CTQ-2016-00001
Court of Appeals
of the
State of New York
FLO & EDDIE, INC., a California Corporation,
individually and on behalf of all others similarly situated,
Plaintiff-Respondent,
– against –
SIRIUS XM RADIO INC., a Delaware Corporation,
Defendant-Appellant,
DOES, 1 THROUGH 10,
Defendants.
––––––––––––––––––––––––––––––
ON APPEAL FROM THE QUESTION CERTIFIED BY THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT IN DOCKET NO. 15-1164-CV
BRIEF OF AMICUS CURIAE CBS RADIO INC.
MICHAEL LYNCH
JAMES SAYLOR
KELLEY DRYE & WARREN LLP
101 Park Avenue
New York, New York 10178
Tel.: (212) 808-7800
Fax: (212) 808-7897
ROBERT M. SCHWARTZ
(pro hac vice pending)
VICTOR JIH
(pro hac vice pending)
IRELL & MANELLA, LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Tel.: (310) 277-1010
Fax: (310) 203-7199
Attorneys for Amicus Curiae CBS Radio Inc.
Date Completed: September 2, 2016
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CORPORATE DISCLOSURE STATEMENT
PURSUANT TO COURT OF APPEALS RULE 500.1(F)
CBS Radio Inc. is a corporation organized under the laws of the State of
Delaware. Its principal place of business is New York, New York. It is a wholly
owned subsidiary, whose ultimate parent company is CBS Corporation.
9842361
CBS RADIO’S STATEMENT OF INTEREST
CBS Radio Inc. (“CBS”) has a material interest in the outcome of this case.
CBS owns and operates 117 radio stations across the United States. It also
operates one of the oldest and most-beloved “classic hits” radio stations in New
York City, WCBS-FM, as well as other “oldies” stations around the country. CBS
has broadcast pre-1972 sound recordings in New York for nearly 100 years, based
on the expectation and understanding of all parties that broadcasters have no
obligation to pay the owners of these recordings to do so.
CBS also is a defendant in a case filed in the Southern District of New York,
stayed pending this Court’s decision, concerning these same pre-1972 issues. ABS
Entertainment Inc., et al. v. CBS Corporation, et al., No. CV 1:15-06801-JGK. As
a result, CBS’s interests will be directly affected by any decision this Court
reaches. Should this Court find that a performance right for pre-1972 sound
recordings exists under New York common law, and extend that right to include
terrestrial broadcasts, it will materially impact CBS, other terrestrial broadcasters,
and the music industry as a whole.
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TABLE OF CONTENTS
INTRODUCTION .............................................................................................. 1
I. DEFINING THE SCOPE OF ANY COMMON LAW RIGHT
REQUIRES BALANCING THE COMPETING INTERESTS OF
ALL AFFECTED STAKEHOLDERS ..................................................... 4
II. THE SCOPE OF ANY PERFORMANCE RIGHT UNDER NEW
YORK COMMON LAW WOULD HAVE TO BE CLEARLY
DELINEATED AND LIMITED .............................................................. 7
A. Any Performance Right For Sound Recordings Should Not
Extend to Terrestrial Radio. ........................................................... 7
B. Any Performance Right Would Need To Differentiate
Between Types Of Performances. ................................................ 11
C. Any Performance Right For Sound Recordings Would Need
To Protect Recording Artists and Composers. ............................. 16
D. Any Performance Right In Sound Recordings Should Not
Apply To Authorized Derivative Works That Are Federally
Copyrighted. ................................................................................. 21
III. ALTERNATIVELY, THE COURT SHOULD DECLINE TO
RECOGNIZE A COMMON LAW PERFORMANCE RIGHT
AND DEFER THE BALANCING OF COMPETING INTERESTS
TO THE NEW YORK LEGISLATURE. .............................................. 24
CONCLUSION ................................................................................................. 27
9842361 - ii -
TABLE OF AUTHORITIES
Page(s)
Cases
ABS Entm’t., Inc. v. CBS Corp.,
No. CV 15-6257, 2016 WL 4259846 (C.D. Cal. May 30, 2016) ....................... 21
Baker v. Carr,
369 U.S. 186 (1962) ............................................................................................ 26
Beck Chevrolet Co., Inc. v. Gen. Motors LLC,
27 N.Y.3d 379 (2016) ........................................................................................... 5
Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics,
403 U.S. 388 (1971) ............................................................................................ 26
Bonneville Int’l Corp. v. Peters,
347 F.3d 485 (3d Cir. 2003) ............................................................................... 18
Broadcast Music, Inc. v. Claire’s Boutiques, Inc.,
949 F.2d 1482 (7th Cir. 1991) ............................................................................ 14
Buck v. Jewell-LaSalle Realty Co.,
283 U.S. 191 (1931) ............................................................................................ 13
Capitol Records, Inc. v. Naxos of Am., Inc.,
4 N.Y.3d 540 (2005) ........................................................................................... 22
Capitol Records v. Sirius XM Radio, Inc.,
No. BC 520981 (Sept. 11, 2013) .......................................................................... 9
Caronia v. Philip Morris USA, Inc.,
22 N.Y.3d 439 (2013) ..................................................................................... 6, 25
Duhan v. Milanowski,
75 Misc.2d 1078 (Sup. Ct. 1973) ........................................................................ 27
Flo & Eddie, Inc. v. Sirius XM Radio, Inc.,
821 F.3d 265 (2d Cir. 2016) ................................................................................. 2
Fortnightly Corp. v. United Artists Television, Inc.,
392 U.S. 390 (1968) ............................................................................................ 13
9842361 - iii -
Fox v. Marshall,
928 N.Y.S.2d 317 (2011) ...................................................................................... 5
Guice v. Charles Schwab & Co.,
89 N.Y.2d 31 (1996) ..................................................................................... 23, 25
Estate of Hemingway v. Random House, Inc.,
279 N.Y.S.2d 51 (Sup. Ct. 1967) .......................................................................... 6
Higby v. Mahoney,
48 N.Y.2d 15 (1979) ............................................................................................. 8
