of the price difference between Sirius XM Premier and

Sirius XM Select did not comport with the CRB’s regulations. The $3.50 difference between the

revenue that Sirius XM receives each month from a Sirius XM Premier subscriber, on the one

hand, and a Sirius XM Select subscriber, on the other, does not reflect any channel,

programming, product, or service “offered for a separate charge.” 37 C.F.R. §382.11 (definition

of Gross Revenues paragraph (3)(vi)(B)). It is merely the price difference between Sirius XM’s

basic product and its more expansive product. Nor, on information and belief, does Sirius XM


72715.1 11

separately recognize revenues attributable to the price difference between Sirius XM Premier and

Sirius XM Select.

33. As with Sirius XM’s pre-1972 Gross Revenues reduction, the CRB’s recent

decision setting royalty rates and terms confirmed that Sirius XM’s exclusion of Sirius XM

Premier incremental revenue is unauthorized. The statutory royalty rate was set based on the

understanding that it would be applied to a royalty base consisting substantially of subscriber

payments for mixed packages of music and non-music programming. The rate presumably

would have been higher if Sirius XM was authorized to allocate its package revenues. Thus, in

discussing when a revenue exclusion is appropriate for non-music packages, the CRB stressed


and/or other services are offered for a separate charge.” 2013-2017 CRB Decision, 78 Fed. Reg.

at 23,072 n.45.

34. Sirius XM’s exclusion of $3.50 per month for each Sirius XM Premier subscriber

since January 2012 (and its exclusion of $4.04 per month prior to January 2012) has resulted in

an underpayment of millions of dollars to SoundExchange during the relevant time period.

3. New XM Products

35. Prior to the July 2008 merger between Sirius and XM, XM began offering two

new products to its subscribers, Family Friendly and Mostly Music. Both of these packages

continue to be offered by Sirius XM today and, as seen in Sirius XM’s advertising, both

packages contain numerous channels dedicated solely to the broadcast of sound recordings.

36. The Family Friendly package offers listeners access to most of Sirius XM’s music

and talk channels, excluding those with an adult theme. The Mostly Music package, as the name

suggests, offers access to channels covering “commercial-free music from nearly every genre” in

addition to a number of talk channels.


72715.1 12

37. As with its other offerings that combine music and talk channels, Sirius XM does

not separately recognize the revenue derived from music and non-music channels contained in

the Family Friendly and Mostly Music packages.

38. Sirius XM excluded from Gross Revenues the revenue recognized from

subscription packages, including its Family Friendly and Mostly Music packages, even though

these packages contain channels that broadcast recordings covered by the statutory license and

do not fall into any of the exclusions identified in the CRB regulations. Sirius XM’s

unauthorized exclusion of this revenue from Gross Revenues resulted in an underpayment of

approximately one million dollars or more to SoundExchange during the relevant time period.

C. Sirius XM’s Non-Payment of Late Fees

39. In the federal regulations promulgated as part of the 2007-2012 CRB Decision,

the Copyright Royalty Judges provided that “a licensee shall pay a late fee of 1.5% per month, or

the highest lawful rate, whichever is lower, for any payment and/or statement of account

received by [SoundExchange] after the due date. Late fees shall accrue from the due date until

payment and statement of account are received by [SoundExchange].” 37 C.F.R. § 382.13(d);

see also 74 Fed. Reg. 40614, 40616; See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

40. For at least the years ending December 31, 2007, 2008, and 2009, Sirius XM and

its predecessor entities repeatedly failed to make timely royalty payments and submit timely

statements of account to SoundExchange. These untimely submissions were made not only for

Sirius XM’s satellite radio service, but also for Sirius XM’s webcasting service and other

platforms. See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

41. When those payments were finally made, Sirius XM failed to include the

additional late fee payments due to SoundExchange under the regulations. That failure extended


72715.1 13

to all of Sirius XM’s platforms. SoundExchange is thus owed millions of dollars in late

payments from the period 2007 to 2009.

COUNT ONE (Violation of 37 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Reduction of Revenue Purportedly Corresponding to Use of Pre-1972 Sound Recordings)

42. SoundExchange incorporates by reference paragraphs 1 to 41 as if fully set forth

herein.








45. From at least January 1, 2007 until December 31, 2012, Sirius XM reduced its

reported Gross Revenues by an amount that it deemed attributable to performances of pre-1972

sound recordings. The CRB’s regulations did not permit this reduction.

46. This unauthorized reduction in reported Gross Revenues reduced the amounts that

Sirius XM paid to SoundExchange under the terms of the federal statutory license. The

unauthorized reduction in reported Gross Revenues, and consequent underpayment, contravened

the requirement in the relevant regulations that a “Licensee shall make the royalty payments due





72715.1 14



COUNT TWO

(Violation of 34 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Partial Exclusion of Revenue From Sirius XM Premier Subscriptions)









51. Starting from at least October 2008, Sirius XM excluded from its reported Gross

Revenues an amount corresponding to the incremental revenue that it received as a result of

subscribers electing its Sirius XM Premier package rather than its standard package. That

exclusion was not authorized by the CRB’s regulations.








72715.1 15



COUNT THREE

(Violation of 34 C.F.R § 382.13(a) and 17 U.S.C. § 114(f)(1)(B) – Underpayment Based on Exclusion of Revenue From Family Friendly and Mostly Music Subscriptions)





on that statutory license, it must make royalty payments to SoundExchange at rates set by the

CRB. 17 U.S.C. § 114(f)(1)(B).



57. From at least January 1, 2008 until December 31, 2009, Sirius XM excluded from

its Gross Revenues the revenues it received from subscriptions to Family Friendly and Mostly

Music. That exclusion was not permitted by the CRB regulations.







59. Sirius XM’s improper actions have deprived SoundExchange of approximately

one million dollars or more to which SoundExchange was entitled under the CRB’s regulations.


72715.1 16

COUNT FOUR

(Violation of 37 C.F.R. § 382.13(d), 74 Fed. Reg. 40614, 40616, 37 C.F.R. § 383.4(a), and 37 C.F.R. § 384.4(e) – Failure To Make Late Fee Payments)

60. Plaintiff incorporates paragraphs 1 to 59 as if set forth herein.

61. 37 C.F.R. § 382.13(d) and related regulations provide that Sirius XM shall pay a

late fee of 1.5% per month for any SDARS payment or statement of account that is received by

SoundExchange after the due date. Other regulations set for late fees applicable to Sirius XM’s

other platforms. See 37 C.F.R. § 380.4(e); id. at § 383.4(a); id. at § 384.4(e).

62. For at least the years ending on December 31, 2007, 2008, and 2009, Sirius XM

repeatedly failed to make timely royalty payments or submit timely statements of account to

SoundExchange, yet when those payments were finally made it failed to pay the applicable late

fees.

63. Sirius XM’s improper failure to pay SoundExchange statutorily mandated late

fees have denied SoundExchange millions of dollars to which it is entitled under the CRB’s

regulations.


Plaintiff hereby demands a jury trial on all issues so triable.

PRAYER FOR RELIEF

WHEREFORE, SoundExchange respectfully prays for judgment against Sirius XM as

follows:

a. For compensatory damages not less than $50 million and up to $100 million or more in

such amounts to be determined at trial arising from Sirius XM’s underpayment of royalties as

required by the statutory license;

b. For appropriate late fees and interest;


72715.1 17

c. For SoundExchange’s costs, including reasonable attorney fees and costs and pursuant to

17 U.S.C. § 505; and

d. For any other relief the Court deems just and proper.

Dated: August 26, 2013 Respectfully submitted,

s/ Michael B. DeSanctis

Michael B. DeSanctis (D.C. Bar #: 460961) Joshua M. Segal (D.C. Bar #: 975949) Ishan K. Bhabha (D.C. Bar #: 1015673) JENNER & BLOCK LLP 1099 New York Avenue NW Suite 900 Washington, DC 20001 (202) 639-6000 Counsel for Plaintiff SoundExchange, Inc.


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) ) SOUNDEXCHANGE, INC. , ) 733 10th St., N.W. ) 10th Floor ) Washington, DC 20001 ) Case No. 1:13 cv 1290 (RJL) ) Plaintiff , ) v. ) ) SIRIUS XM RADIO INC., ) 1221 Avenue of the Americas ) 36th Floor ) New York, NY 10020 ) ) Defendant. ) )

DEFENDANT SIRIUS XM RADIO INC.’S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMI SS

R. Bruce Rich (pro hac vice) Todd Larson (pro hac vice) Adam Banks (pro hac vice pending) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153

(212) 310-8000

Peter D. Isakoff (D.C. Bar # 358419) WEIL, GOTSHAL & MANGES LLP 1300 Eye Street, NW Suite 900 Washington, DC 20005 (202) 682-7000

Counsel for Sirius XM Radio Inc.

Case 1:13-cv-01290-RJL Document 13-1 Filed 10/16/13 Page 1 of 21

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TABLE OF CONTENTS

PRELIMINARY STATEMENT .....................................................................................................1

STATEMENT OF FACTS ..............................................................................................................3

A. The Parties .................................................................................................................3

B. Statutory Licensing Framework ................................................................................4

C. The Satellite I Final Determination ...........................................................................7

D. Sirius XM’s Exclusions from Gross Revenues .........................................................8

E. SoundExchange’s Complaint ....................................................................................9

ARGUMENT ...................................................................................................................................9

A. The Doctrine of Primary Jurisdiction ......................................................................10

B. The Questions Presented Require Resolution of Issues Committed to the CRJs’ Expertise and Policy Judgment.....................................................................11

C. The Court Should Refer the Action to the CRB and Dismiss Without Prejudice ..................................................................................................................16

CONCLUSION ..............................................................................................................................17


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Page(s)

Cases

Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier Ass’n, Inc., 965 F.2d 1118 (D.C. Cir. 1992) ....................................................................................... passim

Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) .................................................................................................................15

Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999) ...................................................................................................6

Recording Indus. Ass’n of Am. v. Copyright Royalty Tribunal, 662 F.2d 1 (D.C. Cir. 1981) .......................................................................................................6

Reiter v. Cooper, 507 U.S. 258 (1993) ...........................................................................................................10, 16

Ricci v. Chi. Mercantile Exch., 409 U.S. 289 (1973) .....................................................................................................10, 11, 13

Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964) .................................................................................................................15

SoundExchange Inc. v. Librarian of Congress, 571 F.3d 1220 (D.C. Cir. 2009) .......................................................................................6, 8, 14

Syntek Semiconductor Co., Ltd. v. Microchip Tech., Inc., 307 F.3d 775 (9th Cir. 2002) ...................................................................................3, 11, 15, 16

United States v. Philip Morris USA, Inc., 686 F.3d 832 (D.C. Cir. 2012) ...........................................................................................10, 11

United States v. Western Pacific R.R. Co., 352 U.S. 59 (1956) ...............................................................................................................2, 10

Statutes

5 U.S.C. § 706 ..................................................................................................................................8

17 U.S.C. § 106 ................................................................................................................................4

17 U.S.C. § 112 ............................................................................................................................3, 4

17 U.S.C. § 114 ..............................................................................................................3, 4, 6, 9, 12


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17 U.S.C. § 301 ..........................................................................................................................4, 15

17 U.S.C. § 801 ................................................................................................................................6

17 U.S.C. § 802 ................................................................................................................................4

17 U.S.C. § 803 ..............................................................................................................5, 6, 7, 8, 16

17 U.S.C. § 804 ................................................................................................................................5

Rules & Regulations

Fed. R. Civ. P. 12(b)(6)....................................................................................................................1

37 C.F.R. § 351 ................................................................................................................................5

37 C.F.R. § 380.4 .........................................................................................................................3, 9

37 C.F.R. § 382.11 .......................................................................................................7, 8, 9, 12, 13

37 C.F.R. § 382.12(a).......................................................................................................................7

37 C.F.R. § 382.13(d) ......................................................................................................................9

37 C.F.R. § 384.4(e).........................................................................................................................9

Copyright Office, Review of Copyright Royalty Judges Determination, 74 Fed. Reg. 4537 (Jan. 26, 2009) ....................................................................................................................................7

Copyright Royalty Board, Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed. Reg. 6832 (Feb. 11, 2009) ........................................................................7

Copyirght Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78 Fed. Reg. 23054 (Apr. 17, 2013)....13

Copyright Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080 (Jan. 24, 2008) (codified at 37 C.F.R. § 382) ........................................................................................... passim

Legislative History

H.R. Rep. No. 108-408 (2004) .............................................................................................4, 14, 15


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Defendant Sirius XM Radio Inc. (“Sirius XM”) respectfully submits this memorandum of

law in support of its motion to dismiss the Complaint under Fed. R. Civ. P. 12(b)(6).


This lawsuit is premised on the unfounded and illogical assertion that Sirius XM should

pay royalty fees to Plaintiff SoundExchange, Inc. (“SoundExchange”) for the performance of

pre-1972 sound recordings and non-music programming exempt from the statutory license

SoundExchange administers. This contention has been repeatedly rejected by both the

specialized regulatory agency charged with determining the statutory royalty rates—the

Copyright Royalty Board (“CRB”)—and the United States Court of Appeals for District of

Columbia Circuit. It is no surprise, then, that SoundExchange has chosen to frame its Complaint

not to argue that its members actually deserve royalties for performances not covered by the

statutory license, but rather as a technical issue—that is, whether Sirius XM has properly

interpreted and applied highly detailed and technical regulations written by the CRB setting forth

the rates and terms of the statutory license, and in particular whether Sirius XM has properly

construed the definition of the term “Gross Revenues”—the baseline used to calculate royalty

payments. The CRB, and not a federal court, is the proper forum to decide in the first instance

whether the regulations the CRB itself wrote allow the exemptions Sirius XM has implemented.

As we explain herein, this lawsuit asks the Court to rule on a question that lies squarely

within the unique competence of the CRB, the specially qualified body to which Congress

delegated the authority to deal with highly technical questions concerning the rates and terms of

the statutory license, see 17 U.S.C. § 801 et seq. These include how to interpret the definition of

Gross Revenues written by the CRB itself and, relatedly, whether Sirius XM’s calculation of

royalty payments under that definition was proper. Not only is the CRB the tribunal best situated


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to interpret a definition that it wrote, the governing statute expressly provides the CRB with

“continuing jurisdiction” to modify or clarify the terms of its own rate determinations to address

controversies that arise as parties operate under those determinations, including the dispute

reflected in SoundExchange’s Complaint.

It is precisely in such circumstances as these that district courts routinely dismiss or stay

claims under the doctrine of “primary jurisdiction.” That doctrine permits a court to “refer”

actions to an administrative agency when the core questions raised in a lawsuit “require[] the

resolution of issues which, under a regulatory scheme, have been placed within the special

competence of an administrative body.” United States v. Western Pacific R.R. Co., 352 U.S. 59,

64 (1956). The purpose of the doctrine, courts have emphasized, is to utilize “the advantages of

allowing an agency to apply its expert judgment” including weighing “the policy judgments

needed to implement an agency’s mandate.” Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier

Ass’n, Inc., 965 F.2d 1118, 1120 (D.C. Cir. 1992).

The questions presented here fall squarely within the scope and purposes of the primary

jurisdiction doctrine, i.e., whether Sirius XM’s exclusion of revenues associated with pre-1972

sound recordings and non-music programming—both exempt from the statutory license—was a

correct application of the definition of “Gross Revenues” within the meaning of the CRB’s rate

determination. Answering those questions requires an understanding of the proper interpretation

and application of the CRB’s own regulations—regulations formulated after detailed evidentiary

and expert submissions by Sirius XM and SoundExchange, and multi-week hearings before the

Copyright Royalty Judges—questions the CRB is undoubtedly in the best position to answer.

Moreover, the questions directly implicate the technical and policy expertise Congress has

expressly delegated to the CRB. Finally, because the questions at issue implicate the copyright


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law, an area where Congress has promoted national uniformity, see, e.g., Syntek Semiconductor

Co., Ltd. v. Microchip Tech., Inc., 307 F.3d 775, 781 (9th Cir. 2002), the agency itself, rather

than the several federal district courts, should have the first opportunity to clarify their meaning.

Accordingly, the case should be dismissed or stayed under the doctrine of primary jurisdiction.

STATEMENT OF FACTS

A. The Parties

Plaintiff SoundExchange, originally organized as an arm of the Recording Industry

Association of America, is a Delaware nonprofit organization designated by CRB as the sole

entity in the United States to collect digital performance royalties from services operating under

the statutory licenses provided for at 17 U.S.C. §§ 112 & 114. Compl. ¶ 10. Pursuant to its

authority under the governing regulations, see, e.g., 37 C.F.R. § 380.4, SoundExchange collects

statutory royalties from, inter alia, providers of satellite radio, Internet radio services and cable

TV music channels, and distributes those royalties to artists and record companies. See Compl.

¶ 10.

Defendant Sirius XM is a Delaware corporation with its principal place of business in

New York City. Sirius XM also has offices in Washington, D.C. and elsewhere. Sirius XM

operates a satellite digital audio radio service (“SDARS”) broadcasting more than 135 channels

of music, sports, news, talk, comedy, entertainment, traffic and weather to over 25 million

subscribers. Although many of Sirius XM’s channels are devoted to commercial-free music,

roughly half of Sirius XM’s programming consists of non-music programming, including, inter

alia, the well-known Howard Stern show, numerous news, political and other talk-radio

channels, and extensive college and professional sports programming. This non-music

programming is not subject to the statutory license administered by SoundExchange. And on

some of its music channels, Sirius XM broadcasts sound recordings created before February 15,


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1972, which are not federally copyrightable, and likewise not covered by the Section 112/114

statutory license. See 17 U.S.C. § 301(c).

B. Statutory Licensing Framework

Section 106 of the Copyright Act, 17 U.S.C. § 106(6), grants record companies and their

artists the right to be compensated under U.S. copyright law for public performances of their

federally copyrighted sound recordings performed by means of a digital audio transmission. At

the same time, the Copyright Act also provides for a compulsory licensing mechanism that

enables users like Sirius XM to obtain a “statutory license” to cover the prescribed performances

of sound recordings and to transmit them by way of a digital audio service, like Sirius XM’s.

See 17 U.S.C. §§ 112(e); 114(d)(2). If a user and a copyright owner are unable to agree to

royalty rates and terms, as happened here, the Copyright Act provides that the CRB—an agency

consisting of three Copyright Royalty Judges (“CRJs”) appointed by the Librarian of Congress—

shall set “reasonable rates and terms of royalty payments.” See 17 U.S.C. § 114(f).

The CRJs are appointed for staggered six-year terms. 17 U.S.C. § 802(c). In order to

ensure that the CRJs bring to bear sufficient relevant experience, the Copyright Act specifies

certain required qualifications. Each CRJ must be an attorney with at least seven years’

experience; in addition, the chief CRJ must have five years’ experience in adjudications,

arbitrations or court trials. One of the remaining CRJs must have significant knowledge of

copyright law; the other remaining CRJ must have significant knowledge of economics. See 17

U.S.C. § 802(a)(1). As the legislative history suggests, these highly specific qualifications

ensure that the CRJs have the requisite “mastery of economics and marketplace factors as well as

considerable knowledge of copyright law,” H.R. Rep. No. 108-408, at 25 (2004), and reflect an

intent to commit questions arising under the statutory license provisions to this specialized

tribunal.


