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Royalty Ruling Could Cost SiriusXM Big Bucks

LOS ANGELES (CN) - Things took a turn for the worse for SiriusXM when a state judge changed her mind about whether record companies can seek royalties for music recorded before 1972, the year federal copyright protection began covering sound recordings.

Capitol Records, Sony and other major labels sued SiriusXM Radio in 2013, claiming the satellite radio company owes millions in royalties for broadcasting songs recorded before 1972.

While federal law does not protect sound recordings made before 1972, the record companies claim that California civil code and common law do.

Civil Code Section 980 states that "the author of an original work of authorship consisting of a sound recording initially fixed prior to Feb. 15, 1972 has an exclusive ownership therein until Feb. 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not recapture the actual sounds fixed in such prior sound recording, but consists of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording."

Based on that, the record companies sought a jury instruction that state law gives them a property interest in and exclusive ownership rights of the pre-1972 recordings. This, they claimed, gives record labels the exclusive digital performing rights of the music - which entitles them to royalties, even though the songs are not federally copyrighted.

Los Angeles County Judge Mary Strobel indicated in a tentative ruling in September that she was inclined to deny the request.

But since then, a federal court granted summary judgment to Flo & Eddie of The Turtles, who claimed that SiriusXM had played their songs for years without authorization and without paying royalties.

On Oct. 14, Strobel agreed to the jury instruction - albeit begrudgingly.

For instance, the judge said that the word "ownership" as laid out in California civil code is not as unambiguous as the record labels believe.

"'Ownership' of a sound recording is not as easily defined as ownership of tangible property," Strobel wrote. "For example, a person may purchase a tangible good such as an automobile and use it how he or she wishes - drive it, give it to their child, resell it - without violating the automobile manufacturer's rights. When an individual owns a sound recording and sells authorized copies of that sound recording to others, the issue of how those persons may use their authorized copies of the sound recording is more complicated. Can the purchaser play the recording for friends who did not purchase it? Can the purchaser broadcast it over an amplifying system at a party? Can it be digitally broadcast over the radio? Section 980 does not explicitly address the issue of how purchasers of authorized copies of sound recordings may use those copies."

Strobel noted that when the Legislature amended Section 980 in 1982 by adding a provision directed at pre-1972 recordings, its sole exception was to allow people to record "covers" of the songs.

"The court concludes that the exclusive ownership right in pre-1972 recordings includes a public performance right, as not specifically excluded," Strobel wrote.

Still, the judge said she is not persuaded by the labels' argument - something the jury will have to decide.

"It is also possible, as SiriusXM contends, that its public performances do not deter sales of plaintiffs' recordings, and might actually encourage sales to listeners hearing the recordings for the first time," Strobel wrote. "To claim that pre-1972 sound recordings were protected by common law misappropriation concepts at the time Section 980 was adopted, without any case so holding, begs the question."

Recording Industry Association of America CEO Cary Sherman praised Strobel's reluctant decision.

"Two courts have now handed down landmark decisions which confirm what should be obvious - the pioneers of rock and roll and every other genre before 1972 deserve to be compensated when their music is used by companies like SiriusXM," Sherman said in a statement. "It's increasingly clear that SiriusXM, Pandora and other digital music firms who refuse to pay legacy artists and rights holders are on the wrong side of history and the law. It's time for that to change."

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