Jones v. Beame,
45 N.Y.2d 402 ..................................................................................................... 26
Klostermann v. Cuomo,
61 N.Y.2d 525 (1984) ......................................................................................... 25
Landon v. Kroll Lab Specialists, Inc.,
934 N.Y.S.2d 183 (2011) ...................................................................................... 5
Madden v. Creative Servs.,
84 N.Y.2d 738 (1995) ........................................................................................... 5
Motorola Credit Corp. v. Standard Chartered Bank,
24 N.Y.3d 149 (2014) ........................................................................................... 8
Ortega v. City of New York,
9 N.Y.3d 69 (2007) ............................................................................................... 5
Palladino v. CNY Centro, Inc.,
23 N.Y.3d 140 (2014) ......................................................................................... 26
People v. Morton,
132 N.Y.S.2d 302 (1954) ...................................................................................... 5
RCA Mfg. Co. v. Whiteman,
114 F.2d 86 (2d Cir. 1940) ................................................................................... 7
Stanley v. Amalithone Realty, Inc.,
940 N.Y.S.2d 65 (2012) ................................................................................ 23, 25
9842361 - iv -
Twentieth Century Music Corp. v. Aiken,
422 U.S. 151 (1975) ............................................................................ 6, 13, 14, 15
Waters v. N.Y.C. Hous. Auth.,
69 N.Y.2d 225 (1987) ........................................................................................... 5
Statutes
17 U.S.C. § 101 ........................................................................................................ 14
17 U.S.C. § 106 ........................................................................................................ 25
17 U.S.C. § 114 ........................................................................................................ 11
17 U.S.C. § 115 .................................................................................................. 21, 23
Copyright Act of 1909 ............................................................................................. 12
Copyright Act of 1976 ....................................................................................... 14, 15
Other Authorities
Copyright Office, 2014 Music Licensing Study: Second Request for
Comments, 79 Fed. Reg. 42,833 (July 23, 2014) .................................................. 8
Digital Performance Right in Sound Recordings Act of 1995:
Hearings Before the Subcomm. On Courts & Intellectual Prop. of
the H. Comm. on the Judiciary, 104th Cong. 31 (1995) .............. 7, 18, 19, 20, 21
H.R. Rep. No. 94-1476 (1976) ........................................................................... 14, 15
H.R. Rep. No. 94-1733 (1976) ........................................................................... 15, 19
In re Determination of Royalty Rates and Terms for Ephemeral
Recording and Webcasting Digital Performance of Sound
Recordings,
Dkt. No. 14-CRB-00001-WR (2016-2020) (Mar. 4, 2016) ............................... 22
Marc Rice, Aging rockers, record companies battle,
The Daily Gazette, March 23, 1994 .................................................................... 20
Mark R. Fratrik, How Will the Radio Industry Be Affected by Pre-
1972 Music Performers’ Fees (2015) ................................................................. 10
9842361 - v -
Music Licensing in Restaurants and Retail and Other Establishments:
Hearing before Subcommittee on Courts and Intellectual Property
of the H. Comm. on the Judiciary, 105th Cong. 4 (1997) .................................. 15
NOI: Federal Copyright Protection of Sound Recordings Fixed Before
February 15, 1972 (Doc. 2010-4, Jan. 31, 2011) ................................................. 9
The Performance Rights in Sound Recordings Act of 1995: Hearing
on S. 227 Before the S. Comm. on the Judiciary, 104th Cong. 73-
74 (1995) ............................................................................................................. 19
Peter DiCola, Money from Music: Survey Evidence on Musicians’
Revenue and Lessons about Copyright Incentives, 55 Ariz. L. Rev.
301 (2013) ........................................................................................................... 19
Staff of H. Comm on the Judiciary, 95th Cong., Performance Rights
in Sound Recordings (Comm. Print. 1978) ............................................. 17, 18, 25
U.S. Copyright Office, Copyright and the Music Marketplace: a
Report of the Register of Copyrights, (2015) (2d printing May
2016). .................................................................................................................... 9
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INTRODUCTION
For nearly 100 years, sound recordings have been broadcast on radio stations
without payment to the owner. Consistent with that practice, until February 2015,
no New York court has held that the owner of a pre-1972 commercially-released
recording has a common law right to control its performance. Over many years,
commentators—and the record companies themselves—have acknowledged that
no performance right exists at common law and that it is for the legislative branch
to decide whether to create one. For decades, the record companies lobbied
Congress to recognize a performance right to control the broadcast of their
recordings. Each time, composers and broadcasters opposed them. Each time,
Congress said no.
CBS agrees with Appellant Sirius XM Radio that no performance right
exists under New York common law and that there is no sound basis for the Court
of Appeals to create one now. But even if this Court were effect this sea-change in
the radio industry, that would not complete its work. The Second Circuit asked the
Court to answer a second question: If there is a performance right under New York
law, “what is the nature and scope of that right?” This amicus brief focuses on that
“scope” question. Not only must it be answered in its own right, but merely
attempting to answer it reveals many reasons why the common law cannot and
should not be the source of a sound recording performance right in the first place.