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The CRB sets the rates and terms for the statutory licenses for license periods lasting five

or six years;1 it does so by adjudicating adversarial proceedings—essentially live trials—between

the affected parties (typically SoundExchange and the services in the particular license category).

17 U.S.C. § 803(b); 37 C.F.R. § 351. In the course of such proceedings, the CRJs take written

direct and rebuttal statements from the participants, supervise comprehensive discovery between

the parties, and hear live testimony from witnesses, including economic and technical experts. In

the proceeding at issue here, which took place between January 2006 and January 2008, the

CRJs considered written direct and rebuttal statements, heard twenty-six days of testimony from

39 witnesses filling over 7,700 transcript pages, admitted more than 230 exhibits, and amassed a

docket of over 400 pleadings, motions and orders. See Determination of Rates and Terms for

Preexisting Subscription Services and Satellite Digital Audio Radio Services (the “Satellite I

Final Determination”), 73 Fed. Reg. 4080, 4080–81 (Jan. 24, 2008) (codified at 37 C.F.R. § 382)

(detailing the record evidence on which the determination was made).

To make the determination of reasonable rates and terms of royalty payments, the

Copyright Act directs the CRJs to consider and balance four objectives:

• “To maximize the availability of creative works to the public”;

• “To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions”;

• “To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication”; and

1 For the first such proceeding involving preexisting satellite digital audio radio services, the services at issue here, the Copyright Act provided for a six-year period beginning January 1, 2007 and ending December 31, 2012. See 17 U.S.C. § 804(b)(3)(B). Thereafter, the Act provides for five-year terms. Id. It is the initial license period that is at issue in this case.


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• “To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.”

17 U.S.C. § 801(b)(1)(A)–(D). Congress granted the CRJs considerable “legislative discretion”

in applying their expert knowledge of the industry and the prevailing economics to balance these

statutory factors appropriately to determine reasonable copyright policy. See SoundExchange

Inc. v. Librarian of Congress, 571 F.3d 1220, 1223–24 (D.C. Cir. 2009) (quoting Recording

Indus. Ass’n of Am. v. Copyright Royalty Tribunal, 662 F.2d 1, 9 (D.C. Cir. 1981)) (affirming in

part and remanding in part the CRJs’ final determination on petition for review from agency’s

decision under the Administrative Procedures Act). This substantial latitude in balancing the

factors is warranted, courts have held, “because the four objectives [the CRJs] must pursue point

in different directions, requiring the agency first to predict the future course of the music industry

and then to work an equitable division of projected music industry profits.” SoundExchange,

571 F.3d at 1225.

Within a given statutory license category, the determination of the CRJs is “binding on

all copyright owners of sound recordings and entities performing sound recordings.” 17 U.S.C.

§ 114(f)(1)(B). The CRJs’ final determination is reviewable under the Administrative

Procedures Act by the D.C. Circuit. See 17 U.S.C. § 803(d). This review, as is typical under the

APA, is extremely limited and deferential. The D.C. Circuit grants “substantial deference” to the

CRJs’ determination, with “judicial review [ ] limited to determining whether the agency’s

decision reasonably advances at least one of those objectives.” SoundExchange, 571 F.3d at

1224, 1225 (quoting Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 971 (D.C. Cir. 1999)).

In addition, the Copyright Act expressly grants the CRJs “continuing jurisdiction” to

“issue an amendment to a written determination to correct any technical or clerical errors in the

determination or to modify the terms, but not the rates, of royalty payments in response to


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unforeseen circumstances that would frustrate the proper implementation” of the final

determination. 17 U.S.C. § 803(c)(4).2

C. The Satellite I Final Determination

On January 9, 2006, the CRB commenced the proceeding to determine the royalty rates

and terms for the statutory license for preexisting satellite digital audio radio services

(“SDARS”) for the period 2007 through 2012 (the “Satellite I Proceeding”), the period at issue

here. The CRJs issued their final determination on January 24, 2008. See Satellite I Final

Determination, 73 Fed. Reg. at 4080. Under the determination, the royalty fees for an SDARS,

like Sirius XM, was 6% of Gross Revenues (as defined in the determination) for 2007 and 2008;

6.5% of Gross Revenues for 2009; 7.0% of Gross Revenues for 2010; 7.5% of Gross Revenues

for 2011; and 8.0% of Gross Revenues for 2012. 73 Fed. Reg. 4084; see also 37 C.F.R. §

382.12(a).

The CRJs determined that for purposes of calculating the applicable royalty payment, the

term Gross Revenues would generally include the user’s subscription and advertising revenue.

See 73 Fed. Reg. 4102; 37 C.F.R. § 382.11. But the CRJs expressly excluded certain items from

the calculation of Gross Revenues, including, as relevant here, “[r]evenues recognized by [the]

Licensee for the provision of”:

• “Channels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings”; and

2 The CRJs and the Register of Copyrights take a broad view of the CRJs’ authority to exercise continuing jurisdiction to amend a rate determination. For example, continuing jurisdiction has been exercised to modify the definition of an “interactive stream” so as more closely to comport with copyright law. See, e.g., Copyright Office, Review of Copyright Royalty Judges Determination, 74 Fed. Reg. 4537, 4543 (Jan. 26, 2009); Copyright Royalty Board, Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed. Reg. 6832, 6833 (Feb. 11, 2009).


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• “Channels, programming, products and/or other services for which the performance of sound recordings and/or the making of ephemeral recordings is exempt from any license requirement or is separately licensed, including by a statutory license.”

73 Fed. Reg. 4102; 37 C.F.R. § 382.11(3)(vi)(B) & (D). These exclusions from Gross Revenues,

the CRJs explained, reflected their effort to “clearly delineate the revenues related to the value of

the sound recording performance rights at issue in this proceeding.” Satellite I Final

Determination, 73 Fed. Reg. at 4087. Put simply, the CRJs recognized that there is no reason for

a user like Sirius XM to have to pay royalties on revenue earned for activities not covered by the

statutory license, and set the royalty rates with these Gross Revenues ground rules in mind. The

D.C. Circuit, considering SoundExchange’s petition for review from the CRJs’ final

determination, agreed: “SoundExchange never contended, and the CRJ[s] never opined that

revenue from such non-music sources should be included in calculating the royalty payments.”

SoundExchange, 517 F.3d at 1225.3

D. Sirius XM’s Exclusions from Gross Revenues

Pursuant to its understanding of the CRJs’ ruling, Sirius XM excluded revenues

associated with certain of its programming from its calculation of Gross Revenues during the

2007-2012 license period. As relevant to this motion, these exclusions fall into two general

categories:

• Pre-1972 sound recordings. Sirius XM excludes revenues attributable to the performance of sound recordings created before February 15, 1972, because these

3 SoundExchange appealed the CRJs’ final determination in Satellite I to the D.C. Circuit on grounds other than those at issue here. That appeal was filed pursuant to 17 U.S.C. § 803(d), which calls for appeals court review of CRJ determinations issued under § 803(c) and specifies that the review be conducted under the Administrative Procedures Act, 5 U.S.C. § 706. Appellate review of CRJ determinations by the Court of Appeals would also appear to include amendments to such determinations issued under the CRJs grant of continuing jurisdiction, as that paragraph granting such continuing jurisdiction to the CRJs is included in the same section (803(c)) as that providing for the initial determination.


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sound recordings are not copyrightable under federal copyright law and therefore not covered by the Section 114 statutory license for which Sirius XM pays SoundExchange. Thus, such revenues fall within the revenue exclusion for sound recordings “exempt from any license requirement.” 73 Fed. Reg. 4102; 37 C.F.R. § 382.11(3)(vi)(D); and

• Sirius XM Premier Packages. Sirius XM excludes incremental subscription fees for upgrades to its premier subscription package because the programming obtained when users upgrade includes all-talk or other non-music content that makes only “incidental” use of covered sound recordings. See 73 Fed. Reg. 4102; 37 C.F.R. § 382.11(3)(vi)(B).4

E. SoundExchange’s Complaint

On August 26, 2013, SoundExchange filed this Complaint purporting to seek relief under

Section 114(f)(1)(B) of the Copyright Act (and the corresponding CRB regulations) for Sirius

XM’s alleged underpayment pursuant to the terms of the statutory license. Specifically,

SoundExchange alleges that Sirius XM wrongly excluded from Gross Revenues monies

attributable Pre-1972 sound recordings (Count I), Sirius XM’s Premier offerings (Count II), and

Sirius XM’s Family Friendly and Mostly Music subscriptions (Count III). In addition,

SoundExchange alleges that Sirius XM failed to make certain late payments it purportedly owed

under 37 C.F.R. §§ 380.4(e), 382.13(d) & 384.4(e) (Count IV).

ARGUMENT

The Court Should Refer this Action to the CRB under the Doctrine of Primary Jurisdiction

SoundExchange’s Complaint should be dismissed (or held in abeyance) under the

doctrine of primary jurisdiction.

4 As noted below, the Complaint also asserts two claims based on Sirius XM’s exclusion of revenue associated with its Family Friendly and Mostly Music subscription packages, and alleges the failure to make certain late payments. These claims are small in size compared with the claims relating to the pre-1972 sound recordings and the Sirius XM premier packages. Nonetheless, to the extent that the doctrine of primary jurisdiction counsels this Court’s deference to the CRB on the principal issues in this case, it counsels deference on these less significant issues as well.


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A. The Doctrine of Primary Jurisdiction

The primary jurisdiction doctrine permits a court to “suspend” the judicial process

“pending referral” of issues to an administrative agency when the core questions before it

“require[] the resolution of issues which, under a regulatory scheme, have been placed within the

special competence of an administrative body.” Western Pacific, 352 U.S. at 64. Courts have

recognized that an administrative agency may be “best suited to make the initial decision on the

issues in dispute,” when Congress has entrusted an agency with special competence over the

matter. Allnet, 965 F.2d at 1120. Courts have held that the primary jurisdiction doctrine is

particularly applicable to “matters that should be dealt with in the first instance by those

especially familiar with the customs and practices of the industry and of the unique market-place

involved.” Ricci v. Chi. Mercantile Exch., 409 U.S. 289, 305 (1973). Applying the doctrine

“requires the court to enable a ‘referral’ to the agency staying further proceedings so as to give

the parties reasonable opportunity to seek an administrative ruling.” Reiter v. Cooper, 507 U.S.

258, 268 (1993).

Courts evaluating whether to refer a question to an agency under the primary jurisdiction

doctrine have typically considered “the advantages of allowing an agency to apply its expert

judgment . . . Expertise, of course, is not merely technical but extends to the policy judgments

needed to implement an agency’s mandate.” Allnet, 965 F.2d at 1120 (internal citation omitted);

see also United States v. Philip Morris USA, Inc., 686 F.3d 832, 837 (D.C. Cir. 2012)

(identifying the applicable factors). In addition, courts have considered the extent to which the

issue in question involves “a concern for uniform outcomes (which may be defeated if disparate

courts resolve regulatory issues inconsistently).” Allnet, 965 F.2d at 1120. In the end, as the

D.C. Circuit has concluded, “we have found the primary jurisdiction doctrine applicable when


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the precise question before the district court was one within the particular competence of an

agency.” Philip Morris, 686 F.3d at 837.

This case presents a prime candidate for referral to the CRB under the primary

jurisdiction doctrine. Most critically, the precise question involved here falls squarely within the

special competence of the CRB and the policy judgments Congress has entrusted the Board with

determining. The core questions here concern the proper interpretation and application of a

definition authored by the CRJs themselves—and one that reflects the Judges’ own effort to

apply the guiding Section 801(b) policy factors to a massive evidentiary record developed over

the course of a multi-week trial between the parties. See Allnet, 965 F.2d at 1120. The CRJs

should have the opportunity to interpret and clarify the meaning of their own regulation in the

first instance. See id. at 1123 (primary jurisdiction appropriate where question involves “the

Commission’s interpretation of its own regulations, on which it is owed great deference”).

Finally, courts have concluded that primary jurisdiction referral is especially appropriate where,

as here, the questions presented implicate the Copyright Act, an area where concerns for national

uniformity are paramount. See Syntek, 307 F.3d at 781.

B. The Questions Presented Require Resolution of Issues Committed to the CRJs’ Expertise and Policy Judgment

As the Supreme Court has emphasized, referral under the primary jurisdiction doctrine is

particularly appropriate where the action implicates “matters that should be dealt with in the first

instance by those especially familiar with the customs and practices of the industry and of the

unique market-place involved . . . . matters typically lying at the heart of an administrative

agency’s task.” Ricci, 409 U.S. at 305 (internal citations omitted). The precise issues presented

in this action fall squarely within the realm of issues Congress committed to the CRB for the


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CRB to apply its expertise and policy judgment to determine “reasonable rates and terms of

royalty payments.” 17 U.S.C. § 114(f).

Specifically, the Complaint raises technical questions, not about the interpretation of a

particular provision of the copyright law, but about the proper construction and application of the

CRJs’ own final determination setting the rates and terms of the 2007-2012 statutory license.

For example, Count I of the Complaint alleges that Sirius XM improperly excludes from “Gross

Revenues”—the baseline on which the royalty payment is calculated—revenues associated with

pre-1972 sound recordings. Because, as noted, sound recordings created before February 15,

1972 are not subject to the statutory license, Sirius XM excludes revenues associated with such

sound recordings under the provision of the final determination that permits revenue deductions

for programming “exempt from any license requirement.” 73 Fed. Reg. 4102; 37 C.F.R.

§ 382.11(definition of the term “Gross Revenues” in paragraph (3)(vi)(D)). SoundExchange

contends that the definition covering the 2007-2012 rate period did not permit Sirius XM’s

deduction. See Compl. ¶ 45. Accordingly, whether Sirius XM properly construed the CRJs’

final determination and appropriately computed its royalty obligation during the 2007-2012 rate

period by accounting for the exempt nature of performances of pre-1972 sound recordings are

questions that essentially ask what the CRJs meant when they defined the exclusion from the

term “Gross Revenues” that is at issue. The CRJs should have the opportunity to address that

question in the first instance; indeed, they are perhaps the only ones who could supply an

informed and authoritative response.5

5 When the issue of allowing a deduction from royalties for pre-72 recordings was placed squarely before them in the recent Satellite II proceeding, the CRJs did not hesitate in holding that “pre-1972 recordings are not licensed under the statutory royalty regime and should not factor into determining the statutory royalty obligation” and, at the urging of the parties, clarified the mechanism for reducing Sirius XM’s royalty payment on account of pre-72 performances.


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Similarly, Count II of the Complaint mounts a technical challenge to Sirius XM’s Gross

Revenues exclusion for programming that makes only “incidental” use of covered sound

recordings. As noted, the CRJs’ final determination excludes from Gross Revenues those

revenues associated with “channels, programming, products and/or other services offered for a

separate charge where such channels use only incidental performances of sound recordings.” 73

Fed. Reg. 4102; 37 C.F.R. § 382.11 (“Gross Revenues” paragraph (3)(vi)(B)). During the 2007-

2012 license period, Sirius XM excluded incremental revenues it earned when its subscribers

upgraded from its “Select” to its “Premier” Package because the incremental difference is

directly and solely attributable to additional offerings available in the Premier Package that are

exempt from the statutory license, i.e., that contain talk and other non-music programming that

makes only incidental, if any, use of covered sound recordings. SoundExchange challenges as

improper Sirius XM’s exclusion of the upcharge as within the meaning of the Gross Revenues

exclusion. See Compl. ¶¶ 52, 58. Again, this question goes directly to what the CRJs intended

when they drafted the Gross Revenues definition and the exclusion for non-music programming.

It is clear that these technical questions about the construction and application of the

CRJs’ Gross Revenues definition fall squarely within the expertise of the CRJs as the body

“especially familiar with the customs and practices of the industry and of the unique market-

place involved.” Ricci, 409 U.S. at 305. As the D.C. Circuit has explained in connection with

SoundExchange’s earlier appeal of the CRJs’ Satellite I determination, see n.3, supra, Congress

delegated to the CRJs “legislative discretion” to determine the reasonable royalty rates and terms

and to use their expertise and policy judgment in balancing the specified statutory factors:

Copyright Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78 Fed. Reg. 23054, 23073 (Apr. 17, 2013) (governing the 2013-2017 rate period).


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First, the agency is required to estimate the effect of the royalty rate on the future of the music industry, which requires a forecast of the direction in which the future public interest lies based on the expert knowledge of the agency. Second, the agency has legislative discretion in determining copyright policy in order to achieve an equitable division of music industry profits between the copyright owners and users. Finally, the statutory factors pull in opposite directions, and reconciliation of these objectives is committed to the agency as part of its mandate to determine reasonable royalty rates.

SoundExchange, 571 F.3d at 1223–24 (internal citations, quotation marks and alterations

omitted). The CRJs’ final determination and the proper interpretation of that determination

necessarily both engage the CRJs’ expertise and weighing of policy factors; such “expertise, of

course, is not merely technical but extends to the policy judgments needed to implement an

agency’s mandate.” Allnet, 965 F.2d at 1120. How the terms should be constructed so as to

exclude revenue earned on account of exempt pre-72 recordings and non-music programming is

precisely such a “policy judgment.” Because Congress has delegated the questions at issue here

to the CRB, giving the CRB the opportunity to decide them in the first instance is not only more

efficient, but true to Congress’s design.

That Congress expressly committed questions as to the detailed implementation of the

statutory license to the CRB is confirmed by the legislative history to the Copyright Royalty and

Distribution Reform Act of 2004. That Act replaced the prior “CARP” regime—a panel of lay

arbitrators convened on an ad hoc basis—with the CRB, a full-time board of expert judges

appointed for a specified term of years to gain and exploit their experience and exposure to the

regulated industries. Critics of the prior system, Congress observed, argued that the arbitrators’

decisions were “unpredictable and inconsistent” and that the “[a]rbitrators lack[ed] appropriate

expertise to render decisions.” H.R. Rep. No. 108-408, at 18 (2004); see also id. at 25

(“[A]rbitrators selected under the current CARP system do not have the training, education, or

experience in [the] relevant subject matter.”). By comparison, the CRB—composed of experts


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trained in the relevant fields—was designed to address the “concern that the evidence presented

in the determination of a rate necessitates a significant mastery of economics and marketplace

factors as well as considerable knowledge of copyright law.” Id. Congress designed the CRB to

ensure that it had the relevant expertise to properly address the rate-setting issues committed to

it.

Finally, this action presents circumstances analogous to other cases where courts have

referred questions to agencies on primary jurisdiction grounds. In Allnet, for example, the D.C.

Circuit referred a question of tariff application and construction to the FCC, the agency

responsible for its implementation and regulation. See Allnet, 965 F.2d at 1120 (“[I]t is hardly

surprising that courts have frequently invoked primary jurisdiction in cases involving tariff

interpretations—an issue closely related to the central issues here, compliance of a tariff with

regulatory standards and the consequences of imperfect compliance.”); see also Syntek, 307 F.3d

at 781(referring a question to the Register of Copyrights where the “resolution of the question at

hand requires an analysis of whether the agency acted in conformance with its own regulations”).

In sum, because “this case requires the resolution of an issue within the jurisdiction of an

administrative body exercising statutory and comprehensive regulatory authority over a national

activity that requires expertise and uniformity in administration,” Syntek, 307 F.3d at 782,6 the

court should refer the matter to the CRJs under the primary jurisdiction doctrine.

