ATTENTION OLDIES STATIONS (OR OTHERS WHO PLAY PRE-72 RECORDINGS): Think Twice Before You Pony Up Three Years of Royalties Under New MMA Provision

Remember our April 4, 2019 "CALLING ALL OLDIES STATIONS!" post that alerted you to a simple form you could file to receive certain protections from potentially crippling infringement awards for unauthorized uses of sound recordings fixed before February 15, 1972 (aka "pre-72 recordings")? That post created quite a stir. In fact, we were flooded with questions from webcasters around the country about whether and how to sign up.

Now, there is another upcoming deadline - July 8, 2019 - for webcasters to take action to receive another potential benefit under the Copyright Act. Specifically, if webcasters who have streamed - but not paid for - pre-72 sound recordings from October 11, 2015 forward treat that activity as if it had been covered by federal law by providing notice of use of, and paying SoundExchange for, those recordings, they will be immune from potential state law infringement suits for that streaming (and related reproductions). But for reasons we'll explain below, this latest potential benefit applies to far fewer webcasters and is far less valuable than the benefit that we flagged for you in our earlier post. As always, do not treat this post as legal advice, and please consult an attorney should you need counsel on this issue.

This deadline and benefit, like those we wrote about in our prior blog, arise from the recently enacted Music Modernization Act (MMA). Before the October 11, 2018 effective date of that legislation, pre-72 recording owners were entitled to no copyright protection under federal law for those recordings. Instead, those recordings were subject to varying degrees of copyright protection - if any - under the patchwork laws of the various States.

That all changed with the passage of the MMA, which granted, for the first time, certain federal copyright protections to these recordings beginning on October 11, 2018. Pre-72 copyright owners welcomed this legislation, as they had met with mixed results, to say the least, in suing large webcasters for copyright infringement under state law. For example, courts in both New York and Florida flatly rejected such claims, finding that no public performance right existed under the laws of those states. Other States similarly rejected such claims.

(Even California, where one might expect the laws to be about as pro-copyright owner as anywhere given the large music and movie presence, the existence or nonexistence of a state public performance right in pre-72 recordings had not been finally decided. Although an early decision had favored the pre-72 recording owners, the question had been certified to the California Supreme Court in early 2017. After sitting on the issue for over two years, the Court dismissed the question on May 22, 2019, finding that it no longer needed to resolve that question in light of the MMA's passage.)

The grant of federal copyright protection to pre-72 recordings is a copyright owner's dream to overcome the difficulties they faced with pre-72 infringement litigation, and the relevant provision of the MMA sweetens the pot. It dangles the carrot of immunity from state infringement suits to pre-72 webcasters if they act as if all performances of those recordings for the past three years had been compensable under federal law by providing notice of use of, and paying SoundExchange federal statutory royalties for, all such performances. In other words, the provision gives pre-72 copyright owners a windfall of three years of federal statutory royalties that they are not legally entitled to if the implicated webcaster chooses to accept the statute's offer of immunity from state law infringement suits.

Before you open your checkbook and go running off to SoundExchange, consider the following, which may cause many, if not most, webcasters to reject this offer:

1. If you did not stream pre-72 recordings at all in the last 3 years, the provision is irrelevant, as you don't need to worry about a state infringement suit in the first place.
2. If you did stream pre-72 recordings in the last 3 years but you already paid SoundExchange for them even though you were not obligated to, the provision also is irrelevant because you already unnecessarily paid SoundExchange for streaming those recordings.
3. If you did stream pre-72 recordings and excluded them from your SoundExchange statutory royalty payments, but your streaming was focused in States that do not recognize a public performance right in those recordings, such as New York or Florida, the provision similarly is irrelevant, as pre-72 owners have no basis to sue you for infringement in those States.

It is only those webcasters who stream numerous pre-72 recordings to States that recognize - or likely would recognize - a state public performance right in pre-72 recordings and have not paid SoundExchange or the relevant copyright owners for these performances who should even think about paying what can best be termed "protection money." In this regard, we are not aware of any States where pre-72 recording owners have successfully litigated the pre-72 performance rights issue to a final, unappealable decision.

Even assuming that some States would recognize such a right (California remains a possible candidate), these webcasters still could make a business decision not to pay this protection money for the guarantee not to be sued under state law. Pre-72 recording owners would need to sue webcasters in each State where they believe they could establish a performance right, and, even if successful, they could only recover for the fraction of allegedly infringing performances made in that State. Given that those owners already have a federal right going forward, they may not be inclined to mount such an uphill - and fragmented - battle in the face of significant litigation uncertainty that such a right would even be recognized.

In summary, if you (a) streamed pre-72 recordings to States that may recognize a performance right, (b) excluded those recordings from your SoundExchange royalty calculations, and (c) are risk-averse, you may wish to pay the protection money for the protection from State infringement suits that this MMA provision offers. We urge you to consult a lawyer to receive advice specific to your circumstances. Remember that the clock is ticking - you only have until July 8 to decide how to respond, if at all, to this provision.