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,
V.
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 ELECTRONIC FRONTIER FOUNDATION IN
SUPPORT OF DEFENDANT-APPELLANT SIRIUS XM RADIO, INC.
Mitchell Stoltz
ELECTRONIC FRONTIER FOUNDATION
815 Eddy Street
San Francisco, CA 94109
Tel: (415) 436-9333
mitch@eff.org
Counsel for Amicus Curiae
August 18, 2016
i
RULE 500.1(f) CORPORATE DISCLOSURE STATEMENT
Amicus Curiae Electronic Frontier Foundation states that it does not have a
parent corporation and that no publicly held company owns 10% or more of its
stock.
ii
TABLE OF CONTENTS
RULE 500.1(f) CORPORATE DISCLOSURE STATEMENT .......................... i
STATEMENT OF INTEREST ........................................................................... 1
INTRODUCTION AND SUMMARY OF ARGUMENT .................................. 2
ARGUMENT ...................................................................................................... 4
I. A New Common-Law Right Of Public Performance Would
Have Far-Reaching Effect. ............................................................... 4
II. New York Copyright Law Should Be Interpreted
Consistently With Federal Law. ....................................................... 5
III. Expansions of Copyright Must Be Based On the
Demonstrated Need For Incentives; Unjustified Expansions
Harm Innovation and Access. .......................................................... 6
A. Retroactive Expansion of Copyright In Pre-1972
Recordings Creates No Incentive For Future Creativity. ........ 6
B. Modern Expansions Of Copyright Are Coupled With
Limitations; This Is A Task For The Legislature. ................... 7
IV. Creating A New Public Performance Right Would Harm
Innovation and Competition in Music Distribution ......................... 9
A. New Right of Public Performance in Pre-1972 Sound
Recordings Would Harm Innovation. ..................................... 9
B. Resolution of this Case in Favor of Flo & Eddie Will
Privilege Sirius XM and Shut Out Competitors;
Deference to the Legislature Avoids These Problems. ......... 12
iii
TABLE OF AUTHORITIES
Cases
Authors Guild v. Google, Inc.,
770 F. Supp. 2d 666 (S.D.N.Y. 2011) ..................................................... 8, 14
Broadcast Music, Inc. v. Columbia Broad. Sys., Inc.,
441 U.S. 1 (1979) ........................................................................................ 10
Capitol Records, Inc. v. Naxos of Am., Inc.,
4 N.Y.3d 540 (2005) ..................................................................................... 5
eBay Inc. v. MercExchange, L.L.C.,
547 U.S. 388 (2006) .................................................................................... 13
Flo & Eddie, Inc. v. Sirius XM Radio, Inc.,
62 F. Supp. 3d 325 (S.D.N.Y. 2014) ......................................................... 4, 8
RCA Mfg. Co., Inc. v. Whiteman,
114 F.2d 86 (2d Cir. 1940) ............................................................................ 4
Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417 (1984) ...................................................................................... 8
United States v. Broadcast Music, Inc.,
426 F.3d 91 (2d Cir. 2005) .......................................................................... 10
Williams v. Bridgeport Music, Inc.,
No. LA CV13–6004, 2015 WL 4479500 (C.D. Cal. July 14, 2015) .......... 13
Statutes
17 U.S.C. § 106 ..................................................................................................... 4
17 U.S.C. § 112 ................................................................................................. 7, 9
17 U.S.C. § 114 ........................................................................................... 7, 9, 11
17 U.S.C. § 301 ..................................................................................................... 7
Statute of Anne, 8 Anne, c. 19 (1710) .................................................................. 6
iv
Constitutional Provisions
U.S. Const. art. 1, § 8, cl. 8 ................................................................................... 6
Legislative Materials
H.R. Rep. 92-487 (1971) ...................................................................................... 7
Other Authorities
About ASCAP ...................................................................................................... 9
Digital Performance Right in Sound Recordings Act,
Pub. L. No. 104-39 (1995) .......................................................................... 11
Future of Music Coalition, “ASCAP-BMI Consent Decrees Fact Sheet,” ......... 10
Melville B. Nimmer & David Nimmer, 2 Nimmer on Copyright (2015) ............ 7
SoundExchange, About, http://www.soundexchange.com/about/ ..................... 11
Thomas Babington Macaulay, First Speech to the House of Commons on
Copyright (Feb. 5, 1841) ............................................................................... 6
U.S. Department of Justice, “Statement of the Department of Justice on the
Closing of the Antitrust Division’s Review of the ASCAP and BMI
Consent Decrees .......................................................................................... 10
1
STATEMENT OF INTEREST1
Amicus EFF is a nonprofit civil liberties organization that has worked for
over 25 years to protect consumer interests, innovation, and free expression in the
digital world. EFF is supported by tens of thousands of dues-paying individual
members. As part of its mission, EFF has often served as amicus in key copyright
cases, including American Broadcasting Companies, Inc. v. Aereo, Inc., No. 13-
461 (U.S. Supreme Court, filed Apr. 2, 2014); Kirtsaeng v. John Wiley & Sons,
Inc., No. 11-697 (U.S. Supreme Court, filed July 9, 2012); Golan v. Holder, No.