6 “Congressional intent to have national uniformity in copyright laws is clear.” Syntek, 307 F.3d at 781 (citing Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 231 n.7 (1964) and 17 U.S.C. § 301 and referring the case under primary jurisdiction); see also Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 740 (1989) (Congress enacted the Copyright Act with the “express objective of creating national, uniform copyright law.”). For just this reason, section 301 of the Copyright Act generally provides for the preemption of federal copyright law over state law. The need for national uniformity is no less acute with respect to the interpretations of the CRJs’ regulations, as inconsistent constructions of the CRJs’ regulations by district courts across the country could destabilize the regulated entities and industries. Referral to the CRJs to


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C. The Court Should Refer the Action to the CRB and Dismiss Without Prejudice

A court referring a case to an agency under primary jurisdiction grounds either stays the

proceedings or dismisses the action without prejudice. See Reiter, 507 U.S. at 268. “Normally,

if the court concludes that the dispute which forms the basis of the action is within the agency’s

primary jurisdiction, the case should be dismissed without prejudice so that the parties may

pursue their administrative remedies.” Syntek, 307 F.3d at 782. Only if the parties will be

prejudiced by a dismissal do courts stay or otherwise hold the lawsuit in abeyance pending the

resolution of the agency proceedings. Id.; see also Allnet, 965 F.2d at 1123 (“We can discern no

present prejudice to either party from dismissal.”). SoundExchange cannot show any prejudice

from a dismissal here.

Finally, as to the mechanics of the referral, a “referral” of the matter to the agency does

not involve a formal “transfer” of the action the CRB. Rather, the court dismisses without

prejudice or stays the action and the parties must initiate appropriate proceedings before the

agency. See Syntek, 307 F.3d at 782 n.3; see also Reiter, 507 U.S. at 269 n.3 (stating that the

proper procedure is for the district court to stay or dismiss “to give the plaintiff a reasonable

opportunity within which to apply to [the relevant agency] for a ruling”). Here, SoundExchange

would initiate proper proceedings before the agency, utilizing the CRJs’ “continuing

jurisdiction” to amend the determination to make technical corrections and resolve unforeseen

questions concerning their final determination. See 17 U.S.C. § 803(c)(4).7

determine in the first instance the proper construction and application of their own regulations would further the Congressional intent to maintain uniform national copyright laws.

7 Sirius XM hereby preserves, and does not by this motion waive, all additional and affirmative defenses it has available to it, including but not limited to laches and the statute of limitations.


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CONCLUSION

For the foregoing reasons, this Court should dismiss the Complaint without prejudice or

stay the action under the doctrine of primary jurisdiction.

Dated: October 16, 2013 Respectfully submitted,

/s/ Peter D. Isakoff Peter D. Isakoff (D.C. Bar No. 358419) WEIL, GOTSHAL & MANGES LLP 1300 Eye Street, NW Suite 900 Washington, D.C., 20005 Telephone: (202) 682-7000 Facsimile: (202) 857-0940 [email protected] R. Bruce Rich (pro hac vice) Todd Larson (pro hac vice) Adam Banks (pro hac vice pending) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 [email protected] [email protected] [email protected]



US_ACTIVE:\44348321\2\76061.0013

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA ) ) SOUNDEXCHANGE, INC. , ) ) Case No. 1:13 cv 1290 (RJL) ) Plaintiff , ) v. ) ) SIRIUS XM RADIO INC., ) ) ) Defendant. ) )

DEFENDANT SIRIUS XM RADIO INC.’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT

Defendant Sirius XM Radio Inc. (“Sirius XM”) moves, pursuant to Federal Rule of Civil

Procedure 12(b)(6), that this Court issue an order dismissing the Complaint of Plaintiff

SoundExchange, Inc. or, in the alternative, staying the action. The grounds for this motion are

set forth in the accompanying Memorandum of Law.

REQUEST FOR ORAL HEARING

Pursuant to Rule 7(f) of the Rules of the United States District Court for the District of

Columbia, Defendant Sirius XM respectfully requests an oral hearing.


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Dated: October 16, 2013 Respectfully submitted,

/s/ Peter D. Isakoff Peter D. Isakoff (D.C. Bar No. 358419) WEIL, GOTSHAL & MANGES LLP 1300 Eye Street, NW Suite 900 Washington, D.C., 20005 Telephone: (202) 682-7000 Facsimile: (202) 857-0940 [email protected] R. Bruce Rich (pro hac vice) Todd Larson (pro hac vice) Adam Banks (pro hac vice pending) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 [email protected] [email protected] [email protected]



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I hereby certify that on this 16th day of October, 2013, I caused a true and correct copy of the foregoing Motion to Dismiss Plaintiff’s Complaint to be filed and served using the CM/ECF system, which shall send notice to all counsel of record.

/s/ Peter Isakoff Peter Isakoff



SOUNDEXCHANGE, INC. Plaintiff, v. Civil Action No. 1:13-cv-1290 (RJL) SIRIUS XM RADIO INC. Defendant.

PLAINTIFF SOUNDEXCHANGE’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT SIRIUS XM’S MOTION TO DISMISS

Michael B. DeSanctis (D.C. Bar #: 460961) Joshua M. Segal (D.C. Bar #: 975949) Ishan K. Bhabha (D.C. Bar #: 1015673) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, D.C. 20001 (202) 639-6000 Counsel for SoundExchange, Inc.


i

TABLE OF CONTENTS

INTRODUCTION......................................................................................................................... 1

BACKGROUND ........................................................................................................................... 2

A. The Statutory Framework for the Licensing of Digital Performance Rights ............... 2

B. The CRB’s Regulations Governing Sirius XM’s Statutory License .............................. 3

C. SoundExchange’s Lawsuit Against Sirius XM ................................................................ 4

1. Exclusion of Revenues Supposedly Attributable to Pre-1972 Sound Recordings .... 4

2. Exclusion of Revenues Associated With Sirius XM Premier Subscriptions ............. 5

ARGUMENT ................................................................................................................................. 7

I. THE DOCTRINE OF PRIMARY JURISDICTION DOES NOT APPLY WHERE GOVERNING REGULATIONS ARE UNAMBIGUOUS AND ALREADY HAVE BEEN INTERPRETED AND APPLIED BY THE AGENCY THAT ISSUED THEM .... 8

II. NONE OF THE TRADITIONAL GROUNDS FOR INVOKING THE DOCTRINE OF

PRIMARY JURISDICTION EXISTS HERE ..................................................................... 11

A. This Case Does Not Involve a Question of Policy or The Application Of Agency

Expertise, But Rather The Interpretation Of Existing Regulations ............................ 12

B. A Decision By This Court Poses No Risk To Uniform Application Of The Law ....... 14

C. It Is Not Clear That The CRB Is Authorized To Hear SoundExchange’s Claims Or Grant The Relief Requested ........................................................................................... 16

CONCLUSION ........................................................................................................................... 18


ii


Page(s) CASES

Allied Air Freight, Inc. v. Pan Am. World Airways, Inc., 393 F.2d 441 (2d Cir. 1968)...............................................................................................12, 16

Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier Ass’n, 965 F.2d 1118 (D.C. Cir. 1992) ...............................................................................................11

American Ass’n. of Cruise Passengers v. Cunard Cruise Line, Ltd., 31 F.3d 1184 (D.C. Cir. 1994) .................................................................................................17

Atchiston, T. & S. F. Rwy. Co. v. Wichita Bd. of Trade, 412 U.S. 800 (1973) .................................................................................................................12

Carnation Co. v. Pac. Westbound Conference, 383 U.S. 213 (1966) .................................................................................................................14

Charvat v. EchoStar Satellite, LLC, 630 F.3d 459 (6th Cir. 2010) ...................................................................................................15

Ciralsky v. CIA, 355 F.3d 661 (D.C. Cir. 2004) .................................................................................................17

Civil Aeronautics Board v. Modern Air Transp., Inc., 179 F.2d 622 (2d Cir. 1950).....................................................................................................12

Dimondstein v. Am. Postal Workers Union, Civ. A. No. 13-1228, – F. Supp. 2d. – , 2013 WL 4578306 (D.D.C. Aug. 29, 2013) .............13

Dreisbach v. Murphy, 658 F.2d 720 (9th Cir. 1981) ...................................................................................................13

Ellis v. Tribune Television Co., 443 F.3d 71 (2d Cir. 2006).......................................................................................................12

Etheridge v. FedChoice Fed. Credit Union, 789 F. Supp. 2d 27 (D.D.C. 2011) ...........................................................................................13

Far East Conference v. United States, 342 U.S. 570 ............................................................................................................................15

Farley Transp. Co., v. Santa Fe Trail Transp. Co., 778 F.2d 1365 (9th Cir. 1985) ...................................................................................................8

Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346 (D.C. Cir. 2003) ...................................................................................................7


iii

Israel v. Baxter Laboratories., Inc., 466 F.2d 272 (D.C. Cir. 1972) .................................................................................................11

Kappelmann v. Delta Air Lines, Inc., 539 F.2d 165 (D.C. Cir. 1976) ...........................................................................................11, 12

Lee v. Hartford Life & Acc. Ins. Co., 928 F. Supp. 2d 51 (D.D.C. 2013) ...........................................................................................13

Litton Sys. Inc. v. Sw. Bell Tel. Co., 539 F.2d 418 (5th Cir. 1976) ...................................................................................................14

Local Union No. 189, v. Jewel Tea Co., 381 U.S. 676 (1965) .................................................................................................................16

MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 496 F.2d 214 (3d Cir. 1974).....................................................................................................11

Montana-Dakota Utils Co. v. Nw. Pub. Serv. Co., 341 U.S. 246 (1951) .................................................................................................................16

Nader v. Allegheny Airlines, Inc., 426 U.S. 290 (1976) .................................................................................................................12

Ryan v. Chemlawn Corp., 935 F.2d 129 (7th Cir. 1991) ...................................................................................................16

United States v. Elrod, 627 F.2d 813 (7th Cir. 1980) ...................................................................................................16

*United States v. Phillip Morris USA Inc., 686 F.3d 832 (D.C. Cir. 2012) .............................................................................................8, 14

*United States v. W. Pac. R.R. Co., 352 U.S. 59 (1956) ...............................................................................................................8, 11

Vahey v. Gen. Motors Corp., Civ. A. No. 11-661 ...................................................................................................................13

Wagner & Brown v. ANR Pipeline Co., 837 F.2d 199 (5th Cir. 1988) ...................................................................................................15

Williamson v. Cox, No. Civ. A. 12-0712, – F. Supp. 2d – , 2013 WL 3388609 (D.D.C. July 9, 2013) ................13 STATUTES

17 U.S.C. § 106(6) ...........................................................................................................................2


iv

17 U.S.C. § 112 ................................................................................................................................2

17 U.S.C. § 114(d)(2) ......................................................................................................................2

17 U.S.C. § 114(f)(1)(A)..................................................................................................................2

17 U.S.C. § 114(g)(2)(A)-(D) ..........................................................................................................3

17 U.S.C. § 114(j)(10) ...................................................................................................................15

17 U.S.C. § 301(c) ...........................................................................................................................4

17 U.S.C. § 803(c)(4) .....................................................................................................................17

OTHER AUTHORITIES

37 C.F.R. § 382.11 .....................................................................................................................3, 13

*37 C.F.R. § 382.11(1) ....................................................................................................................8

*37 C.F.R. § 382.11(vi)(B) ....................................................................................................6, 9, 10

*37 C.F.R. § 382.11(vi)(D) ..............................................................................................................9

*Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080, 4099 (Jan. 24, 2008) (“2007-2012 CRB Decision”) .................................................................................................................3, 4, 6

*Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78 Fed. Reg. 23,054, 23,096 (Apr. 17, 2013) (“2013-2017 CRB Decision”) ............................................................................................3, 5, 6, 10, 15


1

INTRODUCTION

The doctrine of primary jurisdiction could not be less relevant here, and has no

application to the claims at issue. Accordingly, Sirius XM’s motion to dismiss should be denied

out of hand.

Between 2007 and 2012, Sirius XM underpaid SoundExchange by tens of millions of

dollars in license fees that it owed pursuant to regulations promulgated by the Copyright Royalty

Judges (“CRJs”) that make up the federal Copyright Royalty Board (“CRB”).1 Those

regulations required Sirius XM to pay SoundExchange a royalty for Sirius XM’s use of the

copyrighted music that is the lifeblood of its subscription satellite radio service. The royalty, in

turn, was expressed in the regulations as a set percentage of Sirius XM’s “Gross Revenues” as

that term was defined. The thrust of SoundExchange’s case is that Sirius XM was – until the

regulations were changed earlier this year – systematically excluding from its Gross Revenues

certain sources of revenue that the regulations did not permit Sirius XM to exclude.

Thus, this case – like so many others – requires this Court to apply certain regulations

and determine whether a regulated entity acted in compliance with, or in violation of, those

regulations. It is what courts do every day, particularly in this District. Contrary to the

suggestion in Sirius XM's motion to dismiss, this case does not require the Court to engage in

any sort of policymaking determination that should be made by the agency in the first instance.

In fact, this would be the third instance, as the CRB already has twice performed the

policymaking function itself on the very question before this Court: once when it issued the

regulations in 2007, and again earlier this year when it ruled – with the same two parties before it

1 Sirius XM was formed by the merger of Sirius Satellite Radio and XM Satellite Radio. This opposition refers to Sirius XM and these predecessor entities as “Sirius XM.”


2

– that its regulations unambiguously prohibited Sirius XM from taking the very same revenue

carveouts at issue here.

The only reason, it seems, that Sirius XM wants the issue raised with the CRB yet again,

is to get a third bite at the apple in the hope that the CRB will reverse itself and issue a new

retroactive rule. It is not at all clear, however, that the CRB is even authorized to engage in such

an inquiry. As such, this most certainly is not a situation in which a federal court should forgo

its “unflagging obligation” to exercise the jurisdiction given it. Sirius XM’s motion to dismiss

should be denied.

BACKGROUND

A. The Statutory Framework for the Licensing of Digital Performance Rights Section 106 of the Copyright Act grants the owner of a copyright in a sound recording the

exclusive right to perform the recording “publicly by means of a digital audio transmission.” 17

U.S.C. § 106(6). As a counterbalance to this right, however, Congress also granted various

entities – including any satellite digital audio radio service (SDARS), of which Sirius XM is the

nation’s only one – a compulsory “statutory license” to perform these recordings digitally. 17

U.S.C. §§ 112, 114(d)(2). As a statutory licensee, Sirius XM is able to publicly perform all

covered recordings (by transmitting them to millions of paying subscribers and generating

billions of dollars of revenues annually) without fear of copyright infringement.

The federal statutory license, however, is not free. Rather, in the event that copyright

owners and Sirius XM are unable to agree on the license’s royalty rates and terms, the Copyright

Act requires the federal CRB to “determine reasonable rates and terms of royalty payments” for

the statutory license. 17 U.S.C. § 114(f)(1)(A). The Copyright Act provides that the CRB-set

rates “shall . . . be binding on all copyright owners of sound recordings and entities performing


3

sound recordings,” such as Sirius XM. Id. § 114(f)(1)(B). The Act does not, however, confer

any enforcement authority upon the CRB.

B. The CRB’s Regulations Governing Sirius XM’s Statutory License

On January 24, 2008, the CRB promulgated regulations setting the license fees that any

satellite radio service would pay from 2007 to 2012. See Determination of Rates and Terms for


4099 (Jan. 24, 2008) (“2007-2012 CRB Decision”). Those regulations stated that all royalty

payments are to be made to SoundExchange, a nonprofit organization designated to collect

statutory license royalties and distribute those royalties as required by statute to the appropriate

recording artists and record companies. 17 U.S.C. § 114(g)(2)(A)-(D).

Under the CRB’s regulations, Sirius XM’s royalty fee was calculated as a percentage of

its “Gross Revenues,” with the specific percentage increasing from 6% in 2007 to 8% in 2012.

See 2007-2012 CRB Decision, 73 Fed. Reg. at 4098 (promulgating 37 C.F.R. § 382.11); see also

Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital

Audio Radio Services, 78 Fed. Reg. 23,054, 23,096 (Apr. 17, 2013) (2013-2017 CRB Decision).

The regulations – which essentially adopted Sirius XM's proposal to the CRB – defined Gross

Revenues as follows:

(1) Gross Revenues shall mean revenue recognized by the Licensee in accordance with GAAP from the operation of an SDARS, and shall be comprised of the following:

(i) Subscription revenue recognized by Licensee directly from [residential] U.S. subscribers for Licensee’s SDARS; and (ii) Licensee’s advertising revenues, or other monies received from sponsors, if any, attributable to advertising on channels other than those that use only incidental performances of sound recordings . . .

37 C.F.R. § 382.11 (definition of Gross Revenues).


4

The regulations then provide for a number of exclusions from Gross Revenues.

Among other things, they state that Gross Revenues shall exclude the following:

(vi) Revenues recognized by Licensee for the provision of . . .



2007-2012 CRB Decision, 73 Fed. Reg. at 4102 (emphasis added).

C. SoundExchange’s Lawsuit Against Sirius XM

As alleged in the complaint, Sirius XM has violated the CRB’s license fee regulations by

unlawfully excluding two broad categories of revenues, resulting in underpayments to

SoundExchange totaling up to one hundred million dollars.2

1. Exclusion of Revenues Supposedly Attributable to Pre-1972 Sound Recordings

One category of unlawful revenue exclusions alleged in the complaint relates to Sirius

XM’s performance of sound recordings made prior to February 15, 1972. The federal digital

performance right conferred by the Copyright Act applies only to sound recordings made on or

after February 15, 1972. 17 U.S.C. § 301(c). Sirius XM, however, plays a substantial volume of

sound recordings made before that date – so-called “pre-1972 recordings” that it claims are not

2 Besides the exclusions that are the focus of Sirius XM’s motion to dismiss, the lawsuit also alleges that Sirius XM (a) has unlawfully excluded revenues associated with its Mostly Music and Family Friendly packages (Count 3); and (b) has failed to pay late fees associated with untimely payments and submissions of “statements of account” (Count 4).


5

subject to any license requirement. See Compl. ¶¶ 25, 47. Significantly, Sirius XM did not

specifically recognize any revenue for the performance of pre-1972 recordings. Nevertheless,

Sirius XM took it upon itself to exclude from its calculation of Gross Revenues under 37 C.F.R.

§ 382.11(vi)(D) an amount of money supposedly attributable to the performance of pre-1972

recordings. Compl. ¶ 23; see MTD 8-9 (essentially admitting this conduct); 2013-2017 CRB

Decision, 78 Fed. Reg. at 23,080 (observing that Sirius XM had reduced its reported Gross

Revenues by between 10% and 15% on the theory that it corresponded to performances of pre-

1972 recordings). That revenue exclusion was wholly unauthorized by the regulations in place

for the 2007-2012 period. Compl. ¶ 24. As the CRB recently explained with respect to Sirius

XM, “there is no revenue recognition for the performance of pre-1972 works” and thus Sirius

XM’s decision to exclude a certain amount of its revenue under 37 C.F.R. § 382.11(vi)(B) that it

unilaterally deemed attributable to such works was “not the proper means for addressing pre-

1972 recordings.” 2013-2017 CRB Decision, Fed. Reg. at 23,073.

