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MITCHELL SILBERBERG & KNUPP LLPRUSSELL J. FRACKM AN (SBN 49087) rjf@m sk.comMARC E. MAYER (SBN 190969) [email protected] F. EVITT (SBN 261491) efe@m sk.com11377 W est Olympic BoulevardLos Angeles, CA 90064-1683Telephone: (310) 312-2000Facsimile: (310) 312-3100Attorneys for Plaintiffs

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SUPERIOR COURT OF THE STATE OF CALIFORNIAFOR THE COUNTY O F LOS ANGELES

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10CAPITOL RE CORD S, LLC, a Delawarelimited liability corporation; SONY M USICENTERTA INMEN T, a D elaware partnership;UM G RECO RDING S, INC., a Delawarecorporation; WARNER MUSIC GROUPCORP., a Delaware corporation; and AB KCOMUSIC & RECO RDS, INC., a New Yorkcorporation,

Plaintiffs,V

SIRIUS XM R ADIO INC ., a Delawarecorporation; and DOES 1 through 10 ,inclusive,Defendants.

CASE NO. BC 520981Judge: onorable John Shepard WileyNOTICE OF MOTION AND MOTIONOF PLAINTIFFS FOR JURYINSTRUCTION REGARDING ADIGITAL PERFORMANCE RIGHT INSOUND RECORDINGS FIXED BEFOREFEBRUARY 15,1972;MEMORANDUM OF POINTS ANDAUTHORITIES IN SUPPORT[Request for Judicial Notice and Ap pendix ofNon-C alifornia Authorities FiledConcurrently Herew ith]Hearing Information:Location: Dept. 311Date: May 14,2014Time: 10:00 a.m.File Date: September 11, 2013Trial Date: none set

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1 O ALL PARTIES AND THEIR ATTORNEYS OF RECORD:23 LEASE TAKE NOTICE that, on May 14, 2014 at 10:00 a.m., or as soon thereafter as4 the matter may be heard by the Honorable John Shepard Wiley in Department 311 of the above-5 captioned Court, located at Central Civil West Courthouse, 600 South Commonwealth Ave., Los6 Angeles, CA 90005, Plaintiffs Capitol Records, LLC, Sony Music Entertainment, UMG7 Recordings, Inc., Warner Music Group Corp., and ABKCO Music & Records, Inc. will and8 hereby do move the Court to adopt the following instruction to be given to a jury at the trial of this9 action:

10The owner of a sound recording fixed (i.e., recorded) prior toFebruary 15 , 1972, possesses a property interest and exclusiveownership rights in that sound recording. This property interest andthe own ership rights under California law include the exclusive rightto publicly perfolin, or authorize others to publicly perform, thesound recording by means of d igital transmission whether bysatellite transmission, over the Internet, through m obile smartphoneapplications, or otherwise.

1516 s set forth in the attached M emorand um of Points and Authorities, the foregoing jury17 instruction is warranted by California Civil Code Section 980 and California common law,18 including (but not limited to) Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D.19 Cal. 2010); ii&M Records, Inc. v. Heilman, 75 Cal. App. 3d 55 4 (1977); and Capitol Records, Inc.20 v. Erickson, 2 Cal. App. 3d 5 26 (1969).2122 his motion is m ade pursuant to the Stipulated Briefing Schedule filed by the parties on23 January 16, 2014, and the Court's Order thereon, entered January 27, 2014.2425 his motion is based on this Notice of Motion, the attached M emorandu m of Points and26 Authorities, any reply that may be filed in support of this motion, the concurrently filed Appendix27 of Non-California Authorities, the complete files and records in this action, any facts of which the

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Court may take judicial notice under California Evidence Code 45 1 and 45 2 (including the2 materials contained in the concurrently filed Request for Judicial Notice), and any other further3 argument or evidence that Plaintiffs may present at or before the hearing on the motion.

