Legal Analysis of the SiriusXM Loss in New York

First, a disclaimer: I am not a lawyer, nor am I even studying to be one. None of this should be considered any kind of legal advice. I’m just a guy who likes copyright law, and due to the magic of the Internet, I am able to actually read the various court cases. I suggest that you do the same, so I’ve included links to them in this story.

Now, about that. State court rulings, especially below the appeals court level, are still relatively hard to find. The only source I could get for many of these cases comes from a site called Casetext. While they make the entire texts of the rulings available, after a few minutes, an overlay pops up asking you to register, and it won’t let you read the rest of the text until you do. Refreshing the page will give you another couple of minutes. This annoys me as much as it annoys you, and if I find another site that has the rulings, I’ll update the links.

A couple of days ago, SiriusXM once again lost to Flo & Eddie, former band members of The Turtles, and current holders of the band’s sound recordings. I posted an article about it called SiriusXM loses to Turtles again, this time in New York. At that point, I didn’t have the time to go through the entire ruling. But I have now, and boy, is it a doozy.

Unsurprisingly, I don’t think this case was correctly decided. In this article, I’ll analyze the ruling, and show why I think it was wrong. But be forewarned, there is a lot of legalese to go through, and a lot it involves copyright concepts that are fairly obscure. Nonetheless, it is a fairly significant ruling (more than the California case), so it’s well worth reading if you’re a copyright wonk like me.

“First Publication” Rights

To give context to this analysis, we must talk about state law protections for copyright (or copyright-like) rights. Under copyright law, there is a distinction between first publication rights, and post-publication monopoly rights. Prior to publication, the rights that an author has in her creative works are absolute and effectively perpetual. She has the right to choose not to publish them; how and where to publish them; and (perhaps most importantly) how much she should get paid to do so. Of course, nobody is required to actually pay her what she’s asking; but unless they do so, she has every right to withold publication.

But once those works are published, those rights are gone. The works are now part of the public sphere, and she does not have any right to decide what the public should do with them. This is where copyright’s post-publication rights come in. The copyright statutes grant her a right to control public uses of the work, after her first publication rights have ended. These rights are created entirely by those statutes, and do not exist otherwise.

This distinction makes perfect sense, and is generally not controversial at all. When people talk about “copyright,” they are almost always talking about post-publication monopoly rights. (But, as we’ll see, this ruling throws a spanner into the works.) Even “copyright” abolitionists are in favor of first publication rights. Until her works are published, they are still the author’s private property. But when published, they are no longer private, hence no longer her private property, and this is where the controversy arises.

The key word here is not “property,” but “private.” The distinction is better illustrated, not with property rights, but with free speech rights. An author’s works are the very definition of expressive speech. Free speech rights do not only mean that I cannot force her to say what I want. It also means that I cannot force her to speak at all. On the other hand, I am under no obligation to support her speech, or provide her with a venue. She has a right to speak in public, but I don’t have to provide the soapbox.

On the other hand, her speech rights end once she actually gets on that soapbox and makes that speech. Once that happens, the public may use her words as it pleases. The public can ignore them, repeat them at will, use them in their own arguments, or even use them to attack her business or reputation. If they do so, they’re not infringing on her free speech rights in any way, shape, or form. On the contrary, they are asserting their own free speech rights. And every member of the public – including a for-profit business – has this liberty right. This is exactly how the right of first publication works.

All of this should be familiar to those who read my post called What Type Of Right? The right of first publication is a liberty right: it allows the author to do something, or not, according to her whim. Post-publication monopoly rights are claim rights: they grant her legal claims against the actions of others, regardless of whether or not those actions interfere with her own liberties. Under the copyright statutes, her claims trump other peoples’ liberties.

Common Law Only Protects First Publication Rights

This distinction turns out to be of immense importance when talking about “common-law copyright.” If you recall, “common-law” means the body of law created by the judiciary (through civil court cases), and not the law created by the legislature (through legal statutes) – regardless of whether those statutes are created by state or federal legislatures.

It is the settled law of the land that copyright rights under common law end at first publication. At that point, any rights that an author has in her works must be created by the legislature. If the legislature does not create them, they simply don’t exist at all.

This was decided the very first Supreme Court copyright case:

That an author at common law has a property in his manuscript, and may obtain redress against anyone who deprives him of it or by obtaining a copy endeavors to realize a profit by its publication cannot be doubted, but this is a very different right from that which asserts a perpetual and exclusive property in the future publication of the work after the author shall have published it to the world.