2. Exclusion of Revenues Associated With Sirius XM Premier Subscriptions A second category of unlawful revenue exclusions alleged in the complaint relates to fees

that Sirius XM receives for its premium subscription package. Sirius XM offers subscribers a

number of different packages to choose from. Some are fairly specialized and contain only

music channels, or only talk, or only sports. “Sirius XM Select,” however, is Sirius XM’s basic

satellite radio package. It is a bundled package of over 140 music, talk and sports channels,

many of which make frequent use of copyrighted sound recordings. Compl. ¶ 27. In addition,

Sirius XM offers a premium subscription option – called “Sirius XM Premier” – as a higher-


6

priced alternative to its basic package. Compl. ¶ 28.3 Like the basic Select package, the Premier

package is a bundled package that contains a broad mix of music and non-music channels. Id.

Today, Sirius XM offers its bundled Select package for $14.99 per month, and its bundled

Premier package for $17.99 per month. Id.

As the complaint explains, Sirius XM has unlawfully excluded from Gross Revenues the

incremental amount that it receives when a subscriber chooses its Premier package rather than its

Select package. Compl. ¶ 31. The CRB’s regulations provide that channels that “use only

incidental performances of sound recordings” may give rise to a revenue exclusion, but only

where they are “offered for a separate charge.” 37 C.F.R. § 382.11(vi)(B); see 2007-2012 CRB

Decision, 73 Fed. Reg. at 4,087 (describing Gross Revenues definition as excluding revenues for

premium non-music channels “that are offered for a charge separate from the general

subscription charge for the service”). And, here again, the CRB recently confirmed, with this

precise practice of Sirius XM’s before it, that “the exclusion is available only to the extent that

the channels, programming, products and/or other services are offered for a separate charge.”

2013-2017 CRB Decision, 78 Fed. Reg. at 23,072 n.45 (emphasis added). The non-music

channels offered as part of Sirius XM’s Premier package are not “offered for a separate charge.”

Rather, they are part of a larger bundled package that contains both music and non-music

programming and is offered for a single price. Compl. ¶¶ 29, 31-32.

3 As the complaint alleges, Sirius XM – which is the product of a merger between Sirius and XM – continues to offer separately branded Sirius Premier and XM Premier packages, as well as a co-branded Sirius XM Premier package. The complaint alleges, on information and belief, that Sirius XM has erroneously excluded incremental subscription revenue from all three packages in the same manner. See Compl. ¶ 4 n.1. For simplicity, this opposition to Sirius XM’s motion uses “Sirius XM Premier” or “Premier” to refer to all three packages.


7

ARGUMENT

Relying on the doctrine of primary jurisdiction, Sirius XM asks this Court to dismiss (or

stay) SoundExchange’s suit so that the CRB may weigh in on whether Sirius XM violated the

applicable CRB regulations when it excluded from its “Gross Revenues” the two types of

revenue discussed above for purposes of calculating the royalty payable to SoundExchange. The

United States Court of Appeals for the District of Columbia Circuit has emphasized that the

doctrine of primary jurisdiction is a narrow exception to “the virtually unflagging obligation of

the federal courts to exercise the jurisdiction given them.” Handy v. Shaw, Bransford, Veilleux

& Roth, 325 F.3d 346, 351 (D.C. Cir. 2003) (quoting Colorado River Water Conservation Dist.

v. United States, 424 U.S. 800, 817 (1976)). And, as we show below, nothing about this case

warrants the invocation of that narrow doctrine here.

Specifically, (i) the applicable regulations are clear and unambiguous; (ii) those

regulations already have been interpreted and applied by the CRB to the precise facts alleged

here and between the identical parties; (iii) SoundExchange’s claims do not call upon this Court

to make policy but rather to simply enforce regulations that embody the policy judgment already

made by the appropriate agency; (iv) there is no risk of non-uniform outcomes where, as here,

the case is solely for damages against literally the only entity to which the regulations apply; and

(v) it is unlikely that the CRB even has jurisdiction to hear SoundExchange’s claims and award

the monetary relief it seeks. For all of these reasons, Sirius XM’s motion should be denied.4

4 With respect to SoundExchange’s third and fourth claims – relating to unpaid late fees and improper exclusion of revenues from Family Friendly and Mostly Music subscriptions – Sirius XM makes no argument that those claims independently make the doctrine of primary jurisdiction appropriate. Rather, in a footnote, Sirius XM asserts that these two claims should be referred to the CRB only “to the extent that the doctrine of primary jurisdiction counsels this Court’s deference to the CRB on the pre-1972 and SiriusXM Premier underpayment claims.” MTD 9 n.4.


8

I. THE DOCTRINE OF PRIMARY JURISDICTION DOES NOT APPLY WHERE GOVERNING REGULATIONS ARE UNAMBIGUOUS AND ALREADY HAVE BEEN INTERPRETED AND APPLIED BY THE AGENCY THAT ISSUED THEM.

Although “[n]o fixed formula exists for applying the doctrine of primary jurisdiction,”

United States v. W. Pac. R.R. Co., 352 U.S. 59, 64 (1956), it has no application in the vast

majority of cases that fall “within the conventional competence of courts.” United States v.

Phillip Morris USA Inc., 686 F.3d 832, 838 (D.C. Cir. 2012) (quotation marks omitted). Thus,

courts have declined to refer matters to agencies where a case calls for the application of

regulations that are unambiguous. See Farley Transp. Co., v. Santa Fe Trail Transp. Co., 778

F.2d 1365, 1370-71 (9th Cir. 1985). Similarly, it has long been recognized that referral to an

agency on primary jurisdiction grounds is improper where the relevant agency has already

addressed the question at issue or otherwise clarified how its regulations should be applied in a

given context. See W. Pac. R.R., 352 U.S. at 69 (“Certainly there would be no need to refer [a]

matter of construction to the [agency] if that body, in prior releases or opinions, has already

construed the particular tariff at issue or has clarified the factors underlying it.”).

Here, despite Sirius XM’s attempts to cast the governing regulations as ambiguous, see

MTD at 11, they are not. In fact, they are rather straightforward. As is common, the CRB

structured the royalty that Sirius XM would owe to SoundExchange as a percentage of Sirius

XM’s revenue. Thus, the royalty is expressed as a rate times a revenue base. If either the rate or

the base is increased, the royalty goes up. If either is decreased, the royalty goes down. The rate

was defined as 8%, rising each year from a starting point of 6%. In turn, the revenue base was

defined as essentially all subscription and advertising revenue for the satellite radio service, 37

C.F.R. § 382.11(1), minus certain enumerated exclusions. Two of those exclusions are relevant

here. One was for “revenues recognized for the performance of” music not subject to any license


9

requirement (e.g., those in the public domain). 37 C.F.R. § 382.11(vi)(B) (emphasis added).

The other was for “revenues recognized for the performance of” non-music channels and

programming “offered for a separate charge.” 37 C.F.R. § 382.11(vi)(D).

Here, SoundExchange claims that Sirius XM underpaid the royalties it owed by

excluding revenue in two ways that violated the regulations. First, Sirius XM excluded revenue

that it claimed was somehow attributable to music that was not subject to any license (here,

music recorded prior to 1972 according to Sirius XM), even though it recognized no revenue for

those recordings as the regulations require. See Compl. at ¶¶ 42-47. Second, it excluded certain

revenues that it claimed were attributable to non-music channels offered as part of the Premier

Package, even though the non-music channels were not “offered for a separate charge” but were

bundled with the music channels and offered for one bundled price. See Compl. at ¶¶ 48-53.

Certainly, there is nothing ambiguous about the regulations or how they apply to Sirius XM’s

conduct.

Moreover, to the extent Sirius XM wishes to manufacture ambiguity where none exists

and claim that the CRB must resolve that ambiguity in the first instance, the CRB already has

done so. Just last year, Sirius XM and SoundExchange were before the CRB in a proceeding to

determine the royalty rate for 2013-2017. During that proceeding, these precise issues were put

squarely before the CRJs and the CRJs reemphasized that the regulations mean what they say –

rejecting the “ambiguity” that Sirius XM now seeks to concoct.

With respect to Sirius XM having excluded revenue during the 2007-2012 period as

allegedly attributable to pre-1972 recordings, the CRJs explained:

Sirius XM broadcasts pre-1972 recordings on its SDARS service and, in the present license period, excludes a portion of revenues from its Gross Revenues calculation for such use. The current Gross Revenues definition does not expressly recognize such an


10

exclusion, which is not surprising given that there is no revenue recognition for the performance of pre-1972 works.

78 Fed. Reg. at 23,073 (emphasis added). They further explained that a “revenue exclusion is

not the proper means for addressing pre-1972 recordings.” Id. “To be allowable, a deduction

for pre-1972 recordings must be precise and the methodology transparent,” which an exclusion

from revenue was decidedly not.

In turn, the CRJs adopted a new mechanism for Sirius XM to account for its use of pre-

1972 recordings prospectively in the 2013-2017 rate period. Id. In doing so, however, the CRJs

had no difficulty making it crystal clear that no such mechanism was available under the 2007-

2012 regulations (which are at issue here), and that the exclusion from revenue that Sirius XM

was unilaterally taking during 2007-2012 period was not permitted under the governing

regulations.

Similarly, the question of Sirius XM’s having excluded revenue allegedly attributable to

the non-music channels in their Premier Package was squarely put before the CRJs in the most

recent ratemaking proceeding. There, SoundExchange argued that the exclusion from revenue

violated the regulations because, among other things, the non-music channels were not “offered

for a separate charge” as the regulations required. See 37 C.F.R. § 382.11(vi)(B). By contrast,

Sirius XM seemed to believe that the exclusion from revenue was permissible because they

estimated what customers would be paying for the non-music channels in the Premier Package as

if they had been offered for a separate charge. Here again, the CRJs had no difficulty clarifying


and/or other services are offered for a separate charge.” 2013-2017 CRB Decision, 78 Fed.

Reg. at 23,072 n.45 (emphasis added).


11

In 2008, the CRJs adopted clear and unambiguous regulations that govern this case.

Earlier this year, they issued a subsequent decision interpreting and applying those regulations to

the precise questions at issue here. There is no conceivable argument for why these issues

should be sent back to the CRJs for a third time. That is not what the doctrine of primary

jurisdiction is for, and to invoke it here would be decidedly improper. See W. Pac. R.R., 352

U.S. at 69 (“Certainly there would be no need to refer [a] matter of construction to the [agency]

if that body, in prior releases or opinions, has already construed the particular tariff at issue or

has clarified the factors underlying it.”).

II. NONE OF THE TRADITIONAL GROUNDS FOR INVOKING THE DOCTRINE OF PRIMARY JURISDICTION EXISTS HERE.

Dismissing a case on primary jurisdiction grounds can be appropriate under two very

narrow circumstances: where an issue requires “the expert and specialized knowledge of the

agencies,” or where there is a need for “uniformity [of outcomes] which would obtain if initially

a specialized agency passed on certain types of administrative questions,” Kappelmann v. Delta

Air Lines, Inc., 539 F.2d 165, 169 (D.C. Cir. 1976); see Allnet Commc’n Serv., Inc. v. Nat’l Exch.

Carrier Ass’n, 965 F.2d 1118, 1120 (D.C. Cir. 1992) (“[P]rimary jurisdiction . . . rests both on a

concern for uniform outcomes . . . and on the advantages of allowing an agency to apply its

expert judgment.”); MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 496 F.2d 214, 222 (3d Cir.

1974) (explaining that referral under the doctrine of primary jurisdiction is appropriate where a

case requires “the comparative evaluation of complex technical, economic, and policy factors, as

well as consideration of the public interest”). Thus, the D.C. Circuit has referred cases to

agencies when the issue presented was purely a policy question, such as whether a new drug was

“safe and effective for interstate sale,” Israel v. Baxter Laboratories., Inc., 466 F.2d 272, 280

(D.C. Cir. 1972), or when a case would require a court to determine “how much radioactivity is


12

‘significant,’ ... and what constitutes ‘adequate warning’ [of the presence of radioactivity],”

Kappelmann, 539 F.2d at 171 (footnote omitted).5 By contrast, the doctrine has no application

where the issue “regardless of its complexity, is not the reasonableness of the rate or rule, but a

violation of such rate or rule,” Civil Aeronautics Board v. Modern Air Transp., Inc., 179 F.2d

622, 624 (2d Cir. 1950). Similarly, where uniformity of outcomes is not a concern – such as

when a suit addresses only past conduct under regulations that are no longer in effect – courts

decline to refer cases to agencies and instead exercise their own jurisdiction. See Allied Air

Freight, Inc. v. Pan Am. World Airways, Inc., 393 F.2d 441, 448 (2d Cir. 1968) (declining to

invoke primary jurisdiction where the district court’s order “would not have prospective

applicability” because “[t]he allegations of the complaint relate to actions that have been

completed”).

A. This Case Does Not Involve a Question of Policy or The Application Of Agency Expertise, But Rather The Interpretation Of Existing Regulations.

In its motion to dismiss, Sirius XM tries repeatedly to suggest that this case calls upon the

Court to make a policy decision regarding whether and how pre-1972 recordings should be

accounted for under federal law and when revenue for non-music programming should be

excludable from the applicable rate base. Neither of those policy issues is before this Court.

5 See, e.g., Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 305 (1976); (doctrine might apply where case’s resolution “could be facilitated by an informed evaluation of the economics or technology of the regulated industry”); Atchiston, T. & S. F. Rwy. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 824-25 (1973) (reasoning that “public interest is not a simple fact, easily determined by courts,” and thus ruling that referral under the doctrine of primary jurisdiction was appropriate); Ellis v. Tribune Television Co., 443 F.3d 71, 84 (2d Cir. 2006) (“The Commission’s weighing of the ‘public interest’ in considering a waiver request is thus similar to the type of ‘public interest’ or ‘reasonableness’ determinations that the Supreme Court has emphasized require administrative – rather than judicial – review under the primary jurisdiction doctrine.”).


13

Rather, as the discussion in Part I above makes plain, the CRB already has addressed and

resolved those policy questions – twice.

Indeed, the issues in this case lie squarely within the core competency of this and any

other federal Court. SoundExchange’s complaint alleges that Sirius XM has violated the CRB’s

regulations by underpaying royalties. See, e.g., Compl. ¶¶ 46, 52. By way of defense, Sirius

XM offers one particular interpretation of the CRB’s regulations. See, e.g., MTD 8 (asserting

that Sirius XM excluded certain revenues “pursuant to its understanding of the CRB’s ruling”);

37 C.F.R. § 382.11 (definition of Gross Revenues). As Sirius XM itself acknowledges, this case

presents a dispute over the “proper construction and application of the CRJs’ own final

determination” – i.e., the governing CRB regulations. MTD 12. A dispute over whether a

regulated party has erroneously construed an agency’s regulation, and thus has violated that

regulation, falls squarely within the core competency of a court. See, Dreisbach v. Murphy, 658

F.2d 720, 725 (9th Cir. 1981) (“Either the language of the approved . . . Agreements authorizes

the Carriers to agree to use one devanner or it does not.”). Indeed, courts routinely interpret

agency regulations – in situations that include disputes between two private parties – without

ever suggesting the matter lies outside the realm of judicial expertise. See, e.g., Vahey v. Gen.

Motors Corp., Civ. A. No. 11-661, – F. Supp. 2d – , 2013 WL 57387601 (D.D.C. Oct. 23,

2013); Dimondstein v. Am. Postal Workers Union, Civ. A. No. 13-1228, – F. Supp. 2d. – , 2013

WL 4578306 (D.D.C. Aug. 29, 2013); Williamson v. Cox, No. Civ. A. 12-0712, – F. Supp. 2d –

, 2013 WL 3388609, at *4-7 (D.D.C. July 9, 2013); Lee v. Hartford Life & Acc. Ins. Co., 928 F.

Supp. 2d 51, 54-57 (D.D.C. 2013); Etheridge v. FedChoice Fed. Credit Union, 789 F. Supp. 2d

27, 36-39 (D.D.C. 2011).


14

To be sure, questions of copyright policy, as well as the statutory rate-setting factors, bear

on the CRB’s decision whether to create particular exclusions in the first place. But they have no

bearing on whether the language of an existing regulation in fact permits the exclusions that

Sirius XM has taken. In urging that this case entails substantial policymaking and calls for the

application of agency expertise, what Sirius XM really is saying is that the CRB should have

authorized the exclusions that it took. Sirius XM would have been well within its rights to ask

the CRB to permit these exclusions in the CRB’s ratemaking for the 2007-2012 period (and, if

the CRB had agreed, the CRB might well have set the royalty rate at a higher percentage of a

smaller Gross Revenues base). But the time for that has long since passed, as the CRB has

already twice ruled on what revenue exclusions were permissible. The question now is one of

enforcing the agency’s regulations for damages. That is well within the core competence of the

federal courts. See Litton Sys. Inc. v. Sw. Bell Tel. Co., 539 F.2d 418, 423 n.13 (5th Cir. 1976)

(finding “primary jurisdiction could not apply with respect to the damages portion of [the]

lawsuit” addressing past conduct, “even if it must apply to the injunctive portion”); see also

Carnation Co. v. Pac. Westbound Conference, 383 U.S. 213, 222 (1966) (“The award of treble

damages for past and completed conduct which clearly violated the Shipping Act would certainly

not interfere with any future action of the [Federal Maritime] Commission.”).

B. A Decision By This Court Poses No Risk To Uniform Application Of The Law.

As explained above, and as Sirius XM itself recognizes, see MTD 11, a principal

purpose of the doctrine of primary jurisdiction is to prevent the divergent rulings that may result

“if disparate courts resolve regulatory issues inconsistently.” Phillip Morris, 686 F.3d at 837;


15

see, e.g., Far East Conference v. United States, 342 U.S. 570, 574-75 (noting that primary

jurisdiction secures “[u]niformity and consistency in the regulation of business entrusted to a

particular agency”) (quotation marks omitted); Charvat v. EchoStar Satellite, LLC, 630 F.3d 459,

466 (6th Cir. 2010) (expressing concern about “the risk that individuals and companies will be

subject to decisions pointing in opposite directions”); Wagner & Brown v. ANR Pipeline Co.,

837 F.2d 199, 202 (5th Cir. 1988) (“Conflicting decisions among the districts, even when

brought into closer conformity by appellate decisions, are at best a patchwork solution to a

problem that requires uniform resolution.”). Sirius XM is wrong, for two reasons, in arguing that

this concern for uniformity supports dismissal here.

First, Sirius XM is the only entity that is subject to the regulations at issues. As

discussed above, the regulations apply only to providers of commercial satellite radio, and Sirius

XM is the nation’s only satellite radio provider.6 See 17 U.S.C. § 114(j)(10). Because no entity

other than Sirius XM was ever subject to the relevant 2007-2012 regulations, there can be no risk

of non-uniform outcomes that would subject different competitors in the same industry to

different obligations under the same regulations.

Second, this is only a suit for damages for Sirius XM’s past conduct. It is not a suit for

prospective injunctive relief that could result in Sirius XM being subject to inconsistent or

conflicting obligations going forward. For example, with respect to Sirius XM’s pre-1972

revenue exclusion, the issue before the court cannot arise again even between SoundExchange

and Sirius XM. As set forth above, in its decision setting rates for the 2013-2017 period, the

CRB promulgated a prospective means other than revenue exclusion to account for

performances of pre-1972 music. See 78 Fed. Reg. 23,073. Thus, the issue here – Sirius XM’s

6 As noted above, Sirius XM was formed by the merger of Sirius Satellite Radio and XM Satellite Radio.


16

violation of the 2007-2012 regulations – is solely backward looking and should have no impact

on Sirius XM’s future conduct or the future conduct of any other entity.