10-545 (U.S. Supreme Court, filed June 21, 2011, on behalf of the American
Library Association and other amici); Capitol Records, LLC v. Vimeo, LLC, No.
14-1048-cv (2d Cir., filed July 30, 2014); and Viacom Int’l Inc. v. YouTube, Inc.,
No. 13-1720-cv (2d Cir., filed Nov. 1, 2013). As an independent non-profit public
interest organization, EFF is not sponsored by any of the parties to this case.
EFF has a particular interest in a balanced copyright system that protects
freedom of expression and technological innovation against the chilling effects of
overbroad intellectual property laws, and from outcomes that entrench incumbent
businesses. Unlike the parties to this case, EFF represents the interests of small
innovators, who often lack the resources to litigate.
1 No party’s counsel authored this brief in whole or in part. Neither any party
nor any party’s counsel contributed money that was intended to fund preparing or
submitting this brief. No person other than amicus, its members, or its counsel
contributed money that was intended to fund preparing or submitting this brief.
2
INTRODUCTION AND SUMMARY OF ARGUMENT
Neither New York law nor federal law has ever granted a general, exclusive
right to perform sound recordings. Unlike reproduction, performance of sound
recordings is an activity that has remained free to the public, with only a few
carefully crafted and limited exceptions. Judicial creation of a new right of public
performance under New York common law in this case would be neither careful
nor meaningfully limited. Such a right would make illegal the broadcasts and
performances of pre-1972 recorded music done by radio stations, restaurants,
educational and religious institutions, and entrepreneurial businesses every day.
There is no need or valid justification for creating a new exclusive right in
recordings made over four decades ago.
Although judicial expansions of copyright were occasionally done in the
early days of sound recording technology, when the means of broadcasting were in
the hands of a few large, sophisticated entities, copyright today touches the
legitimate activities of millions, in New York and beyond. At the federal level,
where most copyright law resides today, relatively recent and limited rights of
public performance in digital audio transmissions include careful legislative
accommodations for a variety of rightsholders and users, reflecting many claims
upon the public interest that cannot be resolved in a single lawsuit among private
parties, as this proceeding contemplates.
3
The lessons of federal copyright law are these: first, copyright is expanded
only where needed to create incentives for new creative work; second, such
expansions are coupled with appropriate limitations ab initio; and third, such
expansions should not preclude technological and market experimentation or raise
barriers to entry for new music-based businesses. All of these concerns counsel
against creating a new exclusive right in this proceeding.
Creating a new general right of public performance in sound recordings
would also harm competition in the music services market. It would place
Sirius XM and other large broadcasters with ample resources in a privileged
position to continue broadcasting pre-1972 recordings. Any class action settlement
or judicially mediated license to broadcast a large catalog of these recordings will
likely be specific to Sirius XM or similarly situated music services. Unlike with a
statutory license such as those available under federal copyright, new music
services will not have access to a collective license to broadcast pre-1972
recordings, and will face a significant competitive disadvantage.
This Court should follow the considered, well-established example of
federal law by declining to create an unprecedented general right of public
performance in sound recordings, a task that must be left to the legislature, if one is
to be created at all.
4
ARGUMENT
I. A NEW COMMON-LAW RIGHT OF PUBLIC PERFORMANCE WOULD HAVE
FAR-REACHING EFFECT.
Flo & Eddie, the plaintiffs below, seek a new general, exclusive right of
public performance in all sound recordings that are subject to state law. This right
has not previously been recognized under New York or federal law. See RCA Mfg.
Co., Inc. v. Whiteman, 114 F.2d 86, 88 (2d Cir. 1940) (finding no common law
public performance right in sound recordings); 17 U.S.C. § 106 (granting a public
performance right in sound recordings, but only for performance via digital audio
transmission). Creating a new right of this sort would be “unprecedented . . . and
will have significant economic consequences.” Flo & Eddie, Inc. v. Sirius XM
Radio, Inc., 62 F. Supp. 3d 325, 352 (S.D.N.Y. 2014) .
