by FMC legal intern Michelle Davis

Same issue, new lawsuit. The big three record labels (Sony, Universal and Warner Bros), along with indie ABKCO, are the latest to sue SiriusXM for underpayment of royalties for pre-1972 sound recordings.

Earlier this summer, 1960s rock band The Turtles sued the satellite broadcaster in a proposed class action; performance rights organization SoundExchange followed just weeks after, claiming similar allegations.

So why are artists, labels and rights organizations suddenly so litigious over songs released more than 40 years ago?

Well, before Feb. 15, 1972, there was no federal copyright protection for sound recordings. Rather, sound recordings were protected by what is frequently referred to as a “patchwork” of state civil statues, criminal laws and common law. A “patchwork” being a nice way to say a clusterf… OK, we’ll keep things clean. Point is, state laws governing music copyright were inconsistent and therefore unpredictable. But the federalization of copyright protection only went so far, covering songs published on or after the date the legislation passed. This means that all songs fixed prior to 1972 are still governed by state law—a “murky soup,” if you will.

There is even precedent that says the courts should give deference to this murky soup over federal copyright protection, “until and unless Congress takes further action with respect to recordings fixed prior to February 15, 1972.” You can start holding your breath now.

Fast-forward (or flashback) to 1995, when Congress decided that webcasters—which now includes digital streaming services and satellite radio—should pay sound recording royalties to performers and labels. Since then, many have interpreted that these “statutory” rates would not apply to pre-1972 recordings.

And that’s most likely how Sirius XM saw things: no performance rights for pre-1972s under federal law. But now the artists, the labels and SoundExchange are stepping in to un-murk (or further murk, depending on your politics) the whole situation. For their part, labels argue that it doesn’t matter that pre-’72s don’t have federal copyright protection because the state laws have them covered.

Do they have a case? We’ll have to wait and see, as these are mostly untested waters. In December 2011, the United States Copyright Office released a report on Federal Copyright Protection for Pre-1972 Sound Recordings that recognized (and even anticipated) exactly this sort of legal quandary. The report notes that “in general, state law does not appear to recognize a performance right in sound recordings,” but “it is possible that a state court would entertain a claim for unfair competition or a common law copyright infringement if… it were faced with a claim that pre-1972 sound recordings were being made available through internet streaming.” In other words, if The Turtles and the record labels want to claim royalties for pre-72 releases, they may have to show, for example, that they are losing revenue as digital streams are replacing purchases, or some similar unfair competition argument. (Guess what? We filed in the Copyright Office’s initial inquiry into this matter; check it out here.)

SoundExchange’s complaint is a bit more nuanced and complex, and their accusations go beyond just pre-1972 songs. But for the oldies, the problem is not so much that Sirius XM excluded pre-1972 recordings from its reported revenue but how those exceptions were calculated. According to the SoundExchange complaint, Sirius XM “simply estimated that a certain percentage of its sound recording performances were of pre-1972 sound recordings, and it reduced the Gross Revenues that it reported to SoundExchange by a corresponding percentage” (10-15%). The Copyright Royalty Board then chimed in and said that’s not how deductions work. They must be “precise and the methodology transparent” in order to be valid.

Sirius XM is in the hot seat now, and others may soon follow. According to the The Wall Street Journal, Major webcaster Pandora hasn’t paid for pre-1972 recordings since last year, so there is a chance the labels and artists and royalty agencies might go after them next (although Pandora’s repertoire includes significantly fewer pre-1972 songs than Sirius XM, so there are perhaps less damages to be won).

Back in 2011, The Copyright Office recognized that “some webcasters are making royalty payments for the use of pre-1972 sound recordings as part of the statutory royalties they pay to SoundExchange in connection with the digital performance of sound recordings… Presumably this is done to diminish the risk that their webcasting of pre-1972 sound recordings might be actionable under state law.”

Doesn’t that sound a bit silly? Wouldn’t it make more sense if webcasters knew for sure what was required of them, instead of paying money in hopes of avoiding a lawsuit? This mess could all be resolved if Congress just moved to include pre-1972 songs under federal copyright protection, as the 2011 report concludes.

Unfortunately, federalization of copyright has its naysayers, including the RIAA.The same year as the Copyright Office report was published, RIAA’s senior vice president of business and legal affairs, Susan Chertkof, voiced opposition to federalization, warning that it would burden record labels with the cost of registering each album with the copyright office (about $35 a pop) and would lead to more legal complications. Instead, it looks like the labels prefer the murky waters of state regulation, where their targets get confused and disoriented and create the perfect opportunity to strike.

We would prefer a broad, predictable, legislative solution rather than a rash of costly court cases. How about you?