Sirius XM Loses Lawsuit on Royalties for Oldies

Story by New York Times
Written by Ben Sisario

In a case that could have wide implications for the digital music business, a federal judge in California ruled on Monday that Sirius XM, the satellite radio giant, was liable for copyright infringement for failing to pay royalties on recordings made before 1972.

The case, filed last year by members of the 1960s band the Turtles (which recorded “Happy Together”), concerns an obscure aspect of music copyright that has become a major focus in the music industry’s efforts to collect more money from digital media.

By law, federal copyright applies only to recordings made on or after Feb. 15, 1972. But the Turtles, whose hits were made well before that date, argued that when Sirius XM played its songs without seeking a license or paying the group royalties, it infringed on its copyright protections under state laws.

The group filed class-action suits in California, Florida and New York, seeking more than $100 million in damages, and opened the floodgates on the issue. After the Turtles filed the suits, the major record companies followed with similar cases against both Sirius XM and Pandora Media, and industry groups have begun lobbying Congress over extending royalty laws to pre-1972 recordings.

In the first ruling on the issue, Judge Philip S. Gutierrez of United States District Court in Los Angeles on Monday granted summary judgment in the Turtles’ favor, saying that the group has the exclusive right to its recordings under California law, and establishing that Sirius XM had infringed on those rights by publicly performing the records without permission.

Sirius XM declined to comment, but music industry executives said that an appeal was likely. The next step in the case is a trial to set damages, to be scheduled next month.

The decision opens the door for the Turtles and other oldies acts to collect royalties from services like Sirius XM and Pandora, and music groups were quick to declare it an industrywide victory.

“This decision in California confirms what we have always known: All sound recordings have value, and all artists deserve to be paid fairly for the use of their music,” said Michael Huppe, chief executive of Sound-
Exchange, a nonprofit group that collects royalties from digital radio services like Sirius XM and Pandora on behalf of artists and record companies. “It does not — and should not — matter whether those recordings are protected by state or federal law.”

Harvey Geller, a longtime music industry lawyer who represented the Turtles, called the ruling “historic.”

“It gives artists and recording owners the ability to participate in the digital revolution in a way that they never before have been able to participate in,” said Mr. Geller, a former deputy general counsel for the Universal Music Group.

But the judge’s decision is limited to California, and its scope was unclear. A brief filed by Sirius XM last month warned that too broad a ruling would entail a “radical expansion” of intellectual property rights and also place AM-FM radio stations and retail stores, bars and restaurants in the position of infringing on copyright for playing music in public.

The value of the royalties at stake in the oldies cases was also unclear. SoundExchange estimates about $60 million is lost each year in uncollected royalties from oldies on all digital radio services. Up to 15 percent of the music that Sirius XM plays is from before 1972. It paid recording royalties last year equivalent to about 9 percent of its $3.8 billion in revenue.

SoundExchange is promoting a bill introduced in Congress this year, the Respect Act, to require digital services to pay royalties for playing pre-1972 recordings.