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The Second Circuit recognized that both certified questions raise “essentially
a public ‘policy choice.’” Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 821 F.3d
265, 270 (2d Cir. 2016). Thus, the Court must decide whether the public interest
would be served, not only by recognizing a performance right, but also by
whatever scope the Court were to afford that right. The Court will have to balance
the conflicting interests of all stakeholders, many of whom are not before the
Court, such as the composers of the works and the artists who performed them.
The scope question also raises questions of economics and the practical limits of
the common law to address problems that have been deemed better suited to the
legislative branch to solve. This brief addresses some of those myriad questions:
(1) Should a common law public performance right apply to terrestrial
radio (i.e., broadcasts initially made over AM or FM radio bands)?
(2) What should constitute a “performance” under New York common
law? Should it mean any performance, such as playing a pre-1972 recording in
one’s home or car? Or should it be limited to those performances that implicate
policy interests deemed to be deserving of compensation to the recording’s owner?
(3) Who should benefit from any common law performance right: just the
owners (as Respondent’s case has been framed) or also the artists who created the
recordings being performed (as Congress has required, in dealing with the digital
performance of post-1972 recordings)?
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(4) Should this right apply to an authorized derivative work that
incorporates a pre-1972 sound recording, such as a remastered version that so
changes the sounds the listener hears that it qualifies for federal copyright?
These are not academic issues. As noted in CBS’s Statement of Interest, the
New York federal courts are looking to this Court to provide answers to these
questions so that they can resolve currently pending cases.
Unfortunately, these questions do not lend themselves to easy answers. It
took Congress several decades, with substantial input from competing
stakeholders, and hearing after hearing, to decide whether to recognize any right in
a sound recording, and then how to define its scope. At first, in recognizing a right
to control the copying and distribution of sound recordings in 1971, Congress
rejected any form of performance right. It then took Congress another 26 years to
decide to allow a performance right for post-1972 recordings, but again only after
lengthy hearings, input from competing stakeholders, a detailed license scheme
and rate setting procedure, and an exemption for terrestrial radio broadcasts.
As to just the question of whether a common law performance right should
be extended to terrestrial radio, CBS contends that it should not. Doing so would:
(a) upset long-standing investments and expectations, (b) harm radio stations that
broadcast pre-1972 music and businesses that play the radio, (c) result in an
unjustified windfall for record companies at the expense of artists, composers, and
9842361 - 4 -
the public, and (d) conflict with federal law if applied to authorized derivative
works that are subject to federal copyright.
Flo & Eddie can be expected to argue that none of these considerations
should matter, on this or the three other questions raised by this brief. They will
say that the Court can sort them out, or leave it to other courts to do so—and
expect consistent outcomes. That is wishful thinking. Respondent asks the Court
to sit as a legislative body but, unlike Congress, to divine the answers to these
policy and economic debates based on as-yet-to-be-revealed assumptions and
preferences. To the extent the Court is unable to confidently make the same
determinations here that took Congress several decades to sort out, the Court’s
precedents caution that the Court should abstain, and defer any recognition and
scope of a performance right to the New York Legislature. As explained below,
that would be the better course on this issue.
I. DEFINING THE SCOPE OF ANY COMMON LAW RIGHT
REQUIRES BALANCING THE COMPETING INTERESTS OF ALL
AFFECTED STAKEHOLDERS
Flo & Eddie has argued that the common law should recognize a
performance right simply because people should not be able to “profit off the
property of others.” But deciding the proper scope of the common law is not
simply a matter of decreeing that a property right exists and then “provid[ing] an
avenue to redress wrongs”; it is a policy question that requires the Court to “weigh
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other judicial and social policy concerns.” Ortega v. City of New York, 9 N.Y.3d
69, 78-9 (2007); see Landon v. Kroll Lab Specialists, Inc., 934 N.Y.S.2d 183, 192
(2011), aff’d, 22 N.Y.3d 1 (2013). The Court must “consider the larger social
consequences.” Waters v. N.Y.C. Hous. Auth., 69 N.Y.2d 225, 229 (1987).
A New York court considering whether to recognize any common law right
must take into account not only the interests that the plaintiff seeks to vindicate,
but the broader societal and policy impact, as well. See Beck Chevrolet Co., Inc. v.
Gen. Motors LLC, 27 N.Y.3d 379, 389 (2016). This arises most frequently in the
tort context, where New York courts have repeatedly cautioned that a desire to
compensate for wrongs is only the beginning of the question—not the entire
question. Determining the proper scope of the common law requires a court to
balance the interests of all affected. See, e.g., Madden v. Creative Servs., 84
N.Y.2d 738, 746 (1995) (“Tort liability … depends on balancing competing
interests.”); Waters, 69 N.Y.2d 225, 229 (1987) (balancing interests in determining
scope of duty of care); People v. Morton, 132 N.Y.S.2d 302, 307-8 aff’d, 308 N.Y.
96 (1954) (balancing interests in recognizing larceny claim against husband); Fox
v. Marshall, 928 N.Y.S.2d 317, 322-24 (2011) (balancing interests in determining
scope of doctor’s duty of care).
Balancing is especially important when dealing with intangible intellectual
property rights. When a New York court was asked to recognize a common law
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copyright in oral conversations, it evaluated the impact that recognizing such a
right would have on the public interest. See Estate of Hemingway v. Random
House, Inc., 279 N.Y.S.2d 51, 60 (Sup. Ct. 1967), aff’d 23 N.Y.2d 341 (1968).