DATED: February 3,2014 MITCHELL SILBERBERG & KNUPP LLPRUSSELL J. FRACKMA NMARC E. MAYEREMILY F. EVITT

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By: Russell J. Frac an F----utA4/1e/v\-7/110/Attorneys for laintiffs

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TABLE OF CONTENTSPage

Introduction

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I. PROPOSED JURY INSTRUCTIONII. PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAWIII. CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72RECORDINGS THAT INCLUDES THE EX CLUSIVE RIGHT OF DIGITALPUBLIC PERFORMAN CE

A. The Case Law Establishes The Existence Of A Common Law IntangibleProperty Interest In Pre-72 Recordings.B. The Policies And Principles Of California Law Confirm Th e Existence Of ADigital Performance Right In Pre-72 Recordings.C. The Plain Language And Structure Of Civil Code Section 980 Confirm Th eExistence Of An E xclusive Digital Public Performance R ight In Pre-72Recordings 2

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TABLE OF AU THORITIESPage(s)

CASESA& M R ecords, Inc. v. Heilman,

75 Cal. App. 3d 55 4 (1977) assimA& M Records, Inc. v. Napster,239 F.3d 1011 (9th C ir. 2001)Balboa Ins. Co. v. Trans Global Equities,218 Cal. App. 3d 1327 (1990) 0Bonneville Int l Corp. v. Peters,15 3 F. Supp. 2d 763 (E.D. Pa. 2001) 6Bonneville Intl Corp. v. Peters,347 F.3d 485 (3d Cir. 2003) , 16California School Employees A ssn. v. Travis Unified School Dist.,15 6 Cal. App. 3d 242 (1984) 3Capitol Records, Inc. v. Erickson,2 Cal. App. 3d 526 (1969) assimCapitol Records, LLC v. BlueBeat, Inc.,765 F. Supp. 2d 1198 (C.D. Cal. 2010) , 6, 8, 15Order Granting Temporary Restraining OrderPreliminary InjunctionTemporary Restraining OrderCassel v. Superior Court,5 1 Cal. 4th 113 (2011) 3Fnb Mortgage Corp. v. Pac. General Corp.,76 Cal. App. 4th 1116 (1999) 4Geertz v. Ausonio,4 Cal. App. 4th 1363 (1992) 4Goldstein v. California,412 U.S. 546 (1973) , 14, 17Hollywood Screentest of Ame rica, Inc. v. NBC Universal, Inc.,15 1 Cal. App. 4th 631 (2007) 0International News Service v. Associated Press,248 U.S. 215 (1918) , 9, 10

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ABLE OF AUTHO RITIEScontinued)2 Page s)3 Lane v. Whitaker,4 0 Cal. App. 2d 327 (1942) 35 Law Offices of Mathew Higbee v. Expungement Assistance Services,6 14 Cal. App. 4th 544 (2013) 17 Leader v. Cords,182 Cal. App. 4th 1588 (2010) 48 Lone R anger Television, Inc. v. Program Radio Corp.,9 40 F.2d 718 (9th C ir. 1984)

10 Lopez v. Superior Cou rt,5 0 Cal. 4th 105 5 (2010) 41 1

12 Metropolitan O pera Ass 'n v. W agner-Nichols Recorder C orp.,101 N.Y.S.2d 483 (N.Y. Sup. Ct. 195 0) , 1113 Ojala v. Bohlin,14 78 Cal. App. 2d 292 (1960) 115 Pineda v. W illiams-Sonoma S tores, Inc.,16 1 Cal. 4th 524 (2011) 417 Smith v. Paul,174 Cal. App. 2d 744 (195 9) 218 Williams v. Weisser,19 73 Cal. App. 2d 726 (1969) 2, 1320 WorldMark, The Club v. W yndham Resort Development Corp.,21 87 Cal. App. 4th 1017 (2010) 522 STATUTES23 17 U.S.C. 102(a)(7)24 106 1325 114(a) 5 301(c)26 California Civil Code27 4 4

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TABLE OF AUTHORITIES(continued)Page(s)

654 3 980 assim

Fla. Stat. 543.02 (enacted 1941) 4Laws of Florida, 1977, c. 77-440, 1 4N.C. Gen. Stat. 66-28 (enacted 1939) 4S.C. Code 39-3-510 (enacted 1939; previously codified at 6641, 66-101) 4

OTHER AUTHORITIES13 B. E. Witkin, Summary of California Law, 46, 47 (10th ed. 2005) 26 W. F. Patry, Patry On Copyright, 18:55 (2013 ed.)H.R. Conf. Rep. No. 105-796, at 79 (1998) 6H.R. Rep.

