Streaming Pre-'72 Recordings Not Piracy Under Georgia Law

Art Sheridan, founder of Chicago's Chance Records and Sabre Records, holds the contracts and intellectual property rights to dozens of recordings made in the 1950s and 1960s. Last September — after iHeart's attorneys argued that the Sheridans' claims should be tossed because the state of Georgia precludes radio and television broadcasts from being considered a form of record piracy — U.S. District Judge Leslie Abrams asked the Georgia Supreme Court whether Internet streaming could be considered a form of radio broadcast exempt from the state record piracy law — the Criminal Reproduction and Sale of Recorded Material statute, OCGA §16-8-60.

The state Supreme Court heard oral arguments earlier in 2017. (See,”Pre-1972 Recordings Case Against Sirius In GA Hits Spotlight,” Katherine Hayes Tucker and Zack Needles, Entertainment Law & Finance, March 2017, p. 5 (http://bit.ly/2ovOixZ). The state high court has now answered the certified question with a unanimous yes.

Supreme Court Justice Harold Melton, noted: “First, with regard to user experience, iHeartRadio is nearly identical to terrestrial AM/FM radio. For example, one of iHeartMedia's internet services, 'simulcast,' concurrently broadcasts the exact programming offered by its terrestrial radio stations over the internet. The only difference for the listener is that the music would be accessed through an internet-connected device such as a smartphone or computer, rather than a traditional radio receiver. iHeartMedia's other radio service, which allows users to 'build' their own station around a particular song, band, genre, etc., provides for more user input, but is not an on demand service, and ultimately resembles someone selecting a terrestrial AM/FM station based on the station's advertised genre of music. Therefore, from the perspective of the listener, a shift from an AM/FM radio to an internet radio service would mean only minor changes to the user's experience.”

Justice Melton wrote that online music streaming services qualify as “a related use” to a radio broadcast transmission and that streamed sound recordings are “qualitatively the same” as traditional AM/FM radio broadcasts even though “some technological differences exist.”

He emphasized that iHeart's online broadcasts offer music tracks “for a single use” that remain on a listener's electronic device only temporarily. “There is,” he concluded, “no significant difference in either the user experience or the nature of the broadcast of sound recordings between terrestrial AM/FM and internet transmissions of the type offered by iHeartMedia in this case.”

In a footnote, Justice Melton noted that the U.S. Court of Appeals for the Second Circuit in New York in a similar case against Pandora Media defined online music streaming as “radio,” regardless of any technological differences between traditional radio and Internet broadcasts. (See, In re Pandora Media Inc., 785 F.3d 73 (2d Cir. 2015).)

In District Judge Abrams' order certifying the question to the Georgia Supreme Court, the federal judge noted that the U.S. Court of Appeals for the Eleventh Circuit in Atlanta considered a similar case in Florida against Sirius XM Radio and deferred to the state Supreme Court of Florida to interpret Florida's statute on pre-1972 recordings. (See, Flo & Eddie Inc. v. Sirius XM Radio Inc., 827 F.3d 1016 (11th Cir. 2016).) The Florida high court will hear oral arguments in that case later in 2017.

The Sheridans have filed more than a dozen similar actions in California, New York, Florida, New Jersey and Illinois challenging the right of music streaming services to make pre-1972 music recordings available to listeners without licensing agreements or royalty payments. iHeart Media is represented by: Daniel Griffin and Michael Kohler at Atlanta's Miller & Martin; Latham & Watkins attorneys Andrew Gass and James Lynch in San Francisco; and former U.S. Solicitor General Gregory Garre and Jonathan Ellis in Washington, DC.

The Sheridans' counsel in the federal case — California attorneys Tony Abner of Abner & Fullerton and Justin Sobodash and attorneys Matthew Galin and Howard Foster of Chicago's Foster PC — argued that as technology has changed, so must the concept of recording piracy. “In the digital age, piracy takes on a digital form,” they contended in a federal pleading, calling iHeart's ability to earn millions of dollars in advertising on its pre-1972 music broadcasts “modern-day corporate piracy.”

Meanwhile, the U.S. Court of Appeals for the Ninth Circuit has asked the California Supreme Court for help in deciding a dispute over pre-1972 sound recordings. A Ninth Circuit panel wants California's high court to weigh in on guidance on both California statutory and common law.

“We agree with our sister circuits that certification is the best way to proceed on these issues, especially in California,” a panel comprising Judges Stephen Reinhardt, Richard Paez and visiting Judge Paul Friedman of the District of Columbia wrote. “As an incubator of both musical talent and technological innovation, California has a significant interest in the appropriate resolution of the certified questions.”

