Pandora’s Box, Reopened: A Shift in Record Labels’ Litigation Tactics May Mean Serious Problems for Online Streaming Services

ImageBy Jeffrey Echert

Pandora’s in trouble again. We previously covered Pandora’s licensing dispute with performing rights organizations ASCAP and BMI, but this time around, it’s a bit more serious. A group of record labels, including Capitol, Sony, and UMG, filed a lawsuit against the streaming music service, claiming that it’s infringing the copyrights in a host of sound recordings, including works by the Beatles, Bob Dylan, and David Bowie. But the record labels filed the complaint in New York state court, alleging state law misappropriation. Why not go for federal charges, with their statutory damages provision? Because the record labels are specifically claiming infringement of recordings made before 1972, which aren’t protected under federal copyright.

Targeting pre-1972 recordings is a relatively new tactic among record labels, but one they’ve taken a shine to. Just last year, a group of labels filed suit in California state court against SiriusXM Radio alleging the same state law misappropriation theory. So what’s with the sudden shift in tactics? It might stem from Universal Music Group v. Escape Media, a 2012 New York state appellate decision. There, the court ruled that the 1976 Copyright Act explicitly refused to abridge the rights and remedies available to state law copyright holders in pre-1972 recordings – and that later federal laws (like the Digital Millennium Copyright Act) can’t reduce those entitlements. The DMCA gives online service providers a safe harbor from the consequences of their users’ infringing actions– if they comply with the DMCA’s notice and takedown regime, they aren’t liable for the actions of third parties. While filtering out copyrighted content is difficult, it’s better than a lawsuit. But the court denied Escape Media that safe harbor–it simply wouldn’t float as a defense for pre-1972 recordings. Without a defense, the court found that Escape Media infringed all the pre-1972 recordings at issue. While some might question the merits of a New York state court making important decision about federal copyright law, the same question came up in a federal case and is currently on interlocutory appeal to the Second Circuit.

The implications of the UMG decision are, to put it lightly, frightening. In addition to not being able to use the DMCA safe harbor, defendants wouldn’t have access to other statutory defenses like fair use. And while state law causes of action don’t get you the ever-popular statutory damages (handy when you’re suing over a bunch of 99-cent songs), they might allow for punitive damages. If the Second Circuit agrees with the UMG court, expect record labels to start filing state suits against all kinds of online service providers. You can probably find a few Beatles songs on YouTube, right? What happens if Capitol Records decides to pursue those?

To be fair, the defendants aren’t saints either. Musicians are upset that companies like Pandora and SiriusXM prevent artists from profiting off of their work–one artist called it an “injustice that boggles the mind.” SiriusXM, for its part, seems to think that it doesn’t need to pay licenses or pay royalties on pre-1972 works, as there’s no state statutory scheme that requires it. That theory is currently being put to the test. It seems the next great copyright battleground, counterintuitively enough, will be in state courts.

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