No. 92-487 (1971) 1No. 104-274 (1995) 6

S. Rep. No. 104-128 (1995) 6

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Introduction2 efendant Sirius XM Radio Inc. ( Sirius XM ) has built a multi-billion dollar business on3 transmitting sound recordings to the public. Every day, Sirius XM exploits, for commercial gain,4 many hundreds, if not thousands, of Plaintiffs' sound recordings that were fixed (i.e., recorded)5 before February 15, 1972 ( Pre-72 Recordings ), by transmitting high-quality digital versions of6 those recordings to more than 25 million paying customers.' In fact, Sirius XM unabashedly seeks7 to attract users to its service by offering channels dedicated to Pre-72 Recordings (including8 1940s, 1950s, and 1960s channels) and by using Pre-72 Recordings to promote its channels, such9 as by using classic Rolling Stones recordings to advertise the Deep Tracks channel and, just last

10 week, highlighting the works of the late singer/songwriter Pete Seeger on Sirius XM's The11 Village and Outlaw Country channels. Notwithstanding the bounty that Sirius XM is receiving12 from its unfettered use of some of the most iconic sound recordings of all time including13 recordings by artists such as the Beatles, the Rolling Stones, Led Zeppelin, The Supremes, Bob14 D ylan, and hundreds of others it refuses to pay the artists who created those cultural treasures,15 and those who own the rights to them, any portion of the millions of dollars Sirius XM makes each16 year from those Pre-72 Recordings. In addition to being fundamentally unfair, Sirius XM's17 conduct violates California common law and statutes grounded in the century-old maxim that "one18 may not reap where [it] has not sown. International News Service v. Associated Press, 248 U.S.19 215, 239-40 (1918) ( INS ).2021 ' Sirius XM describes its service as follows: Thanks to those satellites high in the sky, you canenjoy Sirius XM S atellite Radio almost anywhere within the 48 contiguous United States, the22 District of Columbia and Puerto Rico (with some limitations), hundreds of miles out into theAtlantic and Pacific Oceans, the Gulf of M exico, Caribbean Sea and the G reat Lakes.23 https://listenercare.siriusxm.corn/app/answers/detail/a id/3570 (last visited Feb. 3, 2014). SiriusXM has now expanded its services beyond satellite radio. Sirius XM's website describes its24 digital service, MySXM, as an Internet radio feature so you can enjoy it on your computer orwith a Sirius XM app for your iPhoneC, iPadS, iPod touch or compatible Android device." See25 http://www.siriusxm.com/mysxm (last visited Feb. 3, 2014).26 2 Sound recordings can be d igitally transmitted by satellite, over the Internet, and over m obilenetworks. "Real time" Internet transmissions are known as "streaming" transmissions. Bonneville27 Intl Corp. v. Peters, 347 F.3d 485, 489 (3d Cir. 2003). Alternatively, music files may bedistributed via digital download, which is a way to receive information, typically a file, from

Mitchell 28 another computer to yours. A& M Records, Inc. v. Napster, 239 F.3d 1011, n. 1 (9th C ir. 2001).Silberberg & 1Knupp LLP

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This mo tion asks the Cou rt to recognize a basic legal principle: the exclusive intellectualproperty rights that California law grants to the owners of Pre-72 R ecordings are broad andadaptable, and include the right to publicly perform Pre-72 Recordings by digital transmission,whether by satellite, over the Internet, through sm artphone applications, or otherwise. For over 40years, California law explicitly has recognized the existence of a comm on law p roperty right inPre-72 Recordings. This exclusive property right, which is necessary to protect and encourage theinvestment of time, money and creative effort involved in providing these unique recordings to thepublic, was written into Section 980 of the California Civil Code in 198 2, which states, inunqualified terms, that the ownership rights of Pre-72 Recordings are exclusive ... as against allpersons.