The court declined to recognize a right after considering the impact on freedom of
speech and the press, public access to information, society’s interest in historical
preservation, and encouraging and protecting intellectual labor. Id.; cf. Twentieth
Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975) (federal law reflects
similar balancing: “[t]he limited scope of the [composition] copyright … reflects a
balance of competing claims upon the public interest: Creative work is to be
encouraged and rewarded, but private motivation must ultimately serve the cause
of promoting broad public availability of literature, music, and the … arts”).
Admittedly, this Court has a tradition of evolving the common law where
justice requires it. But “that authority must be exercised responsibly” by “keeping
in mind” that there will be “foreseeable and unforeseeable consequences, most
especially the potential for vast, uncircumscribed liability.” Caronia v. Philip
Morris USA, Inc., 22 N.Y.3d 439, 450 (2013). As explained below, that is exactly
what would happen here. This Court should conclude that this is an area where it
should refrain from acting.
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II. THE SCOPE OF ANY PERFORMANCE RIGHT UNDER NEW
YORK COMMON LAW WOULD HAVE TO BE CLEARLY
DELINEATED AND LIMITED
A. Any Performance Right For Sound Recordings Should Not
Extend to Terrestrial Radio.
Until recently, New York law has never required terrestrial broadcasters to
pay for the performance of sound recordings. This understanding—whether rightly
or wrongly derived from RCA Mfg. Co. v. Whiteman, 114 F.2d 86 (2d Cir. 1940)—
was shared by broadcasters and the recording industry alike. As the Recording
Industry Association of America told Congress: “Under existing law, record
companies and performers … have no rights to authorize or be compensated for the
broadcast or other public performance of their works.” Digital Performance Right
in Sound Recordings Act of 1995: Hearings Before the Subcomm. On Courts &
Intellectual Prop. of the H. Comm. on the Judiciary, 104th Cong. 31 (1995), 1995
WL 371088, (“DPRA Hearings”).
All of the stakeholders relied on this mutual understanding of the common
law. Broadcasters built radio stations and networks, chose program formats,
negotiated with advertisers, and built relationships with record companies with the
understanding that there was no common law performance right. Similarly, both
the artists and the record companies that hired them negotiated their contracts with
no expectation that there would be performance royalties to share. Record
companies gave away their recordings to radio stations for free. Radio stations
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aired them without payment. Because there was no performance right, the industry
matured with no express licenses, no industry system for determining often-times
unclear question of ownership of sound recordings, no mechanism for setting,
collecting, or distributing royalties, and no arrangement for sharing any
performance royalties with the artists.
This Court has appropriately refrained from adapting or changing the
common law in ways that would disrupt similarly settled industry expectations.
See, e.g. Motorola Credit Corp. v. Standard Chartered Bank, 24 N.Y.3d 149, 162
(2014) (refusing to overrule the common law “separate entity” rule, given the
banking industry’s reliance on the rule when setting up operations in New York);
Higby v. Mahoney, 48 N.Y.2d 15, 18 (1979) (stating the courts’ power to alter the
common law may be limited considering “the extent and degree to which action
may justifiably have been taken in reliance”).
It again should refrain from doing so here. Changing the common law rule
would be highly disruptive. Not only would radio stations be saddled with an
unexpected and massive liability, it would profoundly change the way radio
stations broadcast pre-1972 music. To comply with such a law, each broadcaster
would have to identify the owner(s) of each recording it wanted to play. This is
not an easy task. There is a “lack of standardized and reliable data related to the
identity and ownership of musical works and sound recordings.” Copyright Office,
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2014 Music Licensing Study: Second Request for Comments, 79 Fed. Reg. 42,833,
42,834 (July 23, 2014).1 Even if those owners could be identified and located,
each broadcaster would have to negotiate the terms of a license for each recording.2
The Court cannot make any assumptions as to whether more efficient licensing
approaches might arise over time, much less whether they would pass antitrust or
other scrutiny.
Because these new transaction costs and royalties would apply only to pre-
1972 recordings, the economic uncertainty and disruption would disincentivize the
airplay of these recordings and the public’s exposure and access to them. As
1 The four major record companies claimed in a lawsuit seeking to recognize a
sound recording performance right California law that they own 80% of the pre-
1972 recordings that have meaningful value. See Capitol Records v. Sirius XM
Radio, Inc., No. BC 520981 (Sept. 11, 2013). But even as to those recordings,
tortious ownership transfers and conflicting ownership claims are common. See
Comments of Recording Industry of America and American Association of
Independent Music, on NOI: Federal Copyright Protection of Sound Recordings
Fixed Before February 15, 1972 (Doc. 2010-4, at 26, Jan. 31, 2011), http://www
copyright.gov/docs/sound/comments/initial/20110131-RIAA-and-A2IM.pdf
2 Under federal law, terrestrial broadcasters are required to pay performance
royalties to only the composer, while digital broadcasters are required to pay
performance royalties for post-1972 sound recordings to both the composer and the
record owner and artists. Because industry participants have believed that there is
no common law performance right for recordings, no performing rights
organizations exist to track ownership of these recordings, as there are for
composers, such as ASCAP or BMI. And unlike the federal statutory scheme,
New York does not have the compulsory license, rate-setting boards, royalty
tribunals, or collection agents, such as Sound Exchange, that Congress established
in 1995 to minimize the transaction costs for the limited performance right for
digital distribution of post-1972 recordings. U.S. Copyright Office, Copyright and
the Music Marketplace: a Report of the Register of Copyrights, 85 (2015) (2d
printing May 2016).
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plaintiffs note, this includes some of the most iconic music ever recorded, from
Louis Armstrong, Billie Holliday, and Frank Sinatra, to the Beatles, the Rolling
Stones, Jimi Hendrix, the Beach Boys, and on and on. A change in the common
law that reduces the public’s exposure and access to this music, by imposing terms
of use that have not existed in the nearly 100 years during which radio stations
have been playing the records that record companies gave them, must take that
disruption into account.
