Plaintiffs in pre-1972 recording cases scored a big win

Last week, the 9th U.S. Circuit Court of Appeals published a long-awaited opinion in the case of ABS Entertainment Inc., et al. v. CBS Corporation, et al., 2018 DJDAR 8317 (Aug. 20, 2018), reviving a class action brought against terrestrial AM/FM radio broadcasters for the unauthorized public performance of pre-1972 sound recordings. In a significant win for the plaintiffs that touches on the Copyright Act's originality, derivative work and preemption provisions, the district court, which had previously granted defendants' motion for summary judgment and had stricken plaintiffs' class allegations, was reversed on multiple grounds. In addition, the 9th Circuit also cited to criticism of the Central District of California's local rule requiring that a class certification motion be brought within 90 days after service of the complaint (L.R. 23-3) and ultimately concluded that this local rule "is incompatible with Federal Rule of Civil Procedure 23."

The Legal Backstory

The story of ABS Entertainment actually begins with an earlier case filed in August 2013 by two members of the legendary 1960s rock group The Turtles (of "Happy Together" fame). Under their stage names Flo & Eddie, they sued Sirius XM Radio Inc. for the unauthorized reproduction, distribution and public performance of their catalog of recorded music fixed prior to February 15, 1972, which -- due to a quirk in the federal Copyright Act -- is actually protected entirely by state law. Flo & Eddie based their case on the plain language of Section 980(a)(2) of California's Civil Code, which states that "[t]he author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons" except those who independently create sound-alike versions.

In a case that took much of the music business by surprise, Flo & Eddie successfully convinced the district court that, because the expansive nature of exclusive property rights under state law captures all conceivable uses of that property, and because the doctrine of expressio unius est exclusio alterius warns against reading additional exceptions into a statute beyond what the Legislature has decided to enumerate, the presence of a sole exception for sound-alike recordings in the statute meant that public performances were among the exclusive uses Flo & Eddie had the right to control, and Sirius XM had violated Section 980(a)(2) by failing to obtain Flo & Eddie's authorization to do so itself -- along with every other pre-1972 recording it had played. This interpretation of Civil Code Section 980(a)(2) is currently the subject of a certified question pending before the California Supreme Court, where briefing on the issue was completed in March of this year.

Critically, because Section 980(a)(2) makes no distinction between different types of public performances, it actually grants a broader public performance right to pre-1972 sound recordings than federal law grants to post-1972 sound recordings, the latter of which is limited to performances on internet and satellite radio only. The plaintiffs in ABS Entertainment sought to build upon the same arguments used by Flo & Eddie in their pre-1972 sound recordings class action crusade, and extend it to encompass the world of terrestrial radio as well.

The District Court Ruling

In response to this effort, CBS Radio enlisted two of Sirius XM's former attorneys to architect a novel defense that, while not particularly helpful to a satellite broadcaster, had the potential to completely insulate a terrestrial broadcaster: What if the pre-1972 recordings in ABS Entertainment were not actually pre-1972 recordings? What if, by dint of having been remastered after 1972, they had actually earned federal copyright protection, turning them into post-1972 sound recordings, which terrestrial broadcasters have the statutory right to broadcast without authorization from the owner of the recording?

While superficially attractive, there were two major problems with this defense. First, the defense would have to convince the court that studio engineers polishing aspects of existing recordings, without actually adding any new original material thereto, nevertheless distinguished the remastered version enough to constitute a "derivative work" entitled to its own federal copyright. Second, the defense would have to convince the court that this new federal copyright actually subsumed the original state law copyright protection, effectively destroying the latter rather than sitting atop it.

District Judge Percy Anderson credited the defense's arguments on these issues. Relying heavily on an informative circular issued by the Copyright Office (and later amended in the wake of this case), the district court held that the remastered versions of pre-1972 recordings in the case qualified as federally copyrightable derivative works due to the existence of "perceptible changes" from the original versions, including "subjectively and artistically altering the work's timbre, spatial imagery, sound balance, and loudness range[.]" It also held that, because "[t]here is no allegation that CBS has failed to comply with any of its royalty payment obligations under federal law[,]" there was no basis upon which to allege a state law violation. As a result, it granted summary judgment to the defendants and dismissed the case accordingly.

The District Court's Errors

As counsel for the California Society of Entertainment Lawyers argued to the 9th Circuit in its amicus brief supporting ABS Entertainment, the district court erred in holding that mere "perceptible changes" in a remastering of a pre-1972 recording are sufficient to constitute a derivative work. Rather, such changes must become the "defining aspect" of the work. Entertainment Research Group, Inc. v. Genesis Creative Group., Inc., 122 F.3d 1211, 1221 (9th Cir. 1997). In Entertainment Research Group, the 9th Circuit held that differences in facial expressions between cartoon characters and their three-dimensional costumed counterparts were trivial as a matter of law because "no reasonable trier of fact would see anything but the underlying copyrighted character when looking at [the] costumes." That is precisely the case with a remastered recording, as the goal of remastering is to enhance the sound quality of a previously created recording, not to change its fundamental underlying qualities.

