Source: https://casetext.com/brief/204b55a4-flo-eddie-inc-a-california-corporation-individually-and-on-behalf-of-all-others-similarly-situated-respondentvsirius-xm-radio-inc-a-delaware-corporation-appellant-does-1-through-10-defendants-brief-7
Timestamp: 2020-07-11 01:52:15
Document Index: 356142671

Matched Legal Cases: ['§ 106', '§ 112', '§ 114', '§ 301', 'art. 1', '§ 8', '§ 106', 'art. 1', '§ 8', '§ 8', '§ 112', '§ 301', '§ 112', '§ 114', '§ 114']

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 \