The Court cannot assume that the additional costs that would be attached to
the terrestrial radio broadcast of pre-1972 recordings can be just “passed on” to
listeners or someone else. As to listeners, terrestrial stations operate on the public
airways and have no contractual relationship with listeners and no means by which
they can charge them for listening to their programs. Mark R. Fratrik, How Will
the Radio Industry Be Affected by Pre-1972 Music Performers’ Fees 2 (2015),
http://www.biakelsey.com/pdf/impactofpre72musicroyalties.pdf.
As to advertisers, for the Court to assume that broadcasters could simply
pass on these added royalty costs to advertisers, the Court would have to believe
that the demand for radio advertising time is fully inelastic. This assumes that
radio advertisers would willingly pay more for the same amount of time on a pre-
1972 station, instead of buying less time, or moving their advertising budgets to
cheaper destinations—namely to stations that do not play pre-1972 songs. The
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common law cannot evolve intelligently on the basis of such counterintuitive
assumptions. And as a result of real world consequences, the recognition of a
performance right would discourage and reduce the public’s access to and interest
in pre-1972 music, which would hurt many stakeholders, including composers and
performing artists, as discussed below in Section C.
For these and other reasons, when Congress finally recognized a limited
performance right for sound recordings in 1997, it limited the right to post-1972
recordings and exempted terrestrial broadcasts. 17 U.S.C. § 114(d)(1)(A). If this
Court were to recognize a performance right for pre-1972 recordings, it would
likewise need to exempt terrestrial broadcasts.
B. Any Performance Right Would Need To Differentiate Between
Types Of Performances.
Were the Court to recognize a performance right in sound recordings,
someone listening to a pre-1972 recording in their car (whether on radio or CD)
would be violating the owner’s rights. The same would be true for the person
playing a record at a backyard barbeque. Such results would be absurd. Record
companies have not manufactured and sold pre-1972 records and CDs to be used
as Frisbees and drink coasters. People buy their products to listen to them. And
they do not expect to need to buy an additional license to do so.
To prevent the common law performance right Respondent seeks from
sweeping that far, Respondent needs the Court to limit any such right. But
9842361 - 12 -
Respondent has offered no basis under which the common law could distinguish
between these types of performances. It would not suffice to simply tack on the
word “public” before the word “performance” and expect that addition to provide
meaningful guidance. New York common law does not recognize legal
distinctions between a “public” performance and a “non-public” performance.
Does the common law exempt the person listening to the radio in the car but not
the person listening to the radio at work, if it can be heard by others? Is there a
common law limit on the number of people who can hear one CD player, above
which they need a license? Does that apply to music played at a private party?
What does the common law say about needing a license for music heard in an
elevator at City Hall? While these questions may be posed rhetorically, they are
certainly not hypothetical.
In deciding cases under the U.S. copyright laws, federal courts have had
trouble distinguishing consistently between types of performances, particularly
when asked to determine whether a performance was “public.” In three cases
interpreting the 1909 Copyright Act, the Supreme Court grappled with what
constitutes a “public” performance and came out with different (and arguably
conflicting) results. As explained below, Congress was dissatisfied with the
outcomes, and changed the law in the 1976 Act. Each case illustrates the risks that
would arise in New York for those who listen to the radio, were the Court to adopt
9842361 - 13 -
a performance right, even if limited to what it might label a “public” performance.
See Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191 (1931) (wiring hotel rooms to
a master radio constituted a public performance); Fortnightly Corp. v. United
Artists Television, Inc., 392 U.S. 390 (1968) (cable company amplifying and
transmitting a television broadcast did not publicly perform the work); Aiken, 422
U.S. 151 (1975) (playing a radio attached to four speakers in a restaurant was not a
public performance).
Aiken highlights the need to exempt individuals and businesses that play the
radio from a performance right, which should be of equal concern to the Court
here: “a ruling that a radio listener ‘performs’ every broadcast that he receives
would be highly inequitable” because “a person … would have no sure way of
protecting himself from liability for copyright infringement except by keeping his
radio set turned off. For even if he secured a license from ASCAP, he would have
no way of either foreseeing or controlling the broadcast of compositions whose
copyright was held by someone else.” Id. at 162. The Supreme Court also noted
that a rule that a radio user “performs” the underlying work would be “at odds”
with the goal of the Copyright Act to “accomplish the double purpose of securing
to the composer an adequate return for all use made of his composition and at the
same time prevent[ing] the formation of oppressive monopolies.” Id. at 163-64 If
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this Court were to recognize a performance right for sound recordings, the same
issues would have to be resolved.
Shortly after Aiken, Congress passed the 1976 Copyright Act. In so doing, it
“rejected Aiken’s rationale,” but adopted its result. See Broadcast Music, Inc. v.
Claire’s Boutiques, Inc., 949 F.2d 1482, 1487 (7th Cir. 1991). The 1976 Act
defined “perform publicly” more broadly as:
To perform or display a work “publicly” means—
(1) to perform or display it 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
(2) to transmit or otherwise communicate a performance or display
of the work to a place specified by clause (1) or to the public, by
means of any device or process, whether the members of the public
capable of receiving the performance or display receive it in the
same place or in separate places and at the same time or at different
times.