Today’s landscape of music production and distribution, including
technologies to transmit high-quality sound over numerous communications media
to many kinds of devices, evolved in a world where sound recordings were
understood by all not to carry a general right of public performance.
The case giving rise to this certified question is a putative class action by
copyright holders, concerning common uses of sound recordings done every day
by many thousands of businesses and individuals. And the law’s present balancing
of creative incentives, competition concerns, access to musical culture, and
technological development—including the reservation of performance as an
5
unregulated activity, free to the public—has informed New York law to date. This
Court can and must consider the negative impacts that would flow from
announcing such a right for the first time.
II. NEW YORK COPYRIGHT LAW SHOULD BE INTERPRETED CONSISTENTLY
WITH FEDERAL LAW.
The questions before this Court concerning the historical absence of any
general right of public performance in sound recordings, the purported need for
new rights with respect to decades-old recordings, and the ways in which any such
rights are limited to preserve the rights and legitimate expectations of others, have
been considered intensely and extensively in the context of federal copyright law.
Given that “a page of history is worth a volume of logic,” Capitol Records,
Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540, 546, 830 N.E.2d 250 (2005) (quoting
New York Trust Co. v Eisner, 256 U.S. 345, 349 (1921) (Holmes, J.)), this Court
should look to the extensive work of Congress and the federal courts in defining
and limiting performance rights in sound recordings to inform its interpretation of
New York law. Federal law remains the best (and largely the only) reconciliation
of musicians’ and music producers’ rights with 21st-century technologies and
markets in the United States. Given the absence of controlling New York
precedent, this Court should apply the principles of limited expansion of copyright
from federal law.
6
III. EXPANSIONS OF COPYRIGHT MUST BE BASED ON THE DEMONSTRATED
NEED FOR INCENTIVES; UNJUSTIFIED EXPANSIONS HARM INNOVATION
AND ACCESS.
A. Retroactive Expansion of Copyright In Pre-1972 Recordings
Creates No Incentive For Future Creativity.
Retroactive creation of a public performance right in sound recordings made
before February 1972 would be inconsistent with copyright’s historical purpose.
Copyright, in U.S. law and the broader Anglo-American legal tradition, is intended
to foster the spread of knowledge and culture by creating incentives for artistic
production while avoiding, as much as possible, state-granted monopolies over
those products. Thus, the first modern copyright statute, the Statute of Anne, was
prefaced as “An Act for the Encouragement of Learning.” 8 Anne, c. 19 (1710);
see also Thomas Babington Macaulay, First Speech to the House of Commons on
Copyright (Feb. 5, 1841) (available at http://www.thepublicdomain.org/2014/07/2
4/macaulay-on-copyright/) (“[M]onopoly is an evil. For the sake of the good we
must submit to the evil; but the evil ought not to last a day longer than is necessary
for the purpose of securing the good.”). This purpose was reflected in the
Constitutional language granting Congress the power to make copyright law “to
Promote the Progress of Science and useful Arts.” U.S. Const. art. 1, § 8, cl. 8.
Consistent with that principle, courts and legislators have declined to expand
copyright absent some showing that further incentives are required, and then only
to the extent needed to create such incentives. For example, federal law recognized
7
a copyright in sound recordings only after the sale of recorded music had become a
primary source of income for musicians, and those copyrights did not include a
right of public performance. See H.R. Rep. 92-487, at 2-3 (1971), reprinted in
1971 U.S.C.C.A.N. 1566, 1567 (purpose of 1971 grant of copyright in sound
recordings was to provide a remedy against “widespread unauthorized
reproduction of phonograph records and tapes”). The “qualitatively new right” of
public performance via digital audio transmission that Congress created in 1995
applied only to a narrow range of performances. Melville B. Nimmer & David
Nimmer, 2 Nimmer on Copyright § 8.21[B], at 8-649 (2015). And that right was
substantially limited by statutory licenses for “non-interactive” transmissions. 17
U.S.C. §§ 112, 114.
Expanding the scope of New York copyright in recordings made before
February 15, 1972 cannot create incentives for the production of new works, as
new recordings are subject to federal law exclusively. 17 U.S.C. §§ 301(a), (c)
(preempting state copyright laws for recordings fixed after February 15, 1972).
This essential justification for extending copyright law is absent here.
B. Modern Expansions Of Copyright Are Coupled With Limitations;
This Is A Task For The Legislature.