C. It Is Not Clear That The CRB Is Authorized To Hear SoundExchange’s Claims Or Grant The Relief Requested.

Sirius XM’s primary jurisdiction argument necessarily depends on a conclusion that the

CRB would, in fact, have jurisdiction to issue the appropriate rulings and order the appropriate

relief. Indeed, “[w]here no administrative remedy exists, the doctrine of primary jurisdiction

does not apply.” United States v. Elrod, 627 F.2d 813, 818 (7th Cir. 1980); see id. (“Uncertainty

as to the scope of [the agency’s] administrative authority thus militates against initial resort to

the agency here.”); Montana-Dakota Utils Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 254 (1951)

(“[W]e know of no case where the court has ordered reference of an issue which the

administrative body would not itself have jurisdiction to determine in a proceeding for that

purpose.”); Local Union No. 189, v. Jewel Tea Co., 381 U.S. 676, 687 (1965) (“we must reject

the unions’ primary-jurisdiction contention because of the absence of an available procedure for

obtaining a Board determination.”); Allied Air Freight, 393 F.2d at 448 (declining to invoke

primary jurisdiction when the agency was “unable to give the relief which appellant seeks”

because it “ha[d] no power to award damages for unfair competitive practices”). Here, the

CRB’s limited powers provide yet another reason why resort to the doctrine of primary

jurisdiction is improper.

First, the CRB is empowered to set rates and promulgate regulations – but it has no

authority to enforce its regulations against an entity that fails to comply. Thus, the CRB cannot

award SoundExchange damages for Sirius XM’s underpayment of royalties. Rather, to obtain a

damages award, SoundExchange would have to return to this Court. That alone is reason enough

to reject Sirius XM’s primary jurisdiction argument. See Ryan v. Chemlawn Corp., 935 F.2d


17

129, 131 (7th Cir. 1991) (refusing to invoke primary jurisdiction because the plaintiff sought

“only monetary damages” and the agency “cannot provide the plaintiff with any form of

compensatory or punitive damages”).

Second, it is far from clear that the CRB can issue even the sort of declaratory,

interpretive rulings that Sirius XM proposes. The “continuing jurisdiction” provision on which

Sirius XM relies, see MTD 6-7, provides the CRB only with limited authority to (a) “correct any

technical or clerical errors in the [rate-setting] determination”; or (b) “modify the terms, but not

the rates, of royalty payments in response to unforeseen circumstances that would frustrate the

proper implementation of such determination.” 17 U.S.C. § 803(c)(4). The interpretive, and

retroactive, rulings that Sirius XM proposes cannot plausibly be characterized as a “correct[ion]”

of “technical or clerical errors,” nor as a “response to unforeseen circumstances.” Indeed, if

SoundExchange were to initiate a proceeding to seek the interpretive rulings that Sirius XM

envisions, SoundExchange would not be asking the CRB to “correct” or “modify” anything at

all. Rather, it would be requesting that the CRB reiterate that, when it promulgated the definition

of Gross Revenues, it meant exactly what it said.7

7 Should the Court disagree with SoundExchange and refer this matter to the CRB under the doctrine of primary jurisdiction, this case should be stayed, not dismissed without prejudice. Not only is a stay the customary course of action when a court refers a matter for agency resolution, see, e.g., American Ass’n. of Cruise Passengers v. Cunard Cruise Line, Ltd., 31 F.3d 1184, 1187 (D.C. Cir. 1994), but SoundExchange would be prejudiced were this Court to dismiss the suit. SoundExchange’s filing of this lawsuit tolled the statute of limitations on its claims against Sirius XM. See, e.g., Ciralsky v. CIA, 355 F.3d 661, 672 (D.C. Cir. 2004). If the case were dismissed without prejudice, rather than merely stayed, the statute of limitations would begin to run once again. See id. And there is no assurance that the CRB, for its part, would act promptly. The result might well be that SoundExchange’s claims, though not time-barred today, would be time-barred by the time they returned to this Court. See Am. Ass’n. of Cruise Passengers, 31 F.3d at 1187 (explaining that dismissal would be particularly inappropriate if new judicial proceedings after the completion of agency proceedings might be time-barred, and stressing that “the district court could effortlessly hold the suit in abeyance pending the outcome of the proceedings before the [agency]”).


18

CONCLUSION

For the foregoing reasons, Sirius XM’s motion to dismiss should be denied.


/s/ Michael B. DeSanctis

Michael B. DeSanctis (D.C. Bar #: 460961) Joshua M. Segal (D.C. Bar #: 975949) Ishan K. Bhabha (D.C. Bar #: 1015673) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, D.C. 20001 (202) 639-6000 Counsel for Plaintiff SoundExchange, Inc.



I, Michael B. DeSanctis, do hereby certify that the foregoing opposition was electronically filed and served via ECF on the 2nd day of December, 2013, to the following:

Adam B. Banks WEIL, GOTSHAL & MANGES, LLP 767 Fifth Avenue New York, NY 10153 (212) 310-8419 (212) 310-8007 (fax) Counsel for Sirius XM Radio Inc.

Todd D. Larson WEIL, GOTSHAL & MANGES, LLP 767 Fifth Avenue New York, NY 10153 (212) 310-8238 (212) 310-8007 (fax) [email protected] Counsel for Sirius XM Radio Inc.

Peter Dean Isakoff WEIL, GOTSHAL & MANGES, LLP 1300 Eye Street, NW Suite 900 Washington, DC 20005 (202) 682-7155 (202) 857-0940 (fax) [email protected] Counsel for Sirius XM Radio Inc.

R. Bruce Rich WEIL, GOTSHAL & MANGES, LLP 767 Fifth Avenue New York, NY 10153 (212) 310-8170 (212) 310-8007 (fax) [email protected] Counsel for Sirius XM Radio Inc.

/s/ Michael B. DeSanctis ___________________________________ Michael B. DeSanctis


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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

) ) SOUNDEXCHANGE, INC., ) ) Case No. 1:13 cv 1290 (RJL) ) Plaintiff, ) v. ) ) SIRIUS XM RADIO INC., ) ) ) Defendant. ) )

DEFENDANT SIRIUS XM RADIO INC.’S REPLY MEMORANDUM OF LAW

IN FURTHER SUPPORT OF ITS MOTION TO DISMISS

R. Bruce Rich (pro hac vice) Todd Larson (pro hac vice) Adam Banks (pro hac vice) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 [email protected] [email protected] [email protected]

Peter D. Isakoff (D.C. Bar No. 358419) WEIL, GOTSHAL & MANGES LLP 1300 Eye Street, NW Suite 900 Washington, D.C., 20005 Telephone: (202) 682-7000 Facsimile: (202) 857-0940 [email protected]



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TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ................................................................................................. 1

ARGUMENT .............................................................................................................................. 3

I. This Case is a Prime Candidate for Referral under the Primary Jurisdiction Doctrine .......................................................................................................................... 3

A. SoundExchange Misconstrues the CRB’s Decisions in Satellite I and Satellite II ............................................................................................................ 3

1. The Satellite I Determination Refutes SoundExchange’s Contentions .............................................................................................. 3

2. Satellite II Neither Construed Satellite I nor Reviewed Sirius XM’s Royalty Calculations for the 2007-2012 License Period ............................ 4

3. Satellite II’s Mechanism for Calculating Exclusions Attributable to Pre-1972 Sound Recordings, If Anything, Confirms the Lack of Merit in SoundExchange’s Allegations of Underpayment ......................... 5

4. Satellite II Did Not Purport To Construe the Satellite I Exemption for Non-Music Programming ................................................................... 8

B. This Case is an Ideal Candidate for Invoking the Primary Jurisdiction Doctrine ............................................................................................................... 9

II. The CRB has “Continuing Jurisdiction” to Address the Questions Presented in this Case ........................................................................................................................ 12

CONCLUSION ......................................................................................................................... 15


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Cases Page(s)

Allnet Commc’n Serv., Inc. v. Nat’l Exch. Carrier Ass’n, Inc., 965 F.2d 1118 (D.C. Cir. 1992) ..................................................................................... 10, 11

Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010) ............................................................................................. 13

Ctr. for Individual Freedom v. Van Hollen, 694 F.3d 108 (D.C. Cir. 2012) ............................................................................................. 12

Davel Commc’ns, Inc. v. Qwest Corp., 460 F.3d 1075 (9th Cir. 2006) ............................................................................................. 11

Ricci v. Chi. Mercantile Exch., 409 U.S. 289 (1973) ............................................................................................................ 13

Ryan v. Chemlawn Corp., 935 F.2d 129 (7th Cir. 1991) ............................................................................................... 14

SoundExchange v. Librarian of Congress, 571 F.3d 1220 (D.C. Cir. 2009) ............................................................................................. 3

In re StarNet, Inc., 355 F.3d 634 (7th Cir. 2004) ............................................................................................... 12

United States v. Philip Morris USA, Inc., 686 F.3d 832 (D.C. Cir. 2012) ............................................................................................. 10

United States v. Western Pac. R.R. Co., 352 U.S. 59 (1956) .................................................................................................. 10, 11, 12

Statutes

17 U.S.C. § 801(b)(1) ............................................................................................................ 2, 10

17 U.S.C. § 803(c)(4) ................................................................................................................ 13

Other Authorities

37 C.F.R. 382.11 ................................................................................................................ passim

37 C.F.R. 382.12 ..................................................................................................................... 5, 7

Copyright Office, Review of Copyright Royalty Judges Determination, 74 Fed. Reg. 4537 (Jan. 26, 2009) ............................................................................................................................. 13


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Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78 Fed. Reg. 23054 (Apr. 17, 2013) (Satellite II) ...................... passim

Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080 (Jan. 24, 2008) (Satellite I) .......................... passim


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The central premise of SoundExchange’s opposition is that the primary jurisdiction

doctrine is inappropriate here because the Copyright Royalty Board —twice, in its count—has

already “unambiguously” determined that Sirius XM was not entitled to certain royalty fee

exclusions it took between 2007 and 2012. See SoundExchange Mem. at 1. That argument

conveniently assumes away the parties’ dispute, which arises because Sirius XM interpreted the

same CRB rate determination1 and the regulations enacted under it as unambiguously supporting

the challenged exclusions. The point of remitting this controversy to the CRB is to enable the

agency that crafted the regulations at issue to opine as to what it actually intended and whether

Sirius XM’s practices comport with that intention.

SoundExchange is also wrong on the merits. The disputed revenue definition states

clearly that Sirius XM should not pay royalties to SoundExchange for programming “exempt

from any license requirement” and programming with “only incidental performances of sound

recordings.” 37 C.F.R. 382.11(3)(vi) (2008). The reason for such exclusions is obvious: revenue

earned by Sirius XM for activities “not licensed under the statutory royalty regime”—e.g.,

performances of pre-1972 recordings or non-music programming—“should not factor into

determining the statutory royalty obligation.” Copyright Royalty Board, Determination of Rates

and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78

Fed. Reg. 23054, 23073 (Apr. 17, 2013) (“Satellite II”).

SoundExchange brazenly contends that Sirius XM should have disregarded that

fundamental premise and paid SoundExchange tens of millions of dollars in royalties for such

1 See Copyright Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080 (Jan. 24, 2008) (“Satellite I”).


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programming anyway. It bases this conclusion on a meritless accounting quibble (relating to

when revenue is “recognized” under GAAP) and the misconception that the Copyright Royalty

CRJs, in Satellite II, determined how to interpret Satellite I and evaluated Sirius XM’s practices

under that decision. They did not. As we demonstrate herein, the CRJs in Satellite II forcefully

reiterated their holding that Sirius XM should not pay SoundExchange for programming

unrelated to the statutory license and expressly rejected SoundExchange’s attempt to eliminate

the exemptions for such programming. What is more, the CRJs prescribed a method for

calculating such exemptions for the 2013-2017 license period that is nearly identical, both in

approach and economic consequence, to the methodology utilized by Sirius XM for the period in

dispute. These conclusions support, not contradict, Sirius XM’s payment calculations during

the 2007-2012 period. A referral to the CRB should quickly and efficiently confirm the

propriety of Sirius XM’s approach.

SoundExchange’s further suggestion that this case concerns a garden variety

interpretation of mundane agency regulations, something courts do “every day,” SoundExchange

Mem. at 1, is also erroneous. The CRB is uniquely positioned to opine on the intended economic

outcome of its Satellite I determination in light of both the extensive hearing record before it and

the statutory policy factors that guide its determinations. See 17 U.S.C. § 801(b)(1). It is also

uniquely positioned to opine on SoundExchange’s attempt to fundamentally alter the economics

that determination and the CRJs’ careful balancing of the statutory factors. Courts routinely

refer technical questions of the sort raised by the Complaint to administrative agencies in

recognition of their peculiar expertise and familiarity with the entire panoply of relevant

considerations.


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ARGUMENT

I. This Case is a Prime Candidate for Referral under the Primary Jurisdiction

Doctrine

A. SoundExchange Misconstrues the CRB’s Decisions in Satellite I and Satellite

II

1. The Satellite I Determination Refutes SoundExchange’s Contentions

The CRB has repeatedly stressed, as should be self-evident, that users of the statutory

license like Sirius XM do not have to pay royalties for programming not covered by that license.

In Satellite I, the CRJs explained that the revenue definition should “unambiguously relate[] the

fee to the value of the sound recording performance rights at issue.” 73 Fed. Reg. at 4087–88.

Similarly, in Satellite II, the CRJs stated that “pre-1972 recordings are not licensed under the

statutory royalty regime and should not factor into determining the statutory royalty obligation.”

78 Fed. Reg. at 23073. Likewise, the D.C. Circuit, in the course of affirming Satellite I,

observed that “SoundExchange never contended and the CRJ[s] never opined that revenue from

such non-music sources should be included in calculating the royalty payments.”

SoundExchange v. Librarian of Congress, 571 F.3d 1220, 1225 (D.C. Cir. 2009).

In accordance with these principles, the CRJs’ decision in Satellite I provided for the

following exclusions from Gross Revenues—the base on which the royalty payment is

calculated—to ensure the omission of revenue attributable to programming exempt from the

license:

• “revenues recognized by [the] Licensee for the provision of . . . channels,

programming, products and/or other services offered for a separate charge where

such channels use only incidental performances of sound recordings,” 37 C.F.R.

382.11(3)(vi)(B) (2008); and


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• “channels, programming, products and/or other services for which the

performance of sound recordings . . . is exempt from any license requirement,”

37 C.F.R. 382.11(3)(vi)(D) (2008).

While Satellite I did not spell out the precise mechanics for implementing the exclusions, the

CRJs plainly intended to “relate[] the fee to the value of the sound recording performance rights

at issue.” SoundExchange’s purportedly “unambiguous” construction of the CRB’s regulations

would nullify the above-stated exclusions, impose an unauthorized surcharge on statutory

licensees like Sirius XM, and confer a concomitant windfall on SoundExchange.

SoundExchange’s position is so obviously contrary to what the CRB has held, as well to

common sense, that it is doing everything possible to avoid making its case to the body best

positioned to opine on it, the CRB.

2. Satellite II Neither Construed Satellite I nor Reviewed Sirius XM’s

Royalty Calculations for the 2007-2012 License Period

The Satellite II proceeding set the statutory royalty rates and terms for the 2013-2017

period. In that proceeding, SoundExchange sought essentially identical relief to that which it

seeks here: a nullification of the statutory exclusion from payments of royalties for performances

of sound recordings exempt from the statutory license.2 The CRJs roundly rejected

SoundExchange’s proposal and reiterated the core principle that “pre-1972 recordings are not

licensed under the statutory royalty regime and should not factor into determining the statutory

royalty obligation.” Satellite II, 78 Fed. Reg. at 23073.

2 As the CRJs summarized the argument, “SoundExchange also proposes to eliminate from the current Gross Revenues definition a provision that authorizes an exclusion from revenues received from channels and programming that are licensed outside of the Sections112 and 114 licenses, which includes pre-1972 recordings.” Satellite II, 78 Fed. Reg. at 23071 (emphasis added). Clearly, the CRJs understood the exclusion from Gross Revenues to encompass pre-1972 recordings.


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The CRJs then spelled out a specific mechanism to be utilized in calculating the

appropriate deduction during the 2013-2017 license period.3 They had no occasion to decide

how the fee deductions established in the Satellite I proceeding should have been calculated, let

alone opine as to SoundExchange’s conception of those deductions or the economic

consequences they would have had on the determination reached there. Simply stated, the

construction and application of the Satellite I rates and terms were not before the CRB during the

Satellite II proceedings.

This recognition puts to rest the assertion that the CRJs resolved the issue presented here

(much less in SoundExchange’s favor) by way of their passing remark that “there is no revenue

recognition for the performance of pre-1972 works.” Satellite II, 78 Fed. Reg. at 23073. Not

only, as noted, did the Satellite II proceeding not concern royalty calculations pertaining to the

Satellite I license period; neither did it contain any reliable record as to Sirius XM’s accounting

practices during the prior license period or any expert testimony as to what revenue is or is not

“recognized” under GAAP.

3. Satellite II’s Mechanism for Calculating Exclusions Attributable to Pre-

1972 Sound Recordings, If Anything, Confirms the Lack of Merit in

SoundExchange’s Allegations of Underpayment

A comparison of the mechanism adopted by the CRJs in Satellite II for implementing the

exclusion for pre-1972 sound recordings for the 2013-2017 period with the process Sirius XM

utilized in calculating the same exclusion during the period covered by the Satellite I

determination exposes SoundExchange’s complaint as one of form over substance. In short, the

3 As discussed below, that mechanism provides that the royalty fee should be reduced by a “Pre-1972 Recording Share,” a percentage reflecting the Sirius XM’s number of pre-1972 performances divided by the total number of Sirius XM’s performances. The regulations define the Pre-1972 Recording Share as “the result of dividing the Internet Performances of Pre-1972 Sound Recordings on the Reference Channels by the total number of Internet Performances of all sound recordings on the Reference Channels.” 37 C.F.R. 382.12(e).


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two approaches are equivalent in all material respects, yielding substantially the same economic

results.

Satellite I Royalty Fee Calculation. There were three basic components to Sirius XM’s

royalty fee calculation under the prior determination:

• (A) Gross Revenues, defined as “revenue recognized by the Licensee in accordance with GAAP.” 37 C.F.R. 382.11 (2008).

• (B) An Adjustment for Performances of Pre-1972 Recordings, determined by calculating the percentage of performances of pre-1972 recordings on Sirius XM (out of the total number of performances) and reducing Gross Revenues by that same percentage.

• (C) Royalty Rate, the Satellite I determination called for the license fee to equal between 6% and 8% of monthly Gross Revenues.

To calculate its royalty fee obligation, Sirius XM reduced its Gross Revenues by the percentage

of pre-1972 sound recordings and then multiplied that adjusted Gross Revenues figure by the

applicable royalty rate, as follows:4

[A] x [B] x [C]

Royalty Payment = Gross Revenues (1 – Pre-1972 Performances Total Performances )

Royalty Rate

Satellite II Royalty Fee Calculation. The royalty payment calculation as prescribed the

Satellite II determination for 2013-2017 is substantively identical. Sirius XM’s gross revenues

are multiplied by the royalty rate and then reduced by applying the Pre-1972 Recording Share.