The property right in Pre-72 Recordings has for m any years been exploited by the creatorsand ow ners of those recordings by reproduction and p hysical distribution to the public (i.e., onvinyl records, audio tapes, and CDs). The m ethods by which consum ers enjoy music, and bywhich soun d recording ow ners and artists distribute and are paid for that music, have changed, butthe property exploited is the same. The same m usic now is widely accessed by mean s of digitalaudio transmissions such as those that are the foundation of Sirius XM's business. Thesetransmissions enable businesses like Sirius XM to provide paying subscribers located anywhere inthe United States (and beyond) high-quality recordings through car radios, desktop and laptopcomputers, smartphones, tablets, and other connected devices. Sirius XM's own representationsthat it currently has over 25 million paying subscribers confirm this change in consum er habits inlistening to music. In 2012, Sirius XM's hardware was in two out of every three new cars sold,and its business generated more than $3.4 billion.' Put simply, Sirius XM is using Pre-72Recordings to provide access to the same music that Plaintiffs created, own, and have the right tosell to the public, whether on C Ds, digital copies, or digital transmissions. That Sirius XM ispublicly performing those recordings via digital transmission, rather than selling a dow nload or a

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See Sirius XM Satellite Radio Proxy Statement and 2012 A nnual Report, available athttp://investor.siriusxm.com/annuals.cfm (last visited Feb. 3, 2014); Sirius XM Satellite RadioCorporate Overview, available at http://www .siriusxrn.com/corporate (last visited Feb. 3, 2014).2

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physical copy, do es not chan ge the fact that it app ropriates for itself the value of Plaintiffs'property.

The requested jury instruction does not implicate any proposed affirmative defenses thatSirius XM may later assert in these proceedings. Nor does this motion ask the C ourt to addressthe ultimate proof of a claim for violation of a digital public performance right in Pre-72Recordings. The only issue before the Co urt is recognizing the existence of a digital performanceright under California law.' As set forth below, the existence of a digital perfoimance right in Pre-72 Recordings as part of the exclusive rights conferred by California law is confirmed b y caselawextending over 40 y ears; by the policies that underpin California comm on law theories ofmisappropriation, conversion, and unfair com petition; by the plain language, structure, and intentof California Civil Code Section 980; and by the very same m arket considerations that in 1995drove Co ngress to amend the Copyright A ct (which, unlike California law, previously specificallyexcluded a perform ance right in sound recordings) to give sound recording o wners a digitalperformance right in their federally copyrighted post-72 recordings. Th ese authorities, whethertaken individually or collectively, establish conclusively that there exists a broad intangibleproperty right in Pre-72 R ecordings that includes the valuable right to perform these recordingsdigitally. Accordingly, the Court should grant this motion and adopt Plaintiffs' proposed juryinstruction.

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I. ROPOSED JURY INSTRUCTIONPlaintiffs respectfully request that the Court adopt the following jury instruction:

The owner of a sound recording fixed (i.e., recorded) prior toFebruary 15 , 1972, possesses a property interest and exclusiveownership rights in that sound recording. This property interest andthe ownership rights und er California law include the exclusive rightto publicly perform, or au thorize others to publicly perform, thesound recording by means of digital transmission whether by

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Plaintiffs also claim that Sirius XM is liable for copying thousands of Plaintiffs' Pre-72Recordings to its servers or satellites without authorization. There is no dispute that Californialaw recognizes the exclusive right to reproduce copies of Pre-72 R ecordings. See A&M Records,Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). Sirius XM's violations of Plaintiffs' reproductionright are not part of this m otion and w ill be addressed at a later time.3


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1 satellite transmission, over the Internet, through mobile smartphoneapplications, or otherwise.2II. PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAW

In 1971, Congress passed the Sound Recording Am endment to the 1909 Copyright Act.This amend ment granted certain federal protections to sound recordings fixed on or afterFebruary 15, 1972 ( Post-72 Recordings ). 5 Congress' extension of federal copyright protectionto such sound recordings, however, did no t disturb the pre-existing state law regim en. Instead, theSound R ecording Am endment expressly preserved state law p rotection for Pre-72 Recordings.See 17 U.S.C. 301(c) ( W ith respect to sound recordings fixed before February 15 , 1972, anyrights or remedies under the com mon law or statutes of any state shall not be annulled or limitedby this title until February 15, 2067. ) (emphasis added).