17 U.S.C. § 101. Not wanting to stifle personal use, however, Congress created
the so called “home-style exemption,” based on “the particular fact situation in the
Aiken case.” See H.R. Rep. No. 94-1476 at 87 (1976). Section 110(5) of the 1976
Act thus excludes from “public performance” the:
(5) communication of a transmission embodying a performance or
display of a work by the public reception of the transmission on a
single receiving apparatus of a kind commonly used in private
homes, unless—
(A) a direct charge is made to see or hear the transmission; or
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(B) the transmission thus received is further transmitted to
the public.
Copyright Act of 1976, Pub. L. No. 94-553, § 110(5), 90 Stat. 2541 (1976).
Congress stated that the purpose of this carve-out was to “exempt from copyright
liability anyone who merely turns on, in a public place, an ordinary radio or
television receiving apparatus.” H.R. Rep. No. 94-1476 at 86 (1976). The
Conference Report on the bill added that “the intent … is that a small commercial
establishment of the type involved in … Aiken, which merely augmented a home-
type receiver … would be exempt.” H.R. Rep. No. 94-1733 at 75 (1976).
In 1997, Congress revisited section 110(5) to clarify lingering ambiguity.
The bill’s sponsor, Representative Sensenbrenner, argued that “[b]usinesses should
not be charged for music outside their control…. They should not be forced into
doing business with every licensing society demanding a fee.” Music Licensing in
Restaurants and Retail and Other Establishments: Hearing before Subcommittee
on Courts and Intellectual Property of the H. Comm. on the Judiciary, 105th Cong.
4 (1997). The guidelines were the result of a “very long” legislative history with
“legislative reports [that] specifically talk about factories, restaurants, bars and
those kinds of establishments where you would expect to find a license.” Id. at 22,
Testimony of Copyright Register.
If the Court were to recognize a public performance right, it would have to
give similar guidance to New Yorkers—especially small businesses—who play the
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radio. Otherwise, individuals and small business owners face the prospect of
liability for simply turning on a radio station that happens to play a pre-1972 song.
New York residents would either have to forgo the radio (to avoid that risk) or
engage in the impossible task of trying to license the performance of songs they
hear on the radio—when there is no performing rights organization, no blanket
license, no compulsory license, no rate-setting organization, or any mechanism for
doing so. The problem here is that, given the absence of common law rules, the
Court has no principled basis on which to recognize such distinctions.
C. Any Performance Right For Sound Recordings Would Need To
Protect Recording Artists and Composers.
Because the purpose of the common law is to advance the public interest, the
recognition of a performance right must be based on a clearly identifiable public
benefit. Presumably, Respondent intends to reward the recording artists who
created pre-1972 recordings. While admirable, that is not the automatic
consequence of recognizing a performance right. In fact, it would be just the
opposite.
Retroactively recognizing a common law performance right when no one in
the industry ever believed there was one would not benefit recording artists or
other creators. It would instead result in a windfall for the record companies that
own the recordings. Congress was aware of this problem. It enacted a statutory
scheme to benefit performers, even though they do not own the recordings. As
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with the rights of radio listeners, Respondents have left the Court to legislate
solutions to problems that are beyond the scope of common law to provide.
The problem arises from the fact that most of the artists who created pre-
1972 sound recordings bargained away their ownership decades ago in an
environment where “there [was] nothing to bargain over because [no one had] any
property interest in the … use of the record.” Staff of H. Comm on the Judiciary,
95th Cong., Performance Rights in Sound Recordings 824 (Comm. Print. 1978)
(“1978 Report”), Comments of Jack Golodner, Executive Secretary of the Council
of AFL-CIO Unions for Professional Employees. Those artists had no expectation
of a performance right and negotiated their original deals based on revenue from
“the sale of the record.” Id. Further, the record companies that own these sound
recordings today are not necessarily the ones originally involved in their creation;
rights have been bought and sold over the years, never with the expectation of a
performance right or royalty.3 Ironically, while the recognition of a performance
3 The Copyright Office has commented on the fact that efforts to expand rights for
sound recordings largely have been driven by the record companies and not
necessarily by the artists. Discussing the comments it received in anticipation of
its thousand-page 1978 Report, the Copyright Office noted that “we have had a
great amount of comments from big industry representatives … but we really have
not had any response at all from individual performers.” 1978 Report at 889. At
each new development in copyright law, the main proponents of increased
performance rights are not individual performers, but rather record labels and trade
groups. See also DPRA Hearings at 55 (statement of Edward P. Murphy,
President and C.E.O., National Music Publishers’ Association, Inc.), 1995 WL
371086.
9842361 - 18 -
right would enrich the record companies, it would harm the artists who created the
recordings:
First, record companies have traditionally urged terrestrial radio stations to
play pre-1972 music to maintain public interest in the music and to drive sales of
records. See Bonneville Int’l Corp. v. Peters, 347 F.3d 485, 487 (3d Cir. 2003)
(“The recording industry and broadcasters existed in a sort of symbiotic
relationship wherein the recording industry recognized that radio airplay was free
advertising that lured consumers to retail stores where they would purchase
recordings.”). Given that recording artists based their contracts largely on the sale
of records, any change that discourages airplay, and thus the sale, of pre-1972
records harms the artists. 1978 Report at 824.
Second, to the extent an original recording artist was also the composer,
discouraging airplay would also reduce the revenue the artist receives from
performances of the composition. The interests of composers and the record
companies are not aligned. When Congress held hearings to discuss a performance
right, composers’ rights organizations specifically requested that Congress avoid
negatively impacting their income streams. See 1978 Report at 108 (Broadcast
Music, Inc. (“BMI”) stated it would not support a performance right unless “we are
assured that the position of BMI writers and publishers will not be adversely
affected.”); DPRA Hearings at 55 (1995) (statement of Edward P. Murphy,
9842361 - 19 -
President and C.E.O., National Music Publishers’ Association, Inc.), 1995 WL
371086, (Concerned that “the existing rights of music creators and copyright
owners are not jeopardized.”); id. at 47 (1995) (statement of Wayland Holyfield,
Composer and Member, American Society of Composers, Authors and Publishers),
1995 WL 371087, (“[T]here is one overriding concern that we have—the new right
being granted should not in any way diminish or affect the existing rights of
songwriters and music publishers. After all, a song can exist without a recording,
but a recording cannot exist without a song.”).