In other words, the calculation consists of the same three elements as the Satellite I

determination, but in a different order:

4 For example, if Gross Revenues were $1,000,000, 10% of total performances were pre-1972 performances, and the royalty rate was 8%, the total royalty payment would be $72,000: $1,000,000 x (1-.10) x .08 = $72,000.


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• (A) Gross Revenues as defined at 37 C.F.R. § 382.11.

• (B) An Adjustment for Performances Pre-1972 Recordings, determined, just as Sirius XM did under the Satellite I determination, by dividing the number of performances of pre-1972 recordings by the total number of performances (the Pre-1972 Recording Share) and reducing the royalty obligation by that percentage.

• (C) Royalty Rate, the Satellite II determination called for the license fee rising each year from 9% to 11% of Gross Revenues, “except that the royalty fee so determined may be reduced by . . . the Pre-1972 Recording Share.” 37 C.F.R. 382.12.

Sirius XM’s royalty payment is determined by multiplying these three factors in the same way as

during 2007-2012. To summarize:

[A] x [C] x [B]

Royalty Payment = Gross Revenues Royalty Rate (1 – Pre-1972 Performances Total Performances ) 5

In short, Sirius XM’s approach under the Satellite I determination was mathematically

equivalent to what the CRJs made explicit under Satellite II, except that rather than multiplying

A x B x C, the Satellite II determination calls for multiplying A x C x B. See supra nn. 4 & 5.

While the CRJs suggested the formula should be conceptualized as a reduction of the royalty

payment to be made, rather than as a reduction of revenue against which the royalty rate applied,

the economic results are substantively identical.6 Satellite II is thus completely consistent with

Sirius XM’s treatment of pre-1972 recordings for the 2007-2012 period.

5 As in the example in n.4, supra, if Gross Revenues were $1,000,000, the royalty rate was 8% and 10% of performances were pre-1972 performances, the royalty payment would be $72,000: $1,000,000 x .08 x (1-.10) = $72,000.

6 There are two minor differences that are not germane to the argument. During 2007-2012, Sirius XM calculated the amount of its Pre-72 exclusion based on its subscription revenues, an amount slightly less than total Gross Revenues. Also, for part of that period, it used plays on its satellite service, as opposed to performances on its webcasting service (where the channels are largely identical) to determine the specific pre-1972 share for a given reporting period. While


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Once understood in context, SoundExchange’s reliance on the CRJs’ statement in

Satellite II that “revenue exclusion is not the proper means for addressing pre-1972 recordings”

as purported evidence that Sirius XM had underpaid royalties for the prior period is evidently

misplaced. Satellite II, 78 Fed. Reg. at 23073. The quoted language at most suggests that the

guidance in Satellite I as to precisely how the exemption for pre-1972 recordings should be

computed was not specific enough. Its import was conceptual and forward-looking: i.e., the

royalty adjustment for pre-1972 recordings should be understood and applied as an exclusion

from the total fees owed, rather than applied against the revenue base. Insofar as the result of

the prescribed Satellite II approach leads, as a practical matter, to essentially the same economic

results as the methodology Sirius XM employed in the previous licensing period, the inference

SoundExchange asks be drawn from the CRJs’ statement—that Sirius XM instead should have

paid royalties for performances of recordings that are wholly exempt from the license

requirement—is completely improper.

4. Satellite II Did Not Purport To Construe the Satellite I Exemption for

Non-Music Programming

SoundExchange suggests that in Satellite II the CRJs held that Sirius XM’s exclusion for

non-music programming offered through its premier packages failed to comport with the

Satellite I exemption for programming “us[ing] only incidental performances of sound

recordings” that is “offered for a separate charge.” Satellite I, 73 Fed. Reg. at 4102; 37 C.F.R.

382.11(3)(vi)(B). This is plainly untrue.

these minor differences may have marginally altered Sirius XM’s royalty obligations, they do not alter the point that Sirius XM’s approach to calculating the fee obligation during 2007-2012 was substantively identical to the one later prescribed by the CRJs in Satellite II for 2013-2017.


US_ACTIVE:\44389623\14\76061.0013 9

As Sirius XM explained in its moving papers, the additional all-talk and non-music

programming available through its premier packages is “offered for a separate charge” within the

meaning of the Satellite I determination because the only additional services provided in such

packages—and thus the value the consumer receives for the incremental charge for a premier

package—is programming that makes only incidental use of sound recordings and exempt from

the statutory license. See Sirius XM Mem. at 8, 13. SoundExchange contends here that Sirius

XM should pay for exempt programming because a clear upcharge for only non-music

programming somehow does not count as a “separate charge.” SoundExchange Mem. at 5–6.

The language in Satellite II upon which SoundExchange relies did not pass upon that

contention,7 and indeed did no more than repeat the regulatory text from Satellite I: “the

exclusion is available only to the extent that the channels, programming, products and/or other

services are offered for a separate charge.” Satellite II, 78 Fed. Reg. at 23072 n.45. If anything,

the CRJs once again confirmed that revenues that are attributable to activities not covered by the

statutory license should be exempt from the statutory license calculation: “the Judges are driven

by the admonition in [Satellite I] to include only those revenues related to the value of the sound

recording performance rights at issue in this proceeding.” Satellite II, 78 Fed. Reg. at 23072.

It is clear that the CRJs are in the best position to interpret their own opinions, and should

have the opportunity to provide any necessary clarification on this issue in the first instance.

B. This Case is an Ideal Candidate for Invoking the Primary Jurisdiction

Doctrine

Resolution of this case calls for the interpretation and application of the CRJs’ own rate

determination, a determination they reached after an extensive, multi-week trial and the product

7 SoundExchange has yet to offer any coherent policy reason (accounting gimmicks aside) that would support a construction of the CRJs’ regulations requiring Sirius XM to pay license fees for material exempt from the statutory license.


US_ACTIVE:\44389623\14\76061.0013 10

of the careful balancing of the Section 801(b) policy factors. Congress created the CRB

specifically for the expert determination of royalty rates. Questions concerning the proper

implementation of the CRB’s own rate determinations should properly be decided by the CRB.

See, e.g., United States v. Philip Morris USA, Inc., 686 F.3d 832, 837 (D.C. Cir. 2012) (“[W]e

have found the primary jurisdiction doctrine applicable when the precise question before the

district court was one within the particular competence of an agency.”); Allnet Commc’n Serv.,

Inc. v. Nat’l Exch. Carrier Ass’n, Inc., 965 F.2d 1118, 1122–23 (D.C. Cir. 1992) (finding

primary jurisdiction where the issue involved the agency’s “interpretation of its own regulations,

on which it is owed great deference”).

SoundExchange argues that the primary jurisdiction doctrine is not implicated here

because the questions concern the straightforward interpretation of unambiguous agency

regulations, a function federal courts routinely perform. According to SoundExchange, this case

concerns not policy determinations but simple construction of agency regulations.

SoundExchange Mem. at 12–14. This argument is misplaced for several reasons.

First, policy implications, including the intended economic outcome of the Satellite I

determination, sit at the heart of the questions presented here. The core function of the CRB is to

set “reasonable” rates and terms for the statutory license, taking into account the extensive

factual record before it and balancing the statutory Section 801(b) policy factors enumerated by

Congress. In challenging Sirius XM’s interpretation and implementation of the regulations,

SoundExchnage, not only calls into question, but seeks to fundamentally alter, the economics of

the CRB’s rate determination and its policy choices. The CRB is uniquely positioned to opine

on the intended economic effect of its own rate determination, a task specifically delegated to it

by Congress. See United States v. Western Pac. R.R. Co., 352 U.S. 59, 63 (1956) (“primary


US_ACTIVE:\44389623\14\76061.0013 11

jurisdiction . . . is concerned with promoting proper relationships between the courts and

administrative agencies charged with particular regulatory duties”). In short, the distinction

SoundExchange attempts to draw between regulation interpretation and policymaking is a false

distinction, particularly with respect to the question now before this Court.8

Second, SoundExchange’s suggestion that the primary jurisdiction doctrine is

inapplicable when the question is a matter of the interpretation of agency regulations finds no

support in the case law. Courts routinely invoke the primary jurisdiction doctrine when the

question presented concerns the proper interpretation of agency regulations, particularly rate

determinations that were the product of a highly detailed and technical regulatory process. See

Allnet, 965 F.2d at 1120 (“[I]t is hardly surprising that courts have frequently invoked primary

jurisdiction in cases involving tariff interpretations.”); see also Davel Commc’ns, Inc. v. Qwest

Corp., 460 F.3d 1075, 1089 (9th Cir. 2006) (“the interpretation of an agency order issued

pursuant to the agency’s congressionally granted regulatory authority falls within the agency’s

primary jurisdiction where the order reflects policy concerns or issues requiring uniform

resolution.”) (emphasis added).

For example, in United States v. Western Pacific Railroad Co., 352 U.S. 59 (1956), the

seminal case invoking the primary jurisdiction doctrine, the Supreme Court referred a question of

tariff interpretation to the Interstate Commerce Commission for resolution. The dispute in

Western Pacific, as the one here, concerned the proper interpretation of a definition supplied by

an agency in the context of its Congressionally-delegated policymaking and rate-setting. The

8 See Western Pacific, 352 U.S. at 68–69 (“[T]he mere fact that the issue is phrased in one instance as a matter of tariff construction and in the other as a matter of reasonableness should not be determinative on the jurisdictional issue. To hold otherwise would make the doctrine of primary jurisdiction an abstraction to be called into operation at the whim of the pleader.”).


US_ACTIVE:\44389623\14\76061.0013 12

Court held that the ICC should decide the definitional question in the first instance; as the Court

explained, “to decide the question of the scope of this tariff without consideration of the factors

and purposes underlying the terminology employed would make the process of adjudication little

more than an exercise in semantics.” Id. at 67. Thus, the Court held, the definitional controversy

should be resolved “not by the courts but by the agency which had the exclusive power to pass

on the rate in the first instance.” Id. The same logic applies to questions concerning the proper

interpretation and application of the CRJs’ rate determination.

Similarly, in In re StarNet, Inc., 355 F.3d 634 (7th Cir. 2004), the court referred a

question concerning the definition of the word “location” in FCC regulations to the agency:

“Instead of trying to divine how the FCC would resolve the ambiguity created by the word

‘location,’ we think it best to send this matter to the Commission under the doctrine of primary

jurisdiction.” 355 F.3d at 639. Primary jurisdiction is also often invoked where the court

requires further clarification of the existing regulations. See, e.g., Ctr. for Individual Freedom v.

Van Hollen, 694 F.3d 108, 111 (D.C. Cir. 2012) (“Pursuant to this [primary jurisdiction]

doctrine, we will leave it to the FEC in the first instance to explain the meaning and scope of 11

C.F.R. § 104.20(c)(9), or, if the agency deems it appropriate, to engage in further rulemaking to

better clarify the regulatory regime.”). The fact that this case involves a controversy concerning

the proper scope and interpretation of the CRB’s own regulations is a reason to invoke the

primary jurisdiction doctrine, not to avoid it.

II. The CRB has “Continuing Jurisdiction” to Address the Questions Presented in this

Case

Finally, SoundExchange argues that referral under primary jurisdiction would be

inappropriate because it is “far from clear” that the CRB has jurisdiction to address the questions

presented. SoundExchange’s arguments are not persuasive.


US_ACTIVE:\44389623\14\76061.0013 13

As the D.C. Circuit has held, “for an issue to fall within an agency’s primary jurisdiction,

the agency need not possess definite authority to resolve it; rather, there need only be ‘sufficient

statutory support for administrative authority that the agency should at least be requested to

proceed’ in the first instance.” Comcast Corp. v. FCC, 600 F.3d 642, 648 (D.C. Cir. 2010)

(citing Ricci v. Chi. Mercantile Exch., 409 U.S. 289, 304 (1973)) (alterations omitted); see also

Ricci, 409 U.S. at 304 (finding primary jurisdiction where “there is sufficient statutory support

for administrative authority in this area”).

The CRB’s “continuing jurisdiction” provides more than sufficient statutory support for

its exercise of jurisdiction over the question presented here. As SoundExchange itself

acknowledges, the continuing jurisdiction authority granted to the CRB permits it to correct

“technical or clerical” errors and to modify the terms of the rate determination “in response to

unforeseen circumstances that would frustrate the proper implementation of such determination.”

17 U.S.C. § 803(c)(4). Referring this action to the CRB so that it can decide whether Sirius

XM’s exclusions were proper under the rate determination—or if some other mechanism should

have been used to account for its performances of exempt sound recordings—fits easily within

either of those two grants of continuing jurisdiction authority. For example, the CRJs used their

continuing jurisdiction authority to modify the definition of “interactive stream” in a prior rate

determination proceeding, as either a technical correction or a response to “unforeseen

circumstances.” See, e.g., Copyright Office, Review of Copyright Royalty Judges

Determination, 74 Fed. Reg. 4537, 4543 (Jan. 26, 2009). 9 A similar result would obtain here if

the CRJs concluded that a technical correction were required to clarify that the Gross Revenues

9 SoundExchange does not respond to Sirius XM’s showing in its moving papers that the CRB has understood its continuing jurisdiction authority very broadly, including using the authority to modify definitions contained in prior rate determinations. See Sirius XM Mem. at 7 n.2.


US_ACTIVE:\44389623\14\76061.0013 14

exclusions permitted Sirius XM’s exclusions for its exempt performances. Or, alternatively, if

the CRJs determined that the revenue exclusion were not the correct way to account for pre-1972

recordings and non-music programming, the CRJs could modify the rate determination to enact a

different mechanism to avoid the “unforeseen circumstances” of Sirius XM paying royalties for

performances not covered by the statutory license. As discussed supra, that was the clear intent

of the CRB’s rate determination.

Finally, SoundExchange suggests that referral is inappropriate because the CRB does not

have the authority to award the damages it seeks. According to SoundExchange, “to obtain a

damages award, SoundExchange would have to return to this Court.” SoundExchange Mem. at

16. The fact that the CRB cannot award damages has no bearing on whether the issue should be

referred to the agency for its expert resolution and determination. The purpose of the referral is

not for the agency to resolve every aspect of the claims pending before the district court, but to

obtain the agency’s authoritative views on the substantive issues. For that reason, cases are not

transferred to the agency for resolution under primary jurisdiction; rather, they are “referred,”

with the court retaining jurisdiction over the case to resolve the matter once the agency has

weighed in. It is neither unusual nor problematic that SoundExchange would have to return to

this court to obtain any damages award.10

Moreover, the central case on which SoundExchange relies, Ryan v. Chemlawn Corp.,

935 F.2d 129 (7th Cir. 1991), is inapposite. The court declined to refer a question to the EPA

under primary jurisdiction, not only because the plaintiff sought only damages, but because she

asserted only state common-law claims that were “not dependent on any EPA provisions.” Id. at

10 Of course, if the CRB determined that Sirius XM’s exclusions were permissible under the Satellite I determination, or modified the determination to provide some other mechanism to account for exempt performances, SoundExchange will have no damages.


US_ACTIVE:\44389623\14\76061.0013 15

132. In other words, because there were no federal questions presented whatsoever, let alone

questions that turned on the proper construction of the EPA’s rules or regulations, the court

“fail[ed] to understand what role the EPA can play in this suit.” Id. at 131. To the contrary here,

the CRB’s role in interpreting its own rate determinations is clear, even if it lacks the power to

award the specific damages SoundExchange seeks.

CONCLUSION

For the foregoing reasons and those stated in Sirius XM’s moving brief, this Court should

dismiss or stay the instant proceedings pending referral to the CRB.


/s/ Peter D. Isakoff Peter D. Isakoff (D.C. Bar No. 358419) WEIL, GOTSHAL & MANGES LLP 1300 Eye Street, NW Suite 900 Washington, D.C., 20005 Telephone: (202) 682-7000 Facsimile: (202) 857-0940 [email protected] R. Bruce Rich (pro hac vice) Todd Larson (pro hac vice) Adam Banks (pro hac vice) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 [email protected] [email protected] [email protected]



US_ACTIVE:\44389623\14\76061.0013


I hereby certify that on this 20th day of December, 2013, I caused a true and correct copy

of the foregoing Reply Memorandum in Further Support of Sirius XM’s Motion to Dismiss to be

filed and served using the CM/ECF system, which shall send notice to all counsel of record.

/s/ Peter Isakoff Peter Isakoff


U.S. District CourtDistrict of Columbia (Washington, DC)

CIVIL DOCKET FOR CASE #: 1:13−cv−01290−RJL

SOUNDEXCHANGE, INC. v. SIRIUS XM RADIO INC.Assigned to: Judge Richard J. LeonDemand: $100,000,000Cause: 17:101 Copyright Infringement


Plaintiff

SOUNDEXCHANGE, INC. represented byJoshua Morris SegalJENNER &BLOCK, LLP1099 New York Avenue, NWSuite 900Washington, DC 20001(202) 639−6089Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Michael Brian DeSanctisJENNER &BLOCK LLP1099 New York Avenue, NWSuite 900Washington, DC 20001(202) 637−6323Fax: (202) 639−6066Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

V.