Section 301(c) of the Copyright A ct does not limit the extent or nature of the protectionthat states can grant to P re-72 Recordings. To the contrary, Congress expressly left existing statelaw intact, and further allowed the states to retain, adopt, and continue to develop com mon lawand statutory protection for Pre-72 Recordings as they saw fit. Thus, Congress em powered thestates to provide full protection for any unauthorized and uncom pensated exploitation of Pre-72Recordings. See Goldstein v. California, 412 U.S. 5 46 (1973) (California had broad power toprotect Pre-72 Recordings that are not covered by the federal Copyright Act); see generally 6 W.F. Patry, Patry On Copyright, 18:5 5 at 18-198 (2013 ed.) ( Section 301(c) is directed towardmaterial (pre-1972 sound recordings) wh ich Congress has expressly told the states they mayprotect.... States are thus free to extend pre-1972 sound recordings the full panoply of rightsgranted original works of authorship by the Federal Copyright and beyond (for examp le, aperformance right...)"). As explained below, California provides a valuable, intangible propertyright in the performances em bodied in Pre-72 R ecordings that includes the exclusive right to use(and authorize others to use) Pre-72 Recordings by digitally transmitting them.

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The protection for sound recordings fixed after February 15 , 1972, later was codified in the1976 Copyright Act, which lists sound recordings as a work of authorship protected by federalcopyright law. See 17 U .S.C. 102(a)(7).4


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III. CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72RECORDINGS THAT INCLUDES THE EXCLUSIVE RIGHT OF DIGITALPUBLIC PERFORMANCEA. he Case Law Establishes The Existence Of A Common Law IntangibleProperty Interest In Pre-72 Recordings.California case law supports the existence of a digital performance right in Pre-72

Recordings under theories of unfair competition, misappropriation, and conversion.Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal. 2010), is the only

reported decision applying California law to the digital performance of Pre-72 Recordings. Thedefendants were the owners of w ebsites (bluebeat.com and basebeat.com ) that transmitted anddistributed sound recordings, including a large num ber of Pre-72 Reco rdings (most notablyrecordings by the Beatles), to memb ers of the public, both by digital download and by digitalstreaming, without authorization from the owners o f the recordings. The plaintiffs, six affiliatedrecord labels, sued, alleging that the defendants had engaged in federal copyright infringementwith respect to the plaintiffs' Post-72 Recordings and had violated state law w ith respect to theplaintiffs' Pre-72 Recordings. Specifically, the plaintiffs alleged that the defendan ts had eng agedin comm on law m isappropriation, conversion, and unfair competition and had violated CaliforniaCivil Code Section 980 (discussed at Section III.C. below), which provides that [t]he author of anoriginal work of authorship consisting of a sound recording initially fixed prior to February 15 ,1972, has an exclusive ownership therein ....." (emphasis added).

The case initially was assigned to Judge John W alter who issued both a temporaryrestraining order and preliminary injunction, finding that by offering ... digital streamingtransmissions of Plaintiffs' Recordings, Defendants' actions can cause irreparable damage to theperceived value of Plaintiffs' music and to Plaintiffs' digital distribution strategies andrelationships. See Order Granting Tem porary Restraining Order, Case No. 09-8030 JST at 6(Docket No. 13); Tem porary Restraining Order, Case No. 09-8030 JST (Docket No. 14) at 4

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( TRO ); Preliminary Injunction, Case No. 09-8030 JST (Docket No. 25) at 4 1 1 1 b ) . 6 The TRO andPreliminary Injunction enjoined the defendants from directly or indirectly infringing in anymanner any right in any and all sound recordings originally fixed in a tangible medium ofexpression prior to February 15, 1972, in which any Plaintiff.., owns or controls an exclusiveright under state or comm on law (the 'Pre-1972 Sou nd Recordings'), including without limitationby directly or indirectly copying, reproducing, dow nloading, distributing, comm unicating to thepublic, uploading, linking to, transmitting, publicly performing, or otherwise exploiting in anymanner any of Plaintiffs' Pre-1972 Sound Recordings..." TRO at 4; Preliminary Injunction at 2(emphasis added).