This is not an abstract concern. Royalties from compositions comprise
nearly 40% of revenue for many musicians. Peter DiCola, Money from Music:
Survey Evidence on Musicians’ Revenue and Lessons about Copyright Incentives,
55 Ariz. L. Rev. 301, 329 (2013). Composers have warned that a performance
right in sound recordings would give record companies the ability to “prevent [a
composer’s] music from being freely performed,” thus potentially diminishing the
royalties upon which those composers currently make their living. The
Performance Rights in Sound Recordings Act of 1995: Hearing on S. 227 Before
the S. Comm. on the Judiciary, 104th Cong. 73-74 (1995) (statement of Kurt
Bestor, Professional Composer, Songwriter, and BMI Affiliate), 1995 WL 100532.
Third, many artists rely on concert ticket sales to make a living. DiCola at
329 (live performances comprise 40% of revenues for musicians in rock, pop,
9842361 - 20 -
country, folk, and all other non-jazz non-classical genres). Public performance on
terrestrial radio is a critical driver for those sales. Terrestrial radio has provided
“exposure of musical recordings to the buying public through free broadcasting”
which is “a critical part of the promotion of records, tapes, CDs, music videos and
concert tickets.” See DPRA Hearings at 86 (1995) (statement of the National
Association of Broadcasters), 1995 WL 371107. Older recording artists in
particular rely on ticket and merchandise sales to support themselves in their later
years, often being “forced to eke out a living playing shows on the oldies circuit.”
See Marc Rice, Aging rockers, record companies battle, The Daily Gazette, March
23, 1994 (http://tinyurl.com/zhsmxca, last visited August 15, 2016).
The Second Circuit asked this Court to address the real-world consequences
of recognizing any performance right for sound recordings. Were the Court to
recognize such a right, it would need to define it in a way that properly balances
the interests of record companies, artists, composers, broadcasters, and the public.
Congress balanced those interests by exempting terrestrial radio from any public
performance right, particularly since the industry had evolved with no expectation
of such a right. See 141 Cong. Rec. S945-02 (daily ed. Jan. 13, 1995) (statement
of Sen. Hatch), 1995 WL 15600 at *S948 (“it is … true that long-established
business practices within the music and broadcasting industries represent a highly
9842361 - 21 -
complex system of interlocking relationships which … should not be lightly
upset.”).
For the newer digital broadcasts, Congress required that at least 50% of the
royalties collected from digital broadcasters under the Digital Performance Rights
Act be paid to the performing artists—45% to featured artists, 5% to backup
musicians and session players—regardless of which entity owns the sound
recording. See 17 U.S.C § 115. The common law does not provide instructions on
how to set these rules. But if the Court were to recognize a performance right, it
would need to address these issues to avoid awarding a windfall to record
companies that harms composers and recording artists in the process.
D. Any Performance Right In Sound Recordings Should Not Apply
To Authorized Derivative Works That Are Federally
Copyrighted.
Were the Court to recognize a common law performance right, it would need
to clarify whether that right extends to authorized derivative works. As the district
court found in ABS Entm’t., Inc. v. CBS Corp., No. CV 15-6257, 2016 WL
4259846 at *9 (C.D. Cal. May 30, 2016), many of the original pre-1972 sound
recordings have been remastered, remixed, or edited into new post-1972 recordings
that are governed exclusively by federal copyright law. Plaintiffs have argued that
New York common law applies not only to the original pre-1972 sound recording
but also to any post-1972 sound recording that incorporates elements of the
9842361 - 22 -
original work, even if it is an authorized derivative work. Although the issue arose
over remastered sound recordings, it applies to any authorized derivative work,
including movies and TV shows.
This Court would need to confirm that any common law right applies to only
the original pre-1972 sound recording and does not extend to authorized derivative
works that are otherwise governed by federal copyright law.4 Otherwise, New
York common law would come into conflict with federal copyright law.
The reason plaintiffs have argued state common law still applies to post-
1972 recordings is to circumvent the federal copyright law’s compulsory license
scheme. Congress created the compulsory license for digital broadcasters to
enable “eligible webcasters … to perform sound recordings without an individual
license from the copyright owner, provided they pay the statutory royalty rates.”
In re Determination of Royalty Rates and Terms for Ephemeral Recording and
Webcasting Digital Performance of Sound Recordings, Dkt. No. 14-CRB-00001-
WR (2016-2020) 2 (Mar. 4, 2016). Congress created SoundExchange to collect
and distribute those pre-set royalties to allow digital broadcasters to run their
businesses intelligently and cost-effectively. 17 U.S.C § 115. Similarly, Congress
intended for terrestrial broadcasters to be able to perform post-1972 sound
4 Where the creation of the derivative work has not been authorized, state common
law would still govern. See Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d
540 (2005) (unauthorized derivative works).
9842361 - 23 -
recordings without paying any public performance royalty. The application of
state law in creating a performance right would directly conflict with these
purposes.