As the district court in this case acknowledged, judicial creation of a new,
unlimited right of public performance in sound recordings under state law raises a
8
“specter of administrative difficulties,” and could even “make broadcasts of pre-
1972 recordings altogether unavailable.” Flo & Eddie, 62 F. Supp. 3d at 344. The
district court dismissed these serious issues by suggesting that courts in future
litigation can, in theory, craft limitations and exceptions to the newly created right.
Id. The problem with this approach is that new rights may affect the market
dramatically and immediately, while judicially created exceptions and limitations
will likely take decades to develop.
Creating rights independently of limitations that protect access, preserve
competition, and allow breathing room for innovation is contrary to decades of
careful legislative practice. When lawmakers expand copyrights, they have
consistently tied those expansions to appropriate limitations. Legislatures are best
equipped to balance the rights of recording artists, broadcasters, and the public, and
to consider the broader impacts of new technologies. See Sony Corp. of Am. v.
Universal City Studios, Inc., 464 U.S. 417, 429 (1984) (“[I]t is Congress that has
been assigned the task of defining the scope of the limited monopoly that should be
granted to authors or to inventors in order to give the public appropriate access to
their work product.”); Authors Guild v. Google, Inc., 770 F. Supp. 2d 666, 680
(S.D.N.Y. 2011) (Chin, J.) (“The Supreme Court has recognized that courts should
encroach only reluctantly on Congress’s legislative prerogative to address
copyright issues presented by technological developments.”).
9
IV. CREATING A NEW PUBLIC PERFORMANCE RIGHT WOULD HARM
INNOVATION AND COMPETITION IN MUSIC DISTRIBUTION
A. New Right of Public Performance in Pre-1972 Sound Recordings
Would Harm Innovation.
In order to engage in public performance of music, Sirius XM needs licenses
for the rights in the underlying musical compositions, which it typically obtains
through performance rights organizations (ASCAP, BMI, and SESAC). See, e.g.,
“About ASCAP,” http://www.ascap.com/about (accessed August 18, 2016) (“Our
licensees encompass all who want to perform copyrighted music publicly”). In
addition, because it performs recordings through digital audio transmission, Sirius
XM must obtain licenses to perform post-1972 sound recordings, typically federal
statutory licenses. See 17 U.S.C. §§ 112, 114.
In practice, any business or service wishing to perform multiple sound
recordings subject to an exclusive right, including radio stations and restaurants,
must use a statutory or collective license. For example,
ASCAP and the blanket license developed together out of the practical
situation in the marketplace: thousands of users, thousands of
copyright owners, and millions of compositions. Most users want
unplanned, rapid, and indemnified access to any and all of the
repertory of compositions, and the owners want a reliable method of
collecting for the use of their copyrights. Individual sales transactions
in this industry are quite expensive, as would be individual monitoring
and enforcement, especially in light of the resources of single
composers. Indeed . . . the costs are prohibitive for licenses with
individual radio stations, nightclubs, and restaurants, and it was in that
milieu that the blanket license arose.
10
Broadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 20 (1979)
(internal citation omitted). But the formation of ASCAP and BMI resulted in
“disproportionate power over the market for music rights.” United States v.
Broadcast Music, Inc., 426 F.3d 91, 93 (2d Cir. 2005). Consequently, since the
1940s, ASCAP and BMI have operated under antitrust consent decrees in order to
realize the benefits of collective licensing while at the same time minimizing
anticompetitive behavior. See U.S. Department of Justice, “Statement of the
Department of Justice on the Closing of the Antitrust Division’s Review of the
ASCAP and BMI Consent Decrees,” https:// www. justice. gov/ atr/ file/ 882101/
download (Aug. 4, 2016). Overall, the development of collective licensing for
these performance rights and addressing the antitrust concerns that resulted has
taken decades and remains contentious. See Future of Music Coalition, “ASCAP-
BMI Consent Decrees Fact Sheet,” http://www.futureofmusic.org/article/fact-
sheet/ascap-bmi-consent-decrees (August 4, 2016).
Comparably, when Congress created public performance rights for digital
audio transmissions of post-1972 recordings, it recognized the practical difficulties
licensees would face in needing to contract with myriad diverse (and often
unknown) rightsholders as well as the risk of collusive, anticompetitive behavior.
To address these issues, Congress simultaneously provided a mechanism that
would minimize licensing difficulties and limit anticompetitive conduct by
11
authorizing SoundExchange2 to collect and distribute royalties, with rates and
terms established by administrative law judges. See 17 U.S.C. §§ 114 (e), (f);
Digital Performance Right in Sound Recordings Act, Pub. L. No. 104-39 (1995)
(creating both the limited right of public performance in digital sound recordings
and a statutory licensing scheme).
