IP Law Daily District court must decide if Music Modernization Act preempts Flo & Eddie’s state-law claims against Pandora
Friday, October 18, 2019

District court must decide if Music Modernization Act preempts Flo & Eddie’s state-law claims against Pandora

By Cheryl Beise, J.D.

Factual questions precluded deciding novel legal issues regarding the scope of MMA’s preemption of state-law infringement claims involving pre-1972 sound recordingsand whether Pandora qualified for the preemption defense.

The U.S. Court of Appeals in San Francisco has returned a case to the federal district court in Los Angeles to consider in the first instance whether the 2018 Orrin G. Hatch-Bob Goodlatte Music Modernization Act ("the MMA") was likely to preempt California statutory and common law copyright infringement claims brought against Pandora Media by two members of 1960s folk rock band, The Turtles—who claimed that their Pandora violated their rights by publicly performing the group’s pre-1972 musical works without authorization. The MMA preempts common-law copyright claims arising from the use of pre-1972 recordings that occurs on or after the date of the MMA's enactment, as well as certain statutory claims if specific conditions are met, including the payment of royalties for past transmissions of pre-1972 sound recordings. Pandora had appealed the district court’s denial of its anti-SLAPP motion to the Ninth Circuit, which, in turn, had referred the case to the California Supreme Court to clarify questions regarding state copyright law. However, following enactment of the MMA, the state high court dismissed the certified questions and returned the case to the Ninth Circuit (Flo & Eddie, Inc. v. Pandora Media, LLC, October 17, 2019, per curiam).

This litigation arises out of Pandora’s streaming of music owned by Flo & Eddie, Inc., a corporation controlled by two founding members of the 1960s folk rock band, The Turtles. In 2014, Flo & Eddie filed a complaint against Pandora in federal court, asserting that its sound recordings were protected under Section 980(a)(2) of the California Civil Code, as well as the state’s common law. Pre-1972 sound recordings were generally excluded from the federal Copyright Act’s licensing scheme. Section 980(a)(2) provides that the author of an original sound recording fixed prior to February 15, 1972 has "exclusive ownership" of the recording until February 15, 2047. Pandora subsequently filed a motion to strike Flo & Eddie’s claims pursuant to California’s anti-SLAPP statute, Cal. Code Civ. Proc., § 425.16. The district court denied Pandora’s anti-SLAPP motion—reasoning that although Pandora’s conduct was protected, Flo & Eddie had a reasonable probability of prevailing on its state copyright claim under Section 980(a)(2). Pandora appealed.

In a March 2017 order, the Ninth Circuit certified two questions to the California Supreme Court concerning issues of first impression under California state law: (1) Under Section 980(a)(2) of the California Civil Code, do copyright owners of pre-1972 sound recordings that were sold to the public before 1982 possess an exclusive right of public performance? and (2) If not, does California’s common law of property or tort otherwise grant copyright owners of pre-1972 sound recordings an exclusive right of public performance?

The California Supreme Court granted the Ninth Circuit’s request. However, before the state high court could answer the certified questions, Congress passed the MMA, Public Law No. 115-264, which preempts any state-law claim arising before the passage of the Act from the digital audio transmission of a pre-1972 song if the transmitting party meets certain conditions, including paying statutory royalties. Following enactment of the MMA, the California Supreme Court requested supplemental briefing regarding whether the enactment of the MMA mooted the state-law certified questions. After the filing of the supplemental briefs, the California Supreme Court dismissed the certified questions and returned the case to the Ninth Circuit. The Ninth Circuit requested supplemental briefing from the parties regarding the effect of the MMA on Flo & Eddie’s probability of success on their claims, which in turn informed the analysis of Pandora’s anti-SLAPP motion.