Several months later, the BlueBeat case was transferred to Judge Josephine Tucker who,after the completion of discovery, granted summary judgment to the plaintiffs, holding that thedefendants reproduced, sold, and publicly performed the pre-72 recordings without properauthorization (emphasis added), and that [for these actions, [defendants are] liable formisappropriation, unfair competition, and conversion. BlueBeat, 765 F. Supp. 2d at 1206. Thus,two judg es concluded that defendants had violated the plaintiffs' rights, including by digitallyperforming their Pre-72 Recordings p ublicly.

BlueBeat relied on, and was a natural result of, the two seminal California cases addressingcommon law rights in Pre-72 Recordings Capitol Records, Inc. v. Erickson, 2 Cal. App. 3d 5 26(1969) and il&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). In Erickson, the Court ofAppeal held that the production, distribution, and sale of tape cartridges that copied theperformances em bodied in plaintiff's recordings gave rise to a claim for unfair comp etitionbecause:

Capitol expends substantial effort, skill and m oney in selectingperforming artists and obtaining the exclusive right to record theirperformances, in mechanically reproducing their performances ondiscs and tapes of the highest quality, and in promoting the sale ofthe tapes and discs.... [Defendant] unfairly appropriates artisticperformances prod uced by Capitol's efforts, and [defendant] profits6 Copies of these docum ents are included in the Appendix o f Non-C alifornia Authorities filedconcurrently herewith and subject to judicial notice. See Request for Judicial Notice, filedconcurrently herewith.


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thereby to the disadvantage of Capitol. Such conduct by [defendant]is unfair competition.... 2 Cal. App. 3d at 5377Erickson was followed by and expanded in Heilman, which held that making and

distributing unauthorized copies of the performances em bodied in plaintiffs' Pre-72 Reco rdingsconstituted unfair com petition and also misappropriation and conversion. Heilman, 75 Cal. App.3d at 564 (duplicating Pre-1972 Recordings and selling them for profit presents a classic exampleof the unfair business practice of m isappropriation of the valuable efforts of another. Suchconduct unquestionably constitutes unfair competition....").

These cases recognized the basic proposition that there exists a property right in, andcomm on law protection for, Pre-72 Recordings. Heilman, 75 C al. App. 3d at 570 ( [R]ecordedperformances are [plaintiff record company's] intangible personal property. ); Erickson, 2 Cal.App. 3d at 537 -38 (copying and distributing plaintiff's Pre-72 Recordings appropriates artisticperformances produced by [plaintiff's] efforts and defendant had appropriated the product itself performances embodied on the records. ); see Lone Ranger Television, Inc. v. Program RadioCorp., 740 F.2d 718, 725 (9th Cir. 1984) (plaintiff had an intangible property interest in theperformances on its tapes of scripts broadcast over the radio); see also Metropolitan Opera A ss 'nv. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (N.Y. Sup. Ct. 1950), aff d, 107 N.Y.S.2d795 (N.Y. App. Div. 1951) (per curiam) ( [T]o refuse the groups who expend time, effort, money,and great skill in producing these artistic performances, the protection of giving them a propertyright in the resulting artistic creation w ould be co ntrary to existing law, inequitable, and repugnantto the public interest. ).

These cases protected the valuable intangible property in the recorded perfolinances in Pre-72 Recordings (no t the tangible tapes in wh ich the intangible recordings were em bodied).Defendants in those cases w ere selling, and their custom ers were bu ying, the ability to listen to' The Pre-72 Recording found protectable and sold to the public in Erickson was Goin' Out ofMy Head" by the Lettermen. 2 Cal. App. 3d at 529. Sirius XM also transmits recordings by theLetteimen without authorization or paym ent. See Com plaint Schedule A; see also Heilman, 75Cal. App. 3d at 560 n.5 (listing some of the recorded performances at issue here: W e've OnlyJust Begun by the Carpenters and You Were On My Mind by We Five. See Complaint,Schedule A).



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and enjoy the recorded perfoimances in Pre-72 Recordings. In Erickson and Heilman, defendantsaccomplished that end by copying and distributing hard copies (i.e., tape recordings) of Pre-72Recordings. That conduct violated the exclusive rights of the owners of those Pre-72 R ecordings.Digital audio transmission is