Where allowing a state law cause of action would create a “potential
collision” with federal law, New York courts have declined to recognize such a
cause of action. Guice v. Charles Schwab & Co., 89 N.Y.2d 31, 49 (1996)
(refusing to recognize plaintiffs’ common-law causes of action because “[i]t would
be extraordinary for Congress, after devising an elaborate [] system that sets clear
standards, to tolerate common-law suits that have the potential to undermine” that
system); Stanley v. Amalithone Realty, Inc., 940 N.Y.S.2d 65, 70 (2012) (refusing
to allow “state law challenges to the judgment of Congress and the FCC” because
of “the need to preclude the conflict between state and federal law that would arise
were we to entertain plaintiff’s state law claims.”).5
III. ALTERNATIVELY, THE COURT SHOULD DECLINE TO
RECOGNIZE A COMMON LAW PERFORMANCE RIGHT AND
DEFER THE BALANCING OF COMPETING INTERESTS TO THE
NEW YORK LEGISLATURE.
Determining the proper scope of any public performance right would require
answering numerous empirical, normative, and logistical questions. Empirically,
the Court would need to determine, for example, whether a performance right
5 For purposes of avoiding preemption, New York courts treat common law causes
of action as “being no different from claims based on a state statute or state
regulation.” Stanley, 940 N.Y.S.2d at 68, n.2.
9842361 - 24 -
would reward performing artists or result in a windfall to record companies,
whether a performance right would reduce the airplay of “oldies” and reduce the
public’s access to pre-1972 works, and whether a performance right would
decrease overall revenue to artists and composers. Normatively, the Court would
need to choose between the interests of record companies and composers, decide
whether small businesses should be able to turn on the radio, decide whether New
York even cares about public access to pre-1972 music, and decide whether it is
important to reward the original recording artists who bargained away their rights
with no expectation of a public performance right. Logistically, the Court would
need to address how to minimize transaction costs when there is no recordation
system to establish ownership, compulsory license, rate-setting board or
performing rights organization.
These are not simple tasks. For example, in 1976, Congress directed the
Copyright Office to study the issue of a public performance right in sound
recordings and its effects on society. It took the Copyright Office two years, five
public hearings, hundreds of comment letters, and over 1,000 pages to respond.
See 1978 Report. To determine the economic impact of a public performance right
on terrestrial broadcasters, the Copyright Office read “26,838 records concerning
the financial reports” from over 5,500 AM and FM licensed stations, as well as
advertising rates and expenditures. Id. at 86. To determine the economic impact
9842361 - 25 -
of a public performance right on artists, the Copyright Office analyzed a national
survey of employment and earnings of performers. Id. at 62. Even with this
comprehensive analysis, Congress still took until 1995 (with many proposed bills
in the interim) to create a limited digital public performance right. 17 U.S.C. §§
106, 114-115.
If the Court is not confident in its answers to these questions, then it should
defer the recognition and definition of any public performance right to the
Legislature. This Court has deferred when “[t]he Legislature is plainly in the
better position to study the impact and consequences of creating such a [right].”
Caronia, 22 N.Y.3d at 452. This is especially appropriate when many of the
policy issues are ultimately normative choices between competing stakeholders
and competing policy objectives. “[P]olicy-making and discretionary decisions …
are reserved to the legislative and executive branches,” not the judiciary.
Klostermann v. Cuomo, 61 N.Y.2d 525, 541 (1984). Indeed, courts should abstain
where it is “impossib[le] [to] decid[e] without an initial policy determination of a
kind clearly for nonjudicial discretion.” Baker v. Carr, 369 U.S. 186, 217 (1962);
see generally Jones v. Beame, 45 N.Y.2d 402, 408; Palladino v. CNY Centro, Inc.,
23 N.Y.3d 140, 152 (2014).
Like other courts, this Court lacks the tools available to the Legislature to
ensure that any public performance right does not harm the public interest. The
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Legislature has the ability, if it wants, to enact compulsory licenses, authorize
collection agents like SoundExchange, or mandate sharing of revenue between the
owner of sound recordings and the original artists. Cf. Bivens v. Six Unknown
Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 411-12 (1971) (Burger,
C.J., dissenting) (arguing that the Court may achieve “a better result … by
recommending a solution to Congress” as the legislature “has the facilities and
competence for [legislative tasks] as [the Court] do[es] not.”).
Ultimately, as this Court has recognized, “the court as a policy matter …
will abstain from venturing into areas if it is ill-equipped to undertake the
responsibility and other branches of government are far more suited to the tasks. …
[A]bstention [is] a recognition that the tools with which a court can work, the data
which it can fairly appraise, [and] the conclusions which it can reach as a basis for
entering judgments, have limits.” See Jones, 45 N.Y.2d at 408-09. Indeed, here
we may be faced with a “complete inadequacy of our judicial system to solve such
a complex issue,” because the matter “requires study in depth and resolution by a
comprehensive statutory enactment.” Duhan v. Milanowski, 75 Misc.2d 1078,
1083-84 (Sup. Ct. 1973).
CONCLUSION
For the foregoing reasons, CBS Radio urges this Court to decline to extend a
right of public performance to pre-1972 sound recordings, or in the alternative, to
9842361 - 27 -
limit the scope of any right to exclude terrestrial radio broadcasts and to carefully
limit its scope to avoid harming public access, businesses, composers, and
recording artists.
Dated: September 2, 2016 Respectfully submitted,
By_____________________
Robert M. Schwartz
ROBERT M. SCHWARTZ (pro hac)
VICTOR JIH (pro hac)
IRELL & MANELLA, LLP
Michael C. LYNCH
JAMES B. SAYLOR
KELLEY DRYE & WARREN LLP
Attorneys for Amicus Curiae
CBS Radio Inc.