Second Circuit Gives Belated Valentine’s Day Gift to Music Licensees by Ruling for Sirius XM Regarding Its Use of Pre-72 Sound Recordings

We previously told you about the Christmas gift that New York's highest state court had given to licensees that play "oldies" recordings by finding that the owners of those recordings had no right to demand payment when the recordings were publicly performed in New York. That ruling came in one of many lawsuits that Flo & Eddie - a company owned by two members of The Turtles (of "Happy Together" fame) - had filed against Sirius XM Radio challenging Sirius XM's use of sound recordings created before February 15, 1972.

[Recall that February 15, 1972 is a magic date because sound recordings fixed on or after that date are protected by federal copyright law. Sound recordings fixed before that date are protected - if at all - under the widely varying state copyright laws, with state-law protection expiring on February 15, 2067.]

The Second Circuit has now followed suit by giving licensees a belated Valentine's Day gift - it has found for Sirius XM on each of Flo & Eddie's claims, which ends Flo & Eddie's New York lawsuit.

Flo & Eddie had not merely challenged Sirius XM's performances of pre-72 recordings under New York copyright law. It also had challenged Sirius XM's making of internal copies of those recordings to facilitate the performances under New York copyright law and had alleged that Sirius XM's use of pre-72 recordings amounted to "unfair competition." The Second Circuit gave short shrift to both of these claims, citing its holding earlier in the case that the resolution of those claims "is bound up with whether" Sirius XM's public performances were permissible under New York law. Given the New York high court's ruling that they were, the Second Circuit ordered the district court to enter judgment for Sirius XM and dismiss the case.

The court's decision to let Flo & Eddie's claims rise and fall together was a good one. It makes little sense to hold Sirius XM liable for making internal copies of recordings whose very purpose was to enable the performances that have now been ruled lawful in New York. The market value of a sound recording comes from hearing it, and the public cannot hear Sirius XM's internal copies of recordings unless they are played - a lawful activity in New York. It also makes little sense to hold Sirius XM liable for unfairly appropriating recordings under New York unfair competition law if Flo & Eddie have no underlying property right to bar Sirius XM from performing them.

While the Second Circuit's decision ends the lawsuit in New York, it does not end Flo & Eddie's litigation against Sirius XM - there are still open cases in California and Florida. In California, the parties have reached a settlement, which the district court preliminarily approved on January 27, 2017. That settlement defines Sirius XM's monetary liability but includes adjustable amounts depending on the outcomes of the New York and Florida cases. (The Second Circuit's ruling will reduce how much Sirius XM has to pay under that settlement and will be music to Sirius XM's ears, both literally and figuratively.)

In Florida, the case is tracking the pattern followed in the Second Circuit - the Eleventh Circuit has asked the Florida high court to weigh in on the key public performance question. Oral argument in that case has been scheduled for April 6, 2017. We'll continue to follow this issue, so stay tuned.