The California Supreme Court wasn't obliged to take up the case, but the Ninth Circuit made a hard sell: The court promised that a state supreme court decision would resolve not only an anti-SLAPP motion presently on appeal, but the underlying claims being litigated by Flo & Eddie Inc. against Pandora Media.

The outcome of the Ninth Circuit case, Flo & Eddie Inc. v. Pandora Media Inc., 15-55287, could also affect a $99 million class action settlement with Sirius that is contingent on various appellate outcomes. California Civil Code §980 grants sound recording owners “an exclusive ownership in the representation or expression thereof.”

After federal law expanded to include copyright protection for sound recordings made from Feb. 15, 1972, forward, the California Legislature responded by granting authors “exclusive ownership” of pre-1972 recordings.

The Ninth Circuit said it's not crystal clear that “exclusive ownership” means the right to exclude all unauthorized uses. “There is no precedent, much less controlling precedent, from either the California appellate courts or the California Supreme Court to guide our court's inquiry,” the appeals court stated. The appeals court further noted that a New York district court decision favoring Flo & Eddie was reversed after the Second Circuit certified the case to the state's highest court. Flo & Eddie Inc. v. Sirius XM Radio Inc., 849 F.3d 14 (2d Cir. 2017).

Specifically, the Ninth Circuit asked the California Supreme Court to clarify whether Calif. Civ. Code §980(a)(2) or state common law provides an exclusive right of public performance. If the answer to either question is yes, the appeals court added, “the district court's ruling [in favor of Flo & Eddie in Flo & Eddie Inc. v. Pandora Media Inc., 2014cv07648 (C.D.Calif. 2015)] must be affirmed, and Flo & Eddie's claims granted.”

Latham & Watkins partner Gregory Garre argued the appeal for Pandora. Gradstein & Marzano partner Henry Gradstein argued for Flo & Eddie.

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R. Robin McDonald writes for the Daily Report, an ALM sibling of Entertainment Law & Finance. Scott Graham is the Appellate Reporter for The Recorder, the San Francisco-based ALM sibling of this newsletter.

The Georgia Supreme Court ruled that media companies streaming music recordings made prior to Feb. 15, 1972, over the Internet without paying royalties or licensing fees aren't violating the state's criminal record piracy law.

The ruling is a win for iHeartMedia, owner of hundreds of AM and FM radio stations across the country, and for iHeartRadio, a radio streaming service that currently has 100 million registered users and allows listeners to customize their music selections and access them for through a variety of electronic devices. iHeart Media Inc. v. Sheridan, S17Q0345.

The Georgia high court's ruling stems from a case now pending in the U.S. District for the Middle District of Georgia where iHeartMedia was sued by former Chicago record company owners Art Sheridan and Barbara Sheridan over iHeart's Web broadcasts of vintage doo-wop, jazz and rhythm & blues recordings to which the Sheridans hold the rights. Sheridan v. iHeartMedia Inc., 1:2015cv00160.

Art Sheridan, founder of Chicago's Chance Records and Sabre Records, holds the contracts and intellectual property rights to dozens of recordings made in the 1950s and 1960s. Last September — after iHeart's attorneys argued that the Sheridans' claims should be tossed because the state of Georgia precludes radio and television broadcasts from being considered a form of record piracy — U.S. District Judge Leslie Abrams asked the Georgia Supreme Court whether Internet streaming could be considered a form of radio broadcast exempt from the state record piracy law — the Criminal Reproduction and Sale of Recorded Material statute, OCGA §16-8-60.

The state Supreme Court heard oral arguments earlier in 2017. (See,”Pre-1972 Recordings Case Against Sirius In GA Hits Spotlight,” Katherine Hayes Tucker and Zack Needles, Entertainment Law & Finance, March 2017, p. 5 (http://bit.ly/2ovOixZ). The state high court has now answered the certified question with a unanimous yes.

Supreme Court Justice Harold Melton, noted: “First, with regard to user experience, iHeartRadio is nearly identical to terrestrial AM/FM radio. For example, one of iHeartMedia's internet services, 'simulcast,' concurrently broadcasts the exact programming offered by its terrestrial radio stations over the internet. The only difference for the listener is that the music would be accessed through an internet-connected device such as a smartphone or computer, rather than a traditional radio receiver. iHeartMedia's other radio service, which allows users to 'build' their own station around a particular song, band, genre, etc., provides for more user input, but is not an on demand service, and ultimately resembles someone selecting a terrestrial AM/FM station based on the station's advertised genre of music. Therefore, from the perspective of the listener, a shift from an AM/FM radio to an internet radio service would mean only minor changes to the user's experience.”

Justice Melton wrote that online music streaming services qualify as “a related use” to a radio broadcast transmission and that streamed sound recordings are “qualitatively the same” as traditional AM/FM radio broadcasts even though “some technological differences exist.”