Defendant

SIRIUS XM RADIO INC. represented byPeter Dean IsakoffWEIL, GOTSHAL &MANGES, LLP1300 Eye Street, NWSuite 900Washington, DC 20005(202) 682−7155Fax: (202) 857−0940Email: [email protected] ATTORNEYATTORNEY TO BE NOTICED

Adam B BanksWEIL, GOTSHAL &MANGES, LLP767 Fifth AvenueNew York, NY 10153(212) 310−8419Fax: (212) 310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED

R. Bruce RichWEIL, GOTSHAL &MANGES, LLP767 Fifth AvenueNew York, NY 10153(212) 310−8170Fax: (212) 310−8007Email: [email protected]

Case: 1:13-cv-01290-RJL As of: 02/20/2014 04:29 PM EST 1 of 4







Todd D. LarsonWEIL, GOTSHAL &MANGES, LLP767 Fifth AvenueNew York, NY 10153(212) 310−8238Fax: (212) 310−8007Email: [email protected] HAC VICEATTORNEY TO BE NOTICED


08/26/2013 1 COMPLAINT against SIRIUS XM RADIO INC. with Jury Demand ( Filing fee $400 receipt number 0090−3446142) filed by SOUNDEXCHANGE, INC..(Attachments: # 1 Civil Cover Sheet, # 2 Summons)(DeSanctis, Michael) (Entered:08/26/2013)

08/26/2013 2 LCvR 7.1 CERTIFICATE OF DISCLOSURE of Corporate Affiliations andFinancial Interests by SOUNDEXCHANGE, INC. (DeSanctis, Michael) (Entered:08/26/2013)

08/26/2013 Case Assigned to Judge Gladys Kessler. (md, ) (Entered: 08/27/2013)

08/27/2013 3 ELECTRONIC SUMMONS ISSUED (1) as to SIRIUS XM RADIO INC..(Attachments: # 1 Notice of Consent, # 2 Consent Form)(md, ) (Entered:08/27/2013)

08/27/2013 4 Case randomly reassigned to Judge Richard J. Leon. Judge Gladys Kessler nolonger assigned to the case. (gt, ) (Entered: 08/27/2013)

08/27/2013 5 NOTICE of Corrected Complaint by SOUNDEXCHANGE, INC. (DeSanctis,Michael) (Entered: 08/27/2013)

08/27/2013 6 STANDING ORDER. Signed by Judge Richard J. Leon on 8/27/2013. (lcrjl3)(Entered: 08/27/2013)

09/10/2013 7 RETURN OF SERVICE/AFFIDAVIT of Summons and Complaint Executed.SIRIUS XM RADIO INC. served on 8/28/2013, answer due 9/18/2013 (DeSanctis,Michael) (Entered: 09/10/2013)

09/18/2013 8 NOTICE of Appearance by Peter Dean Isakoff on behalf of SIRIUS XM RADIOINC. (Isakoff, Peter) (Entered: 09/18/2013)

09/18/2013 9 Corporate Disclosure Statement by SIRIUS XM RADIO INC.. (Isakoff, Peter)(Entered: 09/18/2013)

09/18/2013 10 MOTION for Leave to Appear Pro Hac Vice :Attorney Name− Todd D. Larson,:Firm− Weil, Gotshal &Manges LLP, :Address− 767 Fifth Avenue, New York, NY10153. Phone No. − 212 310 8238. Fax No. − 212 310 8007 by SIRIUS XMRADIO INC. (Attachments: # 1 Affidavit of Todd D. Larson, # 2 Text of ProposedOrder)(Isakoff, Peter) (Entered: 09/18/2013)

09/18/2013 11 STIPULATION : Joint Stipulation Regarding Response Date by SIRIUS XMRADIO INC.. (Attachments: # 1 Text of Proposed Order)(Isakoff, Peter) (Entered:09/18/2013)

09/19/2013 12 MOTION for Leave to Appear Pro Hac Vice :Attorney Name− R. Bruce Rich,:Firm− Weil, Gotshal &Manges LLP, :Address− 767 Fifth Avenue, New York, NY10153. Phone No. − 212 310 8000. Fax No. − 212 310 8007 by SIRIUS XMRADIO INC. (Attachments: # 1 Affidavit of R. Bruce Rich, # 2 Text of ProposedOrder)(Isakoff, Peter) (Entered: 09/19/2013)

09/22/2013 MINUTE ORDER granting 10 Motion for Leave to Appear Pro Hac Vice. It ishereby ORDERED that the motion is GRANTED; and it is further ORDERED thatTodd Larson is admitted pro hac vice in this action for all purposes on behalf of



https://ecf.dcd.uscourts.gov/doc1/04504408661?caseid=161697&de_seq_num=3&pdf_header=2






















Sirius XM. Signed by Judge Richard J. Leon on 9/22/2013. (lcrjl3) (Entered:09/22/2013)

09/22/2013 MINUTE ORDER granting 12 MOTION for Leave to Appear Pro Hac Vice. It ishereby ORDERED that the motion is GRANTED; and it is further ORDERED thatR. Bruce Rich is admitted pro hac vice in this action for all purposes on behalf ofSirius XM. Signed by Judge Richard J. Leon on 9/22/2013. (lcrjl3) (Entered:09/22/2013)

09/22/2013 MINUTE ORDER setting defendant Sirius XM's response date. Uponconsideration of the parties' Joint Stipulation Regarding Response Date, it is herebyORDERED that Sirius XM's date to serve its answer or to serve and file a motionunder Rule 12 of the Federal Rules of Civil Procedure shall be 10/16/2013. In theevent Sirius XM elects to file a motion under Rule 12, the parties will meet andconfer regarding the briefing schedule for the motion. Signed by Judge Richard J.Leon on 9/22/2013. (lcrjl3) (Entered: 09/22/2013)

09/22/2013 Set/Reset Deadlines: Sirius XM shall file its answer to the complaint or shall fileand serve a motion under Rule 12 of the FRCP by 10/16/2013. (jth) (Entered:09/22/2013)

10/16/2013 13 MOTION to Dismiss Plaintiff's Complaint by SIRIUS XM RADIO INC.(Attachments: # 1 Memorandum in Support of its Motion to Dismiss, # 2 Text ofProposed Order)(Isakoff, Peter) (Entered: 10/16/2013)

10/16/2013 14 MOTION for Leave to Appear Pro Hac Vice :Attorney Name− Adam B. Banks,:Firm− Weil, Gotshal &Manges LLP, :Address− 767 Fifth Avenue, New York, NY10153. Phone No. − 212 310 8419. Fax No. − 212 310 8007 by SIRIUS XMRADIO INC. (Attachments: # 1 Affidavit of Adam B. Banks, # 2 Text of ProposedOrder)(Isakoff, Peter) (Entered: 10/16/2013)

10/17/2013 MINUTE ORDER granting 14 MOTION for Admission Pro Hac Vice. It is herebyORDERED that the motion is GRANTED; and it is further ORDERED that AdamB. Banks is admitted pro hac vice in this action for all purposes on behalf of SiriusXM. Signed by Judge Richard J. Leon on 10/17/2013. (lcrjl3) (Entered:10/17/2013)

11/01/2013 15 Joint MOTION for Extension of Time to File Response/Reply as to 13 MOTIONto Dismiss Plaintiff's Complaint (Joint Motion To Extend Briefing Deadlines ForPlaintiff's Opposition To Defendant's Motion To Dismiss And Defendant's Reply InSupport Thereof) by SOUNDEXCHANGE, INC. (Attachments: # 1 ProposedOrder)(DeSanctis, Michael) (Entered: 11/01/2013)

11/03/2013 MINUTE ORDER granting 15 Joint MOTION to Extend Briefing Deadlines forPlaintiff's Opposition to Defendant's Motion to Dismiss and Defendant's Reply inSupport Thereof. It is hereby ORDERED that the motion is GRANTED; it isfurther ORDERED that SoundExchange's deadline to file and serve its oppositionto Sirius XM's motion to dismiss shall be 12/2/2013; and it is further ORDEREDthat Sirius XM's deadline to file and serve its reply in support of its motion todismiss shall be 12/20/2013. Signed by Judge Richard J. Leon on 11/3/2013.(lcrjl3) (Entered: 11/03/2013)

11/05/2013 Set/Reset Deadlines: Response due by 12/2/2013. Reply due by 12/20/2013. (tb, )(Entered: 11/05/2013)

11/26/2013 16 MEET AND CONFER STATEMENT. (Attachments: # 1 Proposed DiscoveryPlan, # 2 Proposed Discovery and Motion Schedule, # 3 Proposed SchedulingOrder)(DeSanctis, Michael) (Entered: 11/26/2013)

12/02/2013 17 Memorandum in opposition to re 13 MOTION to Dismiss Plaintiff's Complaintfiled by SOUNDEXCHANGE, INC.. (DeSanctis, Michael) (Entered: 12/02/2013)

12/05/2013 18 MOTION to Stay Discovery by SIRIUS XM RADIO INC. (Attachments: # 1Memorandum in Support of Motion to Stay Discovery, # 2 Exhibit A, # 3 Text ofProposed Order)(Isakoff, Peter) (Entered: 12/05/2013)

12/19/2013 19 NOTICE of Appearance by Joshua Morris Segal on behalf ofSOUNDEXCHANGE, INC. (Segal, Joshua) (Entered: 12/19/2013)

























12/20/2013 20 REPLY to opposition to motion re 13 MOTION to Dismiss Plaintiff's Complaintfiled by SIRIUS XM RADIO INC.. (Isakoff, Peter) (Entered: 12/20/2013)

12/23/2013 21 Memorandum in opposition to re 18 MOTION to Stay Discovery filed bySOUNDEXCHANGE, INC.. (DeSanctis, Michael) (Entered: 12/23/2013)

12/23/2013 MINUTE ORDER granting 18 Defendant Sirius XM Radio Inc.'s MOTION toStay Discovery. It is hereby ORDERED that the motion is GRANTED; and it isfurther ORDERED that discovery in this matter shall be STAYED until the Courtissues an order on defendant's motion to dismiss, at which time proposedscheduling orders will be considered. Signed by Judge Richard J. Leon on12/23/2013. (lcrjl3) (Entered: 12/23/2013)







HB2187

011072

-1-

SENATE BILL 2187

By Campfield

HOUSE BILL 2187

By Hardaway

AN ACT to amend Tennessee Code Annotated, Title 29;

Title 39 and Title 40, relative to legal proceedings against persons unlawfully using certain copyrighted sound recordings.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Title 29, is amended by adding the following

language as a new, appropriately designated chapter:

29-10-101. This chapter shall be known and may be cited as the “Legacy Sound

Recording Protection Act”.

29-10-102. As used in this chapter:

(1) "Copies":

(A) Means material objects, other than phonorecords, in which a

work is fixed by any method now known or later developed, and from

which the work can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or device; and

(B) Includes the material object, other than a phonorecord, in

which the work is first fixed;

(2) "Digital transmission" means a transmission in whole or in part in a

digital or other non-analog format;

(3) "Fixed" means in a tangible medium of expression when its

embodiment in a copy or phonorecord, by or under the authority of the author, is

sufficiently permanent or stable to permit it to be perceived, reproduced, or

otherwise communicated for a period of more than transitory duration; provided,

HB2187

011072

-2-

a work consisting of sounds, that is being transmitted, is "fixed" if a fixation of the

work is being made simultaneously with its transmission;

(4) "Perform" means to recite, render, play, dance, or act it, either directly

or by means of any device or process;

(5) "Phonorecords":

(A) Means material objects in which sounds are fixed by any

method now known or later developed, and from which the sounds can be

perceived, reproduced, or otherwise communicated, either directly or with

the aid of a machine or device; and

(B) Includes the material object in which the sounds are first fixed;

(6) "Publicly" means:

(A) At a place open to the public or at any place where a

substantial number of persons outside of a normal circle of a family and

its social acquaintances is gathered; or

(B) Communicated to a place, described in subdivision (6)(A) or

to the public, by means of any device or process, whether the members

of the public capable of receiving the sound recording receive it in the

same place or in separate places and at the same time or at different

times;

(7) "Sound recording" means a work that results from the fixation of a

series of musical, spoken, or other sounds; and

(8) "Transmit" means to communicate by any device or process, now

known or later developed, whereby sounds are received beyond the place from

which the sounds are sent.

29-10-103.

(a) The owner of copyright of a sound recording initially fixed on or before

February 15, 1972, has the exclusive right to:

(1) Reproduce the sound recording in copies or phonorecords;

- 3 - 011072

(2) Prepare derivative works based upon the sound recording;

(3) Distribute copies or phonorecords of the sound recording to

the public by sale or other transfer of ownership, or by rental, lease, or

lending; or

(4) Perform the sound recording publicly by means of a digital or

satellite audio transmission.

(b) In addition to any other penalty provided by law, including § 39-14-

139, there is created under this section a civil cause of action for an owner of

copyright of a sound recording initially fixed on or before February 15, 1972,

against any person or legal entity that performs the actions described in

subdivisions (a)(1)-(4) without the owner’s express permission.

SECTION 2. This act shall take effect upon becoming a law, the public welfare requiring

it, and applies to prohibited conduct occurring on or after the effective date of this act.

SB2187

011072

-1-

SENATE BILL 2187

By Campfield

AN ACT to amend Tennessee Code Annotated, Title 29;

Title 39 and Title 40, relative to legal proceedings against persons unlawfully using certain copyrighted sound recordings.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:

SECTION 1. Tennessee Code Annotated, Title 29, is amended by adding the following

language as a new, appropriately designated chapter:

29-10-101. This chapter shall be known and may be cited as the “Legacy Sound

Recording Protection Act”.

29-10-102. As used in this chapter:

(1) "Copies":

(A) Means material objects, other than phonorecords, in which a

work is fixed by any method now known or later developed, and from

which the work can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or device; and

(B) Includes the material object, other than a phonorecord, in

which the work is first fixed;

(2) "Digital transmission" means a transmission in whole or in part in a

digital or other non-analog format;

(3) "Fixed" means in a tangible medium of expression when its

embodiment in a copy or phonorecord, by or under the authority of the author, is

sufficiently permanent or stable to permit it to be perceived, reproduced, or

otherwise communicated for a period of more than transitory duration; provided,

SB2187

011072

-2-

a work consisting of sounds, that is being transmitted, is "fixed" if a fixation of the

work is being made simultaneously with its transmission;

(4) "Perform" means to recite, render, play, dance, or act it, either directly

or by means of any device or process;

(5) "Phonorecords":

(A) Means material objects in which sounds are fixed by any

method now known or later developed, and from which the sounds can be

perceived, reproduced, or otherwise communicated, either directly or with

the aid of a machine or device; and

(B) Includes the material object in which the sounds are first fixed;

(6) "Publicly" means:

(A) At a place open to the public or at any place where a

substantial number of persons outside of a normal circle of a family and

its social acquaintances is gathered; or

(B) Communicated to a place, described in subdivision (6)(A) or

to the public, by means of any device or process, whether the members

of the public capable of receiving the sound recording receive it in the

same place or in separate places and at the same time or at different

times;

(7) "Sound recording" means a work that results from the fixation of a

series of musical, spoken, or other sounds; and

(8) "Transmit" means to communicate by any device or process, now

known or later developed, whereby sounds are received beyond the place from

which the sounds are sent.

29-10-103.

(a) The owner of copyright of a sound recording initially fixed on or before

February 15, 1972, has the exclusive right to:

(1) Reproduce the sound recording in copies or phonorecords;

- 3 - 011072

(2) Prepare derivative works based upon the sound recording;

(3) Distribute copies or phonorecords of the sound recording to

the public by sale or other transfer of ownership, or by rental, lease, or

lending; or

(4) Perform the sound recording publicly by means of a digital or

satellite audio transmission.

(b) In addition to any other penalty provided by law, including § 39-14-

139, there is created under this section a civil cause of action for an owner of

copyright of a sound recording initially fixed on or before February 15, 1972,

against any person or legal entity that performs the actions described in

subdivisions (a)(1)-(4) without the owner’s express permission.

SECTION 2. This act shall take effect upon becoming a law, the public welfare requiring

it, and applies to prohibited conduct occurring on or after the effective date of this act.

©2012 John L. Simson and Ken Abdo. All rights reserved.

From Owning to Using Music: Transactional Music Attorneys Struggle With A Changing

Landscape and Its Financial Realities

By John Simson1 and Ken Abdo2

It is nearly impossible to describe the momentous seismic shift that we have all witnessed over the past

fifteen years with each new technological development and method of delivering music to consumers; it

is probably enough to say that it’s been a hell of a ride!

Transactional music attorneys have seen the transformation of five major labels into three major

entertainment companies: no longer able to achieve the return on investment from CD sales that fueled

their enormous growth in the 1980’s and 1990’s, they have tried to re‐invent themselves as leaner,

more agile, marketers and branders of recording artists. Record company executives have long claimed

that it was record company money that built brands through the recordings they funded and released

together with the promotion and marketing they advanced and administered. Tour support was

frequently the only way that new bands could afford to tour and grow a fan base. Is it more surprising

that for decades record labels didn’t try to share in touring and that their attempts to share in other

revenue streams, most notably merchandize and publishing, were on a “right to match” another

company’s offer and not compelled under the terms of the record deal? Now it is expected that

1 John L. Simson was signed to Perception Records in 1971 as a singer/songwriter. He was recently named a Special Consultant for Artist Relations and Business Development by Kobalt Music to assist them in building a "neighboring rights" business (collecting artists' royalties around the world). Simson has practiced entertainment law since 1980 and, in 2011, joined Lommen Abdo Law Firm in an "of counsel" role. From 2001 through 2010, Simson served as Executive Director of SoundExchange, the first U.S. neighboring rights collecting society. Simson's career has also included managing country superstar Mary Chapin Carpenter, among others, as well as receiving an Emmy nomination for music supervision on the PBS "American Roots Music" television series. Over the past decade, Simson has become one of the leading spokespersons for the value of music and the importance of ensuring that artists receive fair pay for the use of their work by digital services. 2 Ken Abdo is Chair of Lommen Abdo Law Firm’s Entertainment Law Department which has served as

legal counsel to music, film, TV, theatre, literary publishing and media artists for over 27 years. Firm

clients include multiple GRAMMY award recipients, gold and platinum recording artists, as well as Oscar,

Emmy, Peabody and Spirit award winners. Ken’s focus is on music law and business over all media

platforms. Following earlier years as a musician and entertainer, his legal career has been recognized

for successful work with developing artists, legacy artists, and music artist estates. His commitment to

artist advocacy and the legal profession have led him to national leadership positions with The

Recording Academy, The American Bar Association among other organizations.

www.lommen.com / 800‐752‐4297

©2012 John L. Simson and Ken Abdo. All rights reserved. 2

recording agreements for new acts will contain “360” terms under which companies will participate in

some, if not all entertainment related revenue streams generated by the artists they sign.

When examining the lower margins generated by single downloads and the deconstruction of the CD

into individual digital download tracks, it becomes clear that the record companies’ return on

investment is far lower than in the past. This means there is now far less to invest in developing bands.

That critical development work is now left to the bands themselves or smaller independent labels. The

companies don’t want to get the ball rolling. They want to acquire rolling balls. What does this mean

for the lawyer who is asked to negotiate a deal? There is far less money now than was traditionally

advanced in all recording and publishing deals which leaves less for legal fees.

The challenge for artists to make a living (let alone a killing) in the digital world has been well

documented, with a new development emerging nearly each and every day. The resulting challenge for

the entertainment bar has been less visible and not nearly as compelling! Fewer major label deals and

less money in the deals that do happen has created angst amongst the transactional entertainment bar

and for good reason. Those who bill on a percentage of revenue with very successful clients who earn

significant amounts touring are less likely to be affected. But those whose stock and trade has been

shopping and negotiating “baby band” deals may need to rethink their business model.

For the well positioned practitioner, the shift in the creation and delivery of entertainment has created

new revenue opportunities. Music consumption is greater than it ever has been – even if it’s no longer

measured in CD sales or even digital download sales. More and more companies want to learn about

how they can use music, want to be involved in some way with recording artists and their brand. These

Companies know that licensing of these rights can be confusing and difficult and that they need experts

who can navigate these issues successfully.

The music economy and consumer habits are irrevocably moving from owning music to using music. As

we’ve transitioned from an industry of purchased goods to one of access, the “listens” and “plays” have

become the new purchases. Monetizing those uses has become paramount. The number of tracks

streamed daily by Pandora, Spotify and other online services is staggering. Billions, yes, billions of tracks

are being streamed daily. Revenue growth at Pandora and Sirius/XM Satellite Radio has been geometric.

Sirius/XM, which launched a little over a decade ago, generates over $3 Billion in annual subscriber

revenue in the United States alone and continues to grow in Canada and contributes about $250 Million

in revenue to SoundExchange for artists and labels and additional revenues to songwriters and

publishers. Pandora has not monetized as well as satellite radio but will still pay recording artists and

labels well over $100 Million in 2012, and Pandora only exists within the United States due to licensing

issues in other countries.

A recent NPD study quantified U.S. internet listening at 96 Million listeners per week while over‐the‐air

radio still remains dominant with around 240 Million weekly listeners. It is clear that internet radio

listening is growing quickly and that over‐the‐air radio is on a slow but steady decline. U.S. recording

artists certainly understand the importance of this shift as they are able to monetize their streams on

internet radio yet still are not paid from over‐the‐air radio spins. It is interesting to note that Clear


Channel has recently made private deals to share over‐the‐air radio revenues with artists and labels at

Big Machines Records and Glassnote Records in exchange for steep discounts in what they pay for their

online streaming. Will this trend continue with more and more labels signing private deals with the

larger radio conglomerates which are trying to build online radio services? If the radio chains are hoping

to give away some share in today’s terrestrial radio revenue in exchange for dramatically reduced rates

for streaming, it may be a wise business move. Though the terms of these private deals have not been

disclosed, sources claim that in exchange for a small pro‐rata share of over‐the‐air money, internet rates

have been slashed far below the rates that SoundExchange currently collects from broadcasters who

stream their signal on the internet. For Clear Channel and its “I Heart Radio” and CBS Radio, whose

properties include Last.fm and who stream for AOL and Yahoo, these deals may be fabulous investments

over the long term.