The argument that a literary man is as much entitled to the product of his labor as any other member of society cannot be controverted. And the answer is that he realizes this product in the sale of his works when first published. […]

Congress, then, by this act, instead of sanctioning an existing right, as contended for, created it.

– Wheaton v. Peters (1834)

This does not merely apply to federal copyright protections, but to the common law protections of the various states. And, in fact, all state case law echoes this distinction – including the case law of New York State:

The author of a literary work or composition has, by law, a right to the first publication of it. He has a right to determine whether it shall be published at all, and if published, when, where, by whom, and in what form. This exclusive right is confined to the first publication. When once published it is dedicated to the public, and the author has not, at common-law, any exclusive right to multiply copies of it or to control the subsequent issues of copies by others. The right of an author or proprietor of a literary work to multiply copies of it to the exclusion of others is the creature of statute. This is the right secured by the “copyright” laws of the different governments. […]

Until published, the work is the private property of the author, whereever the common-law rights of authors are regarded. When once published, with the assent of the author, it becomes the property of the world, subject only to such rights as the author may have secured under copyright laws, and they can have no force or give any rights beyond the territorial limits of the government by which they are enacted.

– Palmer v. De Witt (1872)

The common law copyright arises upon the creation of any work of art, be it a first sketch or the finished product. This common law right protects against unauthorized copying, publishing, vending, performing, and recording. The common law copyright is terminated by publication of the work by the proprietor of the copyright. Upon termination of the common law copyright, the work falls into the public domain if statutory protection is not obtained by the giving of the requisite notice.

In some of the early English decisions there was debate as to whether publication did indeed divest its owner of common law protection. Arguing that divestment should not occur upon publication, because of the seeming irrationality of such a rule, Lord Mansfield observed: “‘The copy is made common, because the law does not protect it: and the law can not protect it because it is made common.'”

In the United States, however, it has been clear, from the date the question first reached the Supreme Court, that the common law copyright is terminated upon the first publication. And as Judge Learned Hand noted in National Comics Publications v. Fawcett Publications, citing Donaldson v. Becket, “It is of course true that the publication of a copyrightable `work’ puts that `work’ into the public domain except so far as it may be protected by copyright. That has been unquestioned law since 1774.”

[Note: the Public Building Commission lost the case for precisely this reason.]

– The Letter Edged In Black Press, Inc., v. Public Building Commission Of Chicago (1970)

The 1909 Copyright Act protects eligible works that are “published” with a copyright notice, 17 U.S.C. § 10 (1976); section 2 of the Act specifically excepts from coverage (and from preemption) the common-law right of an author of an “unpublished” work. 17 U.S.C. § 2. Thus, under the statutory scheme, “publication” generally determines whether state or federal law is the source of any available copyright protection. State law protection begins with a work’s creation and continues until the work is “published,” at which point state protection is lost. The owner secures federal protection by complying with the requirements of the 1909 Act; if he does not, his published work is in the public domain.

– Roy Export Company v. CBS (1982)

All of these quotes are from cases that Judge McMahon cited. Yet despite that, she never even touches on the subject at all. (Later, you’ll see why.)

State Statutory Protections

So, common-law copyright ends at publication, and any rights after that point must be protected by statute. Until they are, rights holders have to sue “infringers” under some other common-law legal theory, such as unfair competition. This is, in fact, what they usually do. But to combat this situation, copyright holders have lobbied the respective state legislatures to create those statutory rights. And in general, they have been successful. (Their lobbying activity became particularly intense during the era of LP “bootlegging,” so most of these statutes were passed in the late 1970’s or early 1980’s.)

California does have such statutes, and unlike most states, those rights are expansive and open-ended. This is why it was not entirely surprising that SiriusXM lost in that state. Does New York have similar statutes?

In fact, they do. Those statutes are codified in Article 275 of the N.Y. Penal Law. Unfortunately, as I pointed out in my last article, those statutes do not cover public performance of sound recordings. (They do cover unauthorized recordings of public peformances, but only their recording, duplication, and distribution, not subsequent public performance of those recordings.) And, even if they did, they explicitly exempt most of the entities that would actually perform that work:

1. This article does not apply to:
(a) any broadcaster who, in connection with or as part of a radio, television, or cable broadcast transmission, or for the purpose of archival preservation, transfers any such recorded sounds or images[.]

– New York Penal Law S.275.45

There is no question that SiriusXM’s performances, being both “radio” and “cable,” would be exempt under these statutes. But, again, Judge McMahon does not even examine the statutes at all. Admittedly, these are penal statutes – covering criminal cases, not civil cases – but one would think that she would at least have given them a cursory discussion, even if dicta.