He emphasized that iHeart's online broadcasts offer music tracks “for a single use” that remain on a listener's electronic device only temporarily. “There is,” he concluded, “no significant difference in either the user experience or the nature of the broadcast of sound recordings between terrestrial AM/FM and internet transmissions of the type offered by iHeartMedia in this case.”

In a footnote, Justice Melton noted that the U.S. Court of Appeals for the Second Circuit in New York in a similar case against Pandora Media defined online music streaming as “radio,” regardless of any technological differences between traditional radio and Internet broadcasts. (See, In re Pandora Media Inc., 785 F.3d 73 (2d Cir. 2015).)

In District Judge Abrams' order certifying the question to the Georgia Supreme Court, the federal judge noted that the U.S. Court of Appeals for the Eleventh Circuit in Atlanta considered a similar case in Florida against Sirius XM Radio and deferred to the state Supreme Court of Florida to interpret Florida's statute on pre-1972 recordings. ( See , Flo & Eddie Inc. v. Sirius XM Radio Inc. , 827 F.3d 1016 (11th Cir. 2016).) The Florida high court will hear oral arguments in that case later in 2017.

The Sheridans have filed more than a dozen similar actions in California, New York, Florida, New Jersey and Illinois challenging the right of music streaming services to make pre-1972 music recordings available to listeners without licensing agreements or royalty payments. iHeart Media is represented by: Daniel Griffin and Michael Kohler at Atlanta's Miller & Martin; Latham & Watkins attorneys Andrew Gass and James Lynch in San Francisco; and former U.S. Solicitor General Gregory Garre and Jonathan Ellis in Washington, DC.

The Sheridans' counsel in the federal case — California attorneys Tony Abner of Abner & Fullerton and Justin Sobodash and attorneys Matthew Galin and Howard Foster of Chicago's Foster PC — argued that as technology has changed, so must the concept of recording piracy. “In the digital age, piracy takes on a digital form,” they contended in a federal pleading, calling iHeart's ability to earn millions of dollars in advertising on its pre-1972 music broadcasts “modern-day corporate piracy.”

Meanwhile, the U.S. Court of Appeals for the Ninth Circuit has asked the California Supreme Court for help in deciding a dispute over pre-1972 sound recordings. A Ninth Circuit panel wants California's high court to weigh in on guidance on both California statutory and common law.

“We agree with our sister circuits that certification is the best way to proceed on these issues, especially in California,” a panel comprising Judges Stephen Reinhardt, Richard Paez and visiting Judge Paul Friedman of the District of Columbia wrote. “As an incubator of both musical talent and technological innovation, California has a significant interest in the appropriate resolution of the certified questions.”

The California Supreme Court wasn't obliged to take up the case, but the Ninth Circuit made a hard sell: The court promised that a state supreme court decision would resolve not only an anti-SLAPP motion presently on appeal, but the underlying claims being litigated by Flo & Eddie Inc. against Pandora Media.

The outcome of the Ninth Circuit case, Flo & Eddie Inc. v. Pandora Media Inc., 15-55287, could also affect a $99 million class action settlement with Sirius that is contingent on various appellate outcomes. California Civil Code §980 grants sound recording owners “an exclusive ownership in the representation or expression thereof.”

After federal law expanded to include copyright protection for sound recordings made from Feb. 15, 1972, forward, the California Legislature responded by granting authors “exclusive ownership” of pre-1972 recordings.

The Ninth Circuit said it's not crystal clear that “exclusive ownership” means the right to exclude all unauthorized uses. “There is no precedent, much less controlling precedent, from either the California appellate courts or the California Supreme Court to guide our court's inquiry,” the appeals court stated. The appeals court further noted that a New York district court decision favoring Flo & Eddie was reversed after the Second Circuit certified the case to the state's highest court. Flo & Eddie Inc. v. Sirius XM Radio Inc. , 849 F.3d 14 (2d Cir. 2017).

Specifically, the Ninth Circuit asked the California Supreme Court to clarify whether Calif. Civ. Code §980(a)(2) or state common law provides an exclusive right of public performance. If the answer to either question is yes, the appeals court added, “the district court's ruling [in favor of Flo & Eddie in Flo & Eddie Inc. v. Pandora Media Inc., 2014cv07648 (C.D.Calif. 2015)] must be affirmed, and Flo & Eddie's claims granted.”

Latham & Watkins partner Gregory Garre argued the appeal for Pandora. Gradstein & Marzano partner Henry Gradstein argued for Flo & Eddie.

*****
R. Robin McDonald writes for the Daily Report, an ALM sibling of Entertainment Law & Finance. Scott Graham is the Appellate Reporter for The Recorder, the San Francisco-based ALM sibling of this newsletter.