On December 20, 2016, the New York Court of Appeals ruled in favor of defendant Sirius XM Radio, Inc., in holding that there is no right of public performance under New York state law for pre-1972 sound recordings. The decision, Flo & Eddie, Inc. v. Sirius XM Radio, Inc. (2016 NY Slip Op 08480), constitutes a big win for Sirius XM, which has been litigating this issue for the past three years in New York as well as in California and Florida.

Copyright interests in sound recordings are subject to a murky combination of state and federal laws. Sound recordings produced after 1972 are protected by the US Copyright Act. Since 1995, those post-72 recordings have been subject to a right of public performance by means of digital audio transmission (with certain key exemptions). “Pre-72” sound recordings are protected, if at all, by state law.

However, not until recently did artists begin arguing that pre-72s should be entitled to royalties under state law when played over the air via satellite or the Internet. Members of the 1960s rock band The Turtles (of “Happy Together” fame), brought class actions in New York, California and Florida to get courts to recognize and apply a public performance right under the laws of these states.

In holding that New York state law does not recognize a right of public performance, the Court of Appeals reasoned that New York’s common-law copyright protection only prevents copying, “but does not prevent someone from using a copy, once it has been lawfully procured, in any other way the purchaser sees fit.” Slip op. at 10. The court observed that “it would be illogical to conclude that the right of public performance would have existed for decades without the court recognizing such a right as a matter of state common law, and in the absence of any artist or record company attempting to enforce that right in this state until now.” Id. at 12. The court also noted that whereas federal copyright for sound recordings comes with a complex mandatory licensing and rate-setting scheme, states seem ill-equipped to address these issues without legislative intervention. The court did leave open the possibility of an unfair competition claim for the plaintiff.

The majority opinion acknowledged that technological changes have “rendered it more challenging for the record companies and performing artists to profit from the sale of recordings,” Id. at 13, but did not find this fact, alone, sufficient to create a common-law performance right. The majority opinion also reasoned that to find such a right would deprive the public of access to pre-72 songs, in turn depriving artists of the promotional benefits of airplay, including concert ticket and merchandise sales—all of which “have replaced record sales as the performers’ primary sources of income.” Id.

One interesting aspect of the decision was Judge Fahey’s concurring opinion, which agreed that New York common law does not recognize a right of public performance for sound recordings, but with the caveat that “‘public performance’ does not include the act of allowing members of the public to receive the ‘on-demand’ transmission of particular sound recordings specifically selected by those listeners.” Slip op. at 16 (Fahey, J., concurring). In the opinion, Judge Fahey observed that the term “public performance” is not as easy to define in the current digital landscape as it was in a “technologically simpler time.” Id. He observed a “continuum” of five types of access to sound recordings: AM/FM (“terrestrial”) radio, Internet radio (e.g., Pandora), subscription broadcast services (e.g., Sirius XM), interactive/on-demand services (such as Apple Music) and, finally, purchases of copies of the recordings (e.g., CDs, iTunes downloads). Id. He described the on-demand services as essentially renting the sound recording to the listener to instantly enjoy its use, which is a substitute for the purchase of that recording. He reasoned that “[t]o allow a user to regularly, specifically, and directly access an exact sound recording ‘on-demand’ is not to facilitate the ‘public performance’ of such recording, but to publish that work and therefore to infringe upon the right of the copyright holder to sell it.” Id. at 19. Judge Fahey concluded that “the evolution of technology should be accompanied by the evolution of the law,” which, to him, requires recognition that “the rental or lease of sound recordings fixed prior to February 15, 1972 by Internet broadcasters who provide the public ‘on-demand’ access to such recordings is a form of publication under copyright law.” Id. at 20.

Judge Fahey’s view was not, of course, adopted by the majority, and the authors are aware of no federal court that has held that on-demand services’ playback of tracks constitutes “publication” rather than “performance.” Nor are we aware of any such court holding that on-demand services engage in copying and/or distribution(a more apt counterpart to New York state’s “publication” right) rather than pure performance of sound recordings. Indeed, there is much uncertainty on this issue in the musical works context, where several notable industry players like the Digital Media Association have previously sought to settle the issue by referring the question as a novel issue of law to the Register of Copyrights. See Motion of [DiMA] Requesting Referral of a Novel Material Question of Substantive Law (filed January 7, 2008).

In any event, it will be interesting to see how California and Florida courts tackle this issue in the coming months, including whether the logic of Judge Fahey’s concurring opinion gains traction. These decisions will have enormous implications for radio stations, satellite radio, non-interactive services and on-demand services alike.