For the practitioner, this new area of revenue and growth requires a new found level of expertise: are

private deals in the marketplace going to replace collective management of rights? What should my

artists’ share of such deals be? Is the discount being given for online streaming too steep? Can I protect

my artist from these direct deals and ensure that they receive the equivalent of what they would have

received under statutory license? It has forced the attorney to become more aware of legislative and

regulatory battles, whether in Brussels, London or Washington, D.C. and to understand how these

skirmishes will affect their clients’ revenue streams in the end.

Another aspect of this shift in the music industry from purchases of goods to purchases of subscription

or access to ad‐supported listens is that the attorney must also become well‐versed in issues

surrounding subscription services like Spotify and Deezer... Should their clients participate in these

services or withhold rights if they can? While Spotify and its equity investors claim the evidence doesn’t

support the claim that they have a substitutional impact on sales, some major artists like Taylor Swift

and the Black Keys have withheld their content in recent months believing that these hold backs may

increase full sale downloads and increase their overall revenue by doing so. They reason that if one can

listen to a recording at anytime, why would that customer ever buy the recording? Consequently, these

artists have withheld rights to their recordings believing that they will sell more copies if they’re not

available as on‐demand streams.

For years it was understood that recorded music was a “penny business” over which pennies publishers,

writers, labels and artists would fight. What has developed in the last decade is a micro‐penny business

in which services like Pandora pay twelve hundredths of a penny per stream (2012 statutory rate for

Pureplay webcasters) and Spotify pays similarly small rates for each stream. The difficulty for the lawyer

is the increasingly longer agreements and concomitant work in a constricting music economy. Royalty

statements now fill thousands of pages. They contain incredible detail on a track‐by‐track basis which

when added up may total a thousand dollars for a small label, a hundred thousand dollars for a good

size independent and in the millions of dollars for a major (whose statements may be over 30,000 pages

long!)

How do lawyers adapt in this new economy? The traditional album deal was the reference standard in

the industry. Now, it may be a singles deal or a demo deal with far less money invested to control the


downside losses. Furthermore, the publishing deal that was often linked to the release of an album on a

major label is also in decline. The deconstruction of the CD means that consumers are more likely buying

the hits and not the entire album. Hence, publishers are selling one track and not 10 or 11. As the

economics force these deals into lower advances for writers and artists, the lawyers too must adjust

billing. Can an artist afford or even want to hire skilled attorneys at an hourly based fee for these deals

when the cost of legal fees may now be out of proportion with the advances? Is taking a percentage of

the deal the only way to make these fee arrangements work? If the percentage remains the same

(traditionally 5%‐10%) and the revenue is less, the lawyer is making less per transaction. In this way, the

impact of the new music economy on artists is symmetrical with their lawyer.

While there have been some landmark deals over the past decade between recording artists and “non‐

traditional” partners: Jay‐Z with LiveNation and Madonna with LiveNation, most notably, those are few

and exceptional. Perhaps what is most surprising is that we have not seen technology companies, in any

appreciable way, become the new record company. While talk of this emerging phenomenon was the

rage a decade ago, it simply has not happened. While technology companies have made some strategic

partnerships with artists, they are more similar to the endorsement or sponsorship deals of years past

and not groundbreaking or creating a new landscape for recording artists or their lawyers! We have

seen a few corporations add a record label to their product line, hoping to use music as a branding

experience, but we’ve seen those same attempts over the past thirty years with mixed success. Perhaps

those lawyers who have been dealmakers in the past with record companies and publishers need to

think more broadly about who their clients’ future partners might be.

Attorneys may also need to think more creatively about their clients’ traditional output. If the sale of

CD’s is in decline, why not sell the rights to your next CD to a major player, be they retail or service

business for their exclusive use? Imagine if Garth Brooks or Carrie Underwood’s next release was only

available to hear in‐store at Wal‐Mart or on Wal‐Mart’s website; Bruno Mars only available in H&M.

Newsflash: The demise of the major labels isn’t imminent. Yes, there are fewer and they are more

consolidated than ever, but that was the inevitable forces of the market at work when no one would

assist these large corporations in combating piracy and the theft of their works. Half as many people to

do twice as much work: the need for economies of scale is clear. What is also clear is that the three

remaining majors own huge catalogues of valuable recordings, many of which they will likely control for

many years to come: until 2067 in the United States (when the first copyright in sound recordings

attached in 1972, Congress provided that any “pre‐1972” work covered by common law or state

copyright would expire by 2047, later extended to 2067 by the Sonny Bono Copyright Extension

legislation) and roughly 2060 in Europe based upon the recent extension of sound recording copyrights

to seventy years. The potential reversion of sound recording copyrights in the U.S. commencing in 2013

may create another new growth area for the entertainment bar: whether in litigation over ownership of

sound recordings or in renegotiation with the current owners for the recovery of works in the future.

While most of the ink has been written about the decline of the majors and the piracy that has gutted

their sales, a parallel story has been the rise of the DIY artist who now has the tools to compete online

with major label artists. But has the evidence borne this out?


It is certainly true that we’ve seen a rise in companies designed to assist unsigned and independent

artists in all facets of their career: SonicBids, ReverbNation, TuneCore, CD Baby, the Orchard; digital

distributors like IODA, InGrooves and IRIS all trying to ensure that DIY and independent product is

available on digital services. But at what cost? What business model?

Many artists are forced to pay “load fees” to get their work uploaded. Many never recoup those fees.

While there have been one or two DIY major success stories, that is not the case for most artists who

fight day in and day out to emerge from a very cluttered and unfiltered universe. New filters are

emerging, whether blogs or the Music Genome Project or EchoNest or other services that try to assist

consumers in finding things they like. Tastemakers are still important, they matter. But as most artists

find out, sooner or later, it is hard to compete with artists on major labels who have hundreds of

thousands and sometimes millions of dollars behind them in marketing and promotional costs, not to

mention the relationships that these labels possess with the major television programs that showcase

new and developing artists alongside superstars.

The good news for niche artists and artists who in previous generations would have had a hard time

finding the money to record and an outlet for their recordings once finished, technology has made it

cheaper to record and it is easier to self‐release than it has ever been.

What is still a challenge is for these DIY artists to afford competent counsel who have been used to

charging “major label rates” and who are priced out of the DIY market. How does the entertainment bar

handles this new explosion of DIY artists who are in constant need of help but who can’t afford the

hourly rates of most entertainment law firms? While the agreements proffered by many of these new

companies are far shorter than major labels, the rights being requested are important and can have

serious consequences. Perhaps a discounted hourly or negotiated rate is offered, but often, when these

artists are quoted rates, even at the lower end of the experienced entertainment bar’s spectrum, they

simply turn away as they can’t afford the expense.

The transformation of the past decade has been monumental for our industry and the challenge to the

entertainment bar no less so. Acquiring new areas of expertise, whether they be in technology, in

regulatory matters affecting copyright and entertainment or in collective management of rights, have

been a positive development for the practicing entertainment attorney. But the challenges of a world

with new services daily, each with a different business model, some with no business model, and more

and more paper, whether in the form of contracts or royalty statements to examine and fewer and

fewer dollars for all but the most successful superstars has created an environment much different than

that which existed before the turn of the century. Lawyers must be more knowledgeable and creative

than ever to continue to expand their practices and to become even more effective advocates for those

they represent.

The Artist Attorney’s Expanded Role in the New Music Business1 By Kenneth J. Abdo2 The Old and the New Music Business The old music business started when Thomas Alva Edison’s words “Mary had a little lamb,” came scratching off a mechanical cylinder in 1877 thus birthing the gramophone and the recorded music era. About 100 years later in 1972, and occasioned by the commercial introduction of cassette tape technology, the U.S. Copyright Act was amended to create a Copyright in sound recordings. About 10 years later, in the mid 1980’s, vinyl records and cassette tapes began to be replaced by digital compact discs. About 10 years after that, in the mid 1990’s, CD sales dominated. By 2007, the full implication of alternative digital distributions was recognized as the industry started irrevocably turning away from physical music products as the economic standard. At this point, 130 years after it was created, the recorded music business lost its old groove. In the new music business, the entire concept of buying music to own is evaporating into the cloud and migrating into other digital platforms. Major recording companies have consolidated and downsized. The new music business is becoming more decentralized. Developing artists are finding ways to finance, record, distribute, and promote their recorded and live music performances effectively without the assistance and services provided through a traditional record company. All recording deals for new artists (and even re-negotiated deals for some established artists) are based on smaller recording funds (recording budget and advances) and required the artist to share revenues with the company from all artist income sources via the so-called 360 deals. American Idol, The Voice, The X-Factor and similar music/contest-based deals provide that winning contestants assign ownership and /or control of all recording merchandising, touring and management rights to the TV production entity or one of its subsidies. For a developing artist in general, there is less development money available under any recording, publishing and/or development deals. Furthermore, it is more difficult for developing artists to attract bona fide talent agents, personal managers, business managers, attorneys, record labels, and/or publishers until the artist proves they have real commerce, i.e., a demonstrated audience and the ability to pay for professional services. To distinguish themselves, artists must be extraordinary…for starters. They also must be more 1 Article appeared in Building Your Artist’s Brand as a Business (IAEL 2011) 2 Ken Abdo is Chair of Lommen Abdo Law Firm’s Entertainment Law Department which has served as legal counsel to music, film, TV, theatre, literary publishing and media artists for over 27 years. Firm clients include multiple GRAMMY award recipients, gold and platinum recording artists, as well as Oscar, Emmy, Peabody and Spirit award winners. Ken’s focus is on music law and business over all media platforms. Following earlier years as a musician and entertainer, his legal career has been recognized for successful work with developing artists, legacy artists, and music artist estates. His commitment to artist advocacy and the legal profession have led him to national leadership positions with The Recording Academy, The American Bar Association among other organizations. www.lommen.com / 800-7524297.

entrepreneurial. This reality will certainly create a new generation of artists that are perhaps as adept at business as they are at music. Most businesses are operated through a business entity and the entertainment business is no different. The corporate form is very common. For the purpose of understanding the functions of the artist’s advisory team, a comparison to the traditional executive team for companies may be useful. Other chapters in this collection explore such comparisons in greater detail. The major difference however is that traditional corporations usually engage key team members as full-time employees of the company. The artist’s team is comprised of independent advisors with whom the artist contracts for services. In this schematic and in this new and highly consolidated music business, the entertainment attorney’s role is akin to serving as the artist’s general counsel. The Artist’s Team

Agent: A music agent's work is generally limited to soliciting and procuring engagements for live performances, personal appearances, endorsements, sponsorships, and other entertainment related opportunities which can extend to reality television and film. In the U.S. agents are highly regulated and must be licensed. The rules and laws for same vary state to state.

Personal Manager: The artist's principal career advisor is the personal manager whose duties include daily management and strategic career development planning. They are usually fully involved with all artist business and logistics. Unlike agents, personal managers are not required to be licensed through state administrative agencies. Personal managers are usually engaged under a contract for a term of years and are paid a commission usually from 15% to 20% on a negotiated net income applicable to all entertainment revenue sources earned by the artist. A negotiated post-term sunset commission on net is also commonly paid. There are other important services provided to the artist which may be available through the management company or via the manager’s relationships. Such services may (or may not) be included in the personal management commission. The services may also be arranged with third parties who report to the personal manager such as a tour manager or an outside publicist. Other such third party services providers may include a technologists and social network staff, promotion and marketing executives, etc. As recording companies are downsized, management companies are providing (or arranging for such services directly)which were traditionally provided by the recording company. Sometimes the company will provide the artist additional funds for these services, to be managed by the manager, as a recoupable advance to the artist.

Business Managers: In the United States, most business managers are also Certified Public Accountants or have them in their firm. Their services are provided independently from the personal management company. Business managers work closely with personal managers to oversee the finances of the artist’s business including accounting for income, payment of expenses, bookkeeping, and filing tax returns. The fee for services is either on an hourly basis or, more commonly, 5% of the artist’s net revenue calculated essentially on the same basis as the personal manager’s commission. However, the services agreement is generally not for a pre-set term of time nor is there a post-term sunset provision.

Entertainment Attorneys: The artist’s entertainment attorney is engaged to negotiate contracts, render advice on legal and business matters, advocate the artist’s position, protect the artist’s legal interests, and oversee the work required and provided by other attorneys from time to time. The practice of entertainment law is broad. For a music artist whose career expands into multiple entertainment mediums and media (music, film, TV, theater, literary publishing, etc), domestically and internationally, a variety of legal expertise may be required. If the entertainment attorney’s firm does not provide this expertise, the entertainment attorney is generally charged with identifying and engaging outside counsel on behalf of the artist. Such legal services may include litigation, immigration, real estate, criminal defense, estate planning and more. The Expanding Entertainment Attorney’s Role

As general counsel of the artist’s brand and businesses, the entertainment

attorney’s role expands further when the artist enters into multiple agreements such as recording, distribution, music publishing, merchandising, sponsorships, endorsements, private financing, live performances (and their broadcast), etc. In addition, burgeoning and multiplying new digitally-based exploitation and distribution alternatives have necessitated the need for transactional attorneys to educate and advocate across many media platforms. In addition, the artist’s business may involve transactions or litigations in various jurisdictions both domestically and internationally.

With even minor success, an artist’s business and brand building

transactions are part of interstate and international commerce. It is now expected that the transactional entertainment attorney not only have substantive knowledge needed to negotiate contracts but that he/she has a complete understanding of the music business in general which includes all issues related to licensing matters on new and evolving digital platforms. New precedent is being established as licenses and these deals are often driven by new technologies.Attorneys are often a part of creating architecture and deal term precedents.

As the artist’s brand and businesses expand, so does the need to address other ancillary brand protection issues such as rights of publicity, privacy, and use of name and likeness. Counsel may be required on non-entertainment matters such as estate planning, family matters (from pre-nuptial agreements, adoption, to divorce and post divorce matters), wealth management, active and passive outside business investments, real estate transactions, and other legal matters. As the artist gets older and inevitably passes on, the estate matters are pronounced. The estate (with related control and governance issues) may become the client while attorneys work with family members, trustees, and personal representatives of the estate. Some attorneys are even appointed as trustees or personal representatives of these estates and perhaps heirs. Relationships are Essential

Some attorneys are more proactive than others with respect to identifying and bringing income producing and career enhancing opportunities to their clients by way of their relationships. In this regard, the attorney’s role may at times overlap those of the agent or managers. Such efforts may include seeking (or shopping) a recording agreement, packaging the artist to play on a hit television show for the purpose of promoting a song or album, connecting artists with others for co-writing, recommending various producers or other creative or business people for possible collaborations. Taking into account the foregoing, the entertainment attorney will work in tandem with the manager and/or the agent to help create symbiotic relationships among each other and with other third parties. In addition, because the attorney-client relationship is one built on the duty of loyalty and trust, the artist may look to the attorney to help build (or rebuild) a his/her team by recommending the artist to managers, business managers and agents with who the attorney may have established relationships.

Notwithstanding the proactive (non-legal) work they may be willing to undertake, the entertainment attorney is ultimately responsible for making sure all legal and business details are addressed and resolved. Attorney work is highly valued when all transactions are properly evaluated, documents are fully negotiated, and final agreements are fully distributed. As the artist brand expands across new products and in various countries, there also needs to be ongoing vigilance to make sure that registered rights are renewed, notice deadlines do not lapse, and intellectual property rights (including an artist’s name and likeness, publicity, and privacy rights) are protected. However, a particular entertainment attorney may be desirable just as much for who they may know as what they know because certain personal and strategic relationships help create opportunities and help expedite legal and non legal tasks. Compensation for Attorney Services

Attorney services are usually secured under the terms of a written agreement. Clients can terminate this agreement at any time subject to payment for services rendered. If the agreement provides for compensation based on an hourly rate, the rate for the attorney’s services should be stated in the agreement. Hourly rates for very experienced entertainment attorneys range from $300 to $500+ per hour.

Percentage or contingency fee (a fee dependent on an outcome) must be

in writing. A customary percentage fee ranges from 5% to 10% of a negotiated and defined net income earned by the client (often calculated similarly to the personal manager’s commission) or on a particular deal. The exact percentage depends on the value the attorney brings to the deal-making (perhaps including shopping or bringing the deal to the artist), the risk of time, and whether the attorney will be responsible for working on non-income generating tasks as well and income generating deals. The earning capacity of the client is also a factor. For example, it is reasonable with an established artist to take a lower percentage of the income than with a new act. Some arrangements are hybrid where a lower contingency fee is expected if coupled with a reduced hourly fee. In both the hourly rate and the contingency fee arrangements, the client usually pays the out-of-pocket costs specifically expended because of a direct need for an artist such as delivery costs, travel related costs, filing fees, etc. Larger costs usually require pre-approval by the artist as a condition for payment.

The client may pay the contingency fee for the attorney’s past services even after the representation is terminated. Depending on the nature of the work, the length of time services were rendered on a speculative fee basis and the actual income received by the attorney for this work, a negotiated sunset provision and payment may granted to an attorney. If the attorney provided general services on a contingent fee basis, the sunset period could extend from 6 months to perhaps as long as income may be received on certain transactions where the attorney helped to procure and secure a deal for the client.

In many states, contingent fee agreements must be in writing, signed by

the client, and state the method by which fees are to be determined, the percentage or percentages that shall accrue to the attorney in transactional matters or in litigation matters, in the event of litigated matters: settlement, trial, or appeal, The agreement must clearly notify the client of any expenses for which the client will be liable regardless of outcomes.

Most states in the U.S. require hourly and contingent fees to be

reasonable. Under the Model Rules promulgated by the American Bar Association, which are adopted in some form by most U.S. states, attorneys can consider the following criteria in determining a reasonable fee: “the time and labor required, the novelty and difficulty of the questions involved, the skill requisite to perform the legal service properly; . . . the fee customarily charged in

the locality for similar legal services; the amount involved and the results obtained; . . . the experience, reputation, and the ability of the attorney or attorneys performing the services required; and whether the fee is fixed or contingent.” These criteria offer attorneys great flexibility and protection in charging fees.

Conclusion

Representing music artists gives rise to opportunities to work with the artist’s team ranging from a strategic advisor on legally technical matters, to functioning as the general counsel charged with overseeing all legal matters affecting the artist’s professional career and personal matters. There are also opportunities to help expand the artist’s business and brand by assisting seeking and securing income producing opportunities. An experienced attorney is often the most familiar with the deal points and architect of various transactions. Along with this experience, many helpful relationships are developed. It is a business where attorneys are valued for not only what they know but who they know. As the new music business is becoming more decentralized and global, there there are fewer opportunities for developing artists to work with traditional recording companies. Contemporary recording, distribution and promotion options have created the ability for artists to self-develop and to operate artist-owned entertainment businesses creating he option to assign (or not) exploitation rights to other companies. Technology is creating new and expanding exploitation platforms for artist content. As a result, in the new music business, the entertainment attorney’s role is expanding axiomatically.

-end-

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