Furthermore, even granting the premise that federal protection could exist for the remastered elements of a pre-1972 recording, the U.S. Supreme Court long ago made clear that a derivative work cannot be exploited without also obtaining the additional right to exploit whatever portions of the original work have been incorporated into the derivative work. Stewart v. Abend, 495 U.S. 207 (1990). The district court's attempt to limit this rule with respect to sound recordings relied on a misreading of 17 U.S.C. Section 114(b), as first promulgated in the unpublished opinion of Pryor v. Jean, 2014 U.S. Dist. LEXIS 143515 (C.D. Cal. Oct. 8, 2014), which believed the "actual sounds" of a sound recording are only protected in their original iteration. As the Recording Industry Association of America explained in its own supporting amicus brief, "every subsequent remastering of a 1964 recording of the Beatles will still embody those same musical performances and 'sounds,' no matter how an engineer might later manipulate those sounds to improve, enhance or alter their quality."

The 9th Circuit's Correction

The 9th Circuit reversed on several grounds. It noted that the Copyright Act requires a "derivative work" to "recast, transform, or adapt" the original work in a manner where the modifications "represent an original work of authorship," and that this becomes much more difficult "[w]here the alleged derivative work ... is intended as, and is in fact, a direct representation of the original work[.]" The court surveyed a variety of precedent across various federal circuits where changes made in recasting works, though they required skill and artistic choice, nevertheless resulted in a work without substantial variation from the original.

"From the foregoing," the 9th Circuit concludes, "it should be evident that a remastered sound recording is not eligible for independent copyright protection as a derivative work unless its essential character and identity reflect a level of independent sound recording authorship that makes it a variation distinguishable from the underlying work." This is no easy task, given that "the essential characters and identity of a sound recording" is drawn from choices made during the original recording session, and consequently "are not present" when that recording session "is merely remastered":

"A remastering, for example, of Tony Bennett's 'I Left My Heart in San Francisco' recording from its original analog format into digital format, even with declicking, noise reduction and small changes in volume or emphasis, is no less Bennett's 'I Left My Heart in San Francisco' recording -- it retains the same essential character and identity as the underlying original sound recording, notwithstanding the presence of trivial, minor or insignificant changes from the original. That is so even if the digital version would be perceived by a listener to be a brighter or cleaner rendition."

With this threshold in mind, the 9th Circuit held that to fix the standard of derivative copyrightability at mere "perceptible change" was legal error, because the ability to distinguish the two works does not mean the essential character and identity of the original work was changed as the law required. Where "all of the sounds contained in the remastered sound recordings" were fixed in the original versions, and "the remastering engineers did not add or remove any sounds and did not edit or resequence the fixed performances," the remasters were presumptively noncopyrightable.

Moreover, even if the remasters were ultimately determined to be authorized derivative works, the district court was found to have erred by holding the plaintiffs' state law claims were preempted by federal copyright law. Such a holding "is directly contrary to both established precedent and the statutory scheme" of the Copyright Act, which explicitly exempts pre-1972 sound recordings from the general preemption scheme of 17 U.S.C. Section 301. To the extent CBS was found to have been broadcasting a post-1972 remastered sound recording, it was simultaneously broadcasting "the pre-1972 sound recording therein embodied," because no amount of remastering changes the fact that "the sounds fixed in the remastered sound recording include those performed and fixed before 1972."

Local Rule vs. FRCP

In the Central District of California, Local Rule 23-3 currently requires that motions for class certification be filed within 90 days after service of the complaint. As often occurs in class actions, in this case, both sides stipulated to try and extend this deadline. Judge Anderson rejected the first stipulation as lacking good cause and also denied, on the day the class certification motion was due, a second stipulation seeking to extend the deadline. After citing to criticism calling the Central District's 90-day rule "impractical," the 9th Circuit held that striking the class allegations in this case was error, and it ultimately concluded that "the bright-line of Local Rule 23-3 is incompatible with Federal Rule of Civil Procedure 23." The 9th Circuit thus reversed and remanded for consideration of the class certification motion on its merits, including after reconsidering whether pre-certification discovery is warranted.

Conclusion

The 9th Circuit's new opinion in ABS Entertainment v. CBS Corp. answers some important questions about how pre-1972 sound recordings should be harmonized with the Copyright Act. The California Supreme Court may reprise some of these issues in its disposition of the question certified to it in the Flo & Eddie case regarding California Civil Code Section 980(a)(2). Further, there have been indications that Congress may chime in by passing the Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society (CLASSICS) Act, or a version of the Music Modernization Act incorporating the same. Accordingly, although this new decision is a major win for plaintiffs in pre-1972 sound recording litigation, the music business will have to stay tuned for the ending.