Other litigation. In a similar lawsuit Flo & Eddie’s filed against Sirius XM, the federal district court in Los Angeles granted summary judgment in September 2014 as to liability in favor of Flo & Eddie and later granted Flo & Eddie’s motion for class certification. In November 2016, the parties reached a settlement agreement, under which Sirius XM agreed to pay a cash benefit of up to $99 million to the prospective settlement class. In New York, however, the Second Circuit in 2017 directed a district court to dismiss Flo & Eddie’s suit against Sirius XM with prejudice, after the New York Court of Appeals, responding to a certified question from the Second Circuit, held that there was no right of public performance for creators of pre-1972 sound recordings under New York common law. In 2017, in response to questions from the Eleventh Circuit, the Florida Supreme Court also clarified that Florida common law did not recognize an exclusive right of public performance in pre-1972 sound recordings.

MMA preemption. The Ninth Circuit explained that the MMA preempts common-law copyright claims arising from the use of pre-1972 recordings that occurs on or after the date of the MMA's enactment. See 17 U.S.C. § 301(c). In addition, Section 1401(e) of the MMA provides a preemption defense to similar claims arising from a transmission or reproduction, made before the date of the MMA’s enactment, of a pre-1972 recording if the transmission or reproduction would have satisfied statutory licensing requirements under Section 114(d)(1)–(2), or 112(e)(1), respectively, and, within 270 days after the enactment of the MMA, the transmitting entity pays statutory royalties for the use of the recordings occurring during the three-year period prior to the date of enactment and provides notice of the use of the recordings. See 17 U.S.C. § 1401(e)(1)(A)–(B). To be eligible for the statutory licensing regime under Section 114(d), the transmitter must not be part of an "interactive service," among other things. 17 U.S.C. § 114(d)(2)(A). Eligibility for statutory licensing under Section 112(e) requires meeting a different set of criteria, including that the phonorecord in question be "destroyed within six 6 months from the date the sound recording was first transmitted to the public using the phonorecord[,]" unless it is used exclusively for archival preservation. See 17 U.S.C. § 112(e)(1)(C).

Unanswered factual questions. "Whether the MMA applies to and preempts Flo & Eddie’s claims, as Flo & Eddie note, cannot be answered on the record before us," the Ninth Circuit said. The court identified at least four unresolved factual questions that preluded deciding the merits of Pandora’s preemption defense, including whether:

  1. Pandora would have satisfied the specific statutory licensing requirements under either Section 114(d)(2) or 112(e)(1), or been exempt under Section 114(d)(1);
  2. the relevant royalty payment was made within 270 days of the enactment of the MMA;
  3. that payment covered all reproductions and transmissions of pre-1972 recordings during the three-year period;
  4. Pandora accurately identified all pre-1972 recordings it reproduced or transmitted during the three-year period; and finally, whether Pandora provided notice of the use of pre-1972 recordings within 270 days of the enactment of the MMA.

Pandora attached a letter to its supplemental reply brief as evidence that it made the requisite royalty payment by July 8, 2019, and that it provided a federally appointed rights clearinghouse with notice of its transmission of pre-1972 recordings. However, documents not filed with the district court are not part of the record on appeal. The Ninth Circuit declined to exercise its discretion to consider Pandora’s new evidence, given the novel legal issues presented in this case—in particular, the scope of the MMA’s preemption clauses and their application to the facts of this case.

The court additionally noted that MMA preemption is an affirmative defense, and affirmative defenses are typically not preserved unless they are pleaded in a party’s answer. "Where new, intervening authority creates additional causes of action or affirmative defenses that may materially alter the course of the litigation, the appropriate remedy is to remand to the district court to allow the parties to amend their pleadings in light of that intervening authority," the appeals court said. The court granted Flo & Eddie’s motion to strike the documents attached to Pandora’s supplemental brief because they were not admitted in the district court and were not part of the record on appeal.

Remand. The Ninth Circuit vacated the district court’s order denying Pandora’s anti-SLAPP motion, and remanded the for further proceedings. On remand, the district court was instructed to address the dispositive factual and legal issues in the first instance, in view of the enactment of the MMA. The court also suggested that the parties and the district court consider "any intervening developments in California’s anti-SLAPP law."

The case is No. 15-55287.

Attorneys: Maryann Rose Marzano (Gradstein & Marzano, PC) for Flo & Eddie, Inc. Gregory G. Garre (Latham & Watkins LLP) for Pandora Media, LLC.

Companies: Flo & Eddie, Inc.; Pandora Media, LLC

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