As this history shows, licensing exclusive performance rights is complex,
and requires caution and supervision to avoid collusive behavior that harms
consumer welfare.
Significantly, uncertainty as to how users can obtain public performance
rights will chill the introduction of new innovations in music broadcasting and
distribution. New businesses, digital or otherwise, will face transaction costs and
uncertainty from the creation of a general public performance right, given that
there exists no collective licensing for pre-1972 recordings.
The risk of litigation will also chill innovation. Without a statutory license
and accompanying antitrust supervision, the only cost-effective way to collectively
license the newly created rights will likely be additional class action litigation. But
the risk and cost of such litigation will likely prevent small innovators from
entering the market, as the specter of uncertain damages and legal costs will loom.
2 SoundExchange is the “nonprofit performance rights organization that
collects and distributes digital performance royalties” pursuant to 17 U.S.C.
§ 114(e). See SoundExchange, About, http://www.soundexchange.com/about/ (last
visited Aug. 18, 2016).
12
Moreover, creating a new right would introduce new confusion into music
licensing. The majority of commercially significant sound recordings are now
within the ambit of federal law (including foreign works given federal protection
by the implementation of the Berne Convention), and it is relatively easy to license
music catalogs based on established federal rights. But the creation of additional
and much broader rights in state-protected, pre-1972 recordings makes the
licensing of broad and varied music catalogs (such as through performing rights
organizations) increasingly difficult, and potentially impossible for some users.
Users may have to license recordings on a state-by-state basis, or simply avoid
older recordings entirely.
In order to prevent this chilling of new innovation, if any right is to be
recognized, it should be done after careful consideration through the legislative
process.
B. Resolution of this Case in Favor of Flo & Eddie Will Privilege
Sirius XM and Shut Out Competitors; Deference to the
Legislature Avoids These Problems.
Radio stations, restaurants, live music venues, and online performers of
music have long thought themselves able to publicly perform pre-1972 music
without needing any sort of license from the performers of that music. These
businesses have conducted themselves accordingly, having never made payments
for performances that have never been subject to an exclusive right.
13
If this court creates a new exclusive right, any resolution of this matter will
likely place Sirius XM in a privileged position. Sirius XM, and others with
significant resources for litigation, will become the sole entities with the practical
ability to publicly perform pre-1972 recordings in New York. If Sirius XM settles
this case, presumably it will do so with the ability to continue to perform pre-1972
works. Even if it does not settle, the parties will likely establish an ongoing royalty
under court supervision instead of an injunction prohibiting such performances.
See, e.g., Williams v. Bridgeport Music, Inc., No. LA CV13–6004, 2015 WL
4479500, at *42-45 (C.D. Cal. July 14, 2015) (denying a permanent injunction
against infringer of sound recording, as any injury could be remedied through an
ongoing royalty); see generally eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388,
391 (2006) (applying traditional four-factor injunction test to claims for patent
infringement).
Unfortunately, many others such as college or religious broadcasters may
find that the new right threatens their ability to perform pre-1972 recordings at all.
They will have neither a collective license available to them nor the resources to
establish one through litigation. A new performance right is likely to cause the
consolidation of any market for the performance of pre-1972 sound recordings to a
privileged few. That outcome should give the Court pause.
The risk to competition has generated concern in the courts in analogous
situations. In Authors Guild v. Google, Inc., for example, then-district court Judge
Chin refused to approve a proposed class action settlement, where it would have
given substantial market power to the defendant. 770 F. Supp. 2d 666 (S.D.N.Y. ·
2011 ). Judge Chin recognized the valid objections by many parties, including the
Department of Justice~s opinion that "[t]he seller of an incomplete database ...
. . .
. . .
cannot compete effectively with the seller of a comprehensive product." /d. at 682.
This is precisely a concern here. Because of litigation risk and transaction ·
costs, small broadcasters will be forced to remove pre-1972 works from their
repertoires. They will be unable to compete with those who have the fmancial and
business clout to either survive litigation or establish a collective licens~, harming
small broadcasters and denying the public the benefits of robust competition.
EFF urges this Court to remove ·that risk by answering the certified question
in the negative.
DATED: August 18, 2016
,. Mitchell L. Stoltz
Electromc Frontier Foundation·
815 Eddy Street .
San Francisco, CA 941 09
Tel: (415) 436-9333
mitch@eff.org
Attorney for Electronic Frontier
Foundation
14
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