To any sane person, it’s case closed. The Turtles material is not unpublished, so Flo & Eddie have no common-law rights in their recordings. They would have to rely on the statutes, which don’t cover SiriusXM. Game over, right?

Not so fast.

Are Turtles Songs “Published?”

Flo & Eddie are not the only rights holders that have been frustrated by the lack of statutory protection. Historically, judges have also been sympathetic to authors or rights holders whose works were used without authorization, but lacked protection under state statutes. But their hands were tied; they legally couldn’t grant common-law protection to published works.

So, they engaged in what is essentially judicial sleight-of-hand. Instead of granting a post-publication monopoly, they simply redefined what the word “published” means. The legal term for this is the doctrine of “limited publication.” Essentially, the doctrine holds that certain disclosures of copyrighted works, even if made to the general public, do not constitute a “general publication,” and the author still retains some common-law rights in the works as if they were still private.

It should be noted that they are legally entitled to do this. Prior to 1972, the term “published” was not defined anywhere in the federal statutes, leaving the legal definition up to the various states to decide. This was decided by the Supreme Court in Goldstein v. California, where they held: “As to categories of writings which Congress has not brought within the scope of the federal statute, the term [publication] has no application.” Whether this is just or moral is of course open to debate, but it is absolutely legal.

The general rule is that a public performance of the work is just such a “limited publication.” For example, a playwright whose plays are performed will nonetheless retain his “first publication” rights, and may prevent unauthorized productions of that play. On the other hand, once that playright creates copies of his script, and distributes those copies outside the confines of a single theatrical production, then (and only then) the play is considered published.

This was the entire issue in the cases cited by Judge McMahon (Palmer v. De Witt, Roberts v. Petrova, and French v. Maguire – sorry, I couldn’t find the latter online). They were not deciding whether a “public performance” is a common-law right per se, but determining whether performances should be considered a general publication. Of course, in this case, that is probably a distinction without a difference.

Incidentally, the 1976 Act does actually include a definition of the word “published,” and the doctrine of “limited publication” is now codified as black-letter law. It is defined (as would be expected) in 17 USC 101, “Definitions.” Publication includes distribution “by sale or other transfer of ownership, or by rental, lease, or lending;” but “public performance or display of a work does not of itself constitute publication.”

But obviously, Flo & Eddie did much more than publicly perform their works. They have been selling copies of those works to the general public for decades (and only re-acquired those rights after the recordings had been sold for many years). By definition, under federal law and most case law, their works are published. So a sane individual would again think that it was game over for them. But not, apparently, in New York.

The latest case to deal with common-law rights in sound recordings was Capitol Records v. Naxos, a case that Judge McMahon relies heavily on in her decision. She correctly quotes the Naxos court when it says that “in the realm of sound recordings, it has been the law in this state for over 50 years that, in the absence of federal statutory protection, the public sale of a sound recording otherwise unprotected by statutory copyright does not constitute a publication sufficient to divest the owner of common-law copyright protection.” Unfortunately, she does not quote the cases cited by the Naxos court. Whether those cases support Naxos is debatable (the Naxos case was controversial), but none of them seem to support Flo & Eddie.

Take, for example, the first case cited by Naxos:

The failure of a copyright owner to file his notice of use in effect puts his composition into the public domain – at least from the time of use to the date of filing. During such time it would seem that granting protective rights under State law would be inconsistent with the Congressional policy of requiring notice by copyright owners to would-be users so that they in turn may protect themselves under the two-cent royalty provision by paying the royalty to the copyright owner (§§ 1(e), 101(e)).

– Rosette v. Rainbo Record Manufacturing Corporation

In case you’re wondering, the “two-cent royalty provision” is the statutory rate paid to songwriters – the same one SiriusXM has always paid, including to Flo & Eddie.

McMahon is right that public sale does not divest rights holders of all common-law rights. But it does divest them of at least some of those rights. Yet what rights are divested, and what rights remain, receives not even a cursory glance in McMahon’s decision. Instead, Judge McMahon seems to be of the opinion that New York case law (and particularly the Naxos decision) has completely obliterated the distinction between published and unpublished works. For example, she cites Swatch Group. v. Bloomberg, saying parenthetically that this case is “describing the bundle” of rights held at common law. But this case has nothing whatsoever to do with common-law rights; the “bundle” that she describes are the rights granted under federal statute.

And that’s where we are now. Even though Flo & Eddie have pressed copies of their records, made them to sale for the public, and intended for them to be publicly performed on the radio, they’re still “unpublished” under New York common law.

Nobody in their right mind would think this makes any sense, but that’s the law for ya.

We Don’t Need No Stinkin’ Public Benefit

It makes a lot of sense to distinguish between first publication rights and post-publication monopoly rights. The first publication right is a liberty right, and infringing upon that right would be an infringement upon civil liberties – both as private property, and as free speech.

Post-publication monopoly rights, on the other hand, don’t just affect the artist. By their very nature, they take away the liberty rights of others. Any post-publication monopoly rights should therefore be determined by a legislature that is elected by the general public, so that it may take all of the public’s rights into account, and afford a balance that works for their general benefit. On the Congressional level, this is in fact a Constitutional requirement.

SiriusXM raises the issue that granting a common-law public performance right, after decades of not recognizing this right, would be absolutely catastrophic from a public policy perspective. Judge McMahon does not even attempt to dispel this issue. Instead, she completely ignores it, and basically says “don’t worry your pretty little head about it:”

Sirius would of course respond that any public performance right that the New York Court of Appeals might recognize would be broader than the right legislated by Congress, encompassing analog broadcasting, the “mature” (some would say dying) industry that Congress exempted from the payment of royalties for public performance. And Sirius quite rightly notes that the right Congress has created for post-1972 works is part of a carefully crafted scheme that operates nationwide, whereas common law copyrights are the province of the several states – raising the specter of administrative difficulties in the imposition and collection of royalties, which would ultimately increase the costs consumers pay to hear broadcasts, and possibly make broadcasts of pre-1972 recordings altogether unavailable.

Sirius may well be correct that a legislative solution would be best. But the common law, while a creature of the courts, exists to protect the property rights of the citizenry. And courts are hardly powerless to craft the sort of exceptions and limitations Congress has created, or to create a mechanism for administering royalties. […]

New York courts are capable of fashioning appropriate relief – and even of recognizing only such public performance rights in pre-1972 sound recordings as conform to rights statutorily conferred on holders of statutory copyright in post-1972 recordings.

But all of these tasks are properly done by the elected legislature, not by unelected judges. In essence, her only “solution” is to usurp the legislative process and replace it with judicial activism. (The fact that she uses the ASCAP/BMI consent decrees as an example should raise the hackles of any Trichordist fan-boy.)

Most judges instinctively know this, which is why it’s extraordinarily unlikely that any of them will do anything. Judge McMahon, for example, does not. By her own statements, she is perfectly capable of “recognizing only such public performance rights in pre-1972 sound recordings as conform to rights statutorily conferred on holders of statutory copyright in post-1972 recordings.” It’s exactly what this case was about. Yet she resolutely declined to do so, and essentially scoffs at any arguments that she even should.

And until she (or another judicial body) does so, all of the negative effects are going to be a reality. Not just for SiriusXM, but for all terrestrial radio stations, bars, and venues; for PRO’s like ASCAP and BMI; for the artists who assigned their copyrights to record labels; and for the general public.

In the meantime, if her ruling causes chaos, tough shit. That’s not her problem, so fuck you:

Sirius is correct that this holding is unprecedented (aside from the companion California case, which reached the same result), and will have significant economic consequences. Radio broadcasters – terrestrial and satellite – have adapted to an environment in which they do not pay royalties for broadcasting pre-1972 sound recordings. Flo and Eddie’s suit threatens to upset those settled expectations. Other broadcasters, including those who publicly perform media other than sound recordings, will undoubtedly be sued in follow-on actions, exposing them to significant liability. And if different states adopt varying regulatory schemes for pre-1972 sound recordings, or if holders of common law copyrights insist on licensing performance rights on a state-by-state basis (admittedly, an unlikely result, since such behavior could well cause broadcaster to lose interest in playing their recordings) it could upend the analog and digital broadcasting industries.

But in the end, all this case presents me with is a suit between private parties seeking to vindicate private property rights – not a challenge to state regulation. That lawsuit can and will be resolved on its merits. The broader policy problems are not for me to consider. They are the province of Congress, the New York Legislature, and perhaps the New York Court of Appeals.

This ruling is a complete mess. It seems like a certainty that SiriusXM will appeal, and that these issues will be ruled upon by the Second Circuit appeals court. Whether they find for SiriusXM or not, one can only hope that their eventual ruling will be better than this.

Update: Thanks to Les from Rock Around The Web, we can now look at all the court documents for this case:
http://www.plainsite.org/dockets/u6k3bzkm/new-york-southern-district-court/flo-and-eddie-inc-v-sirius-xm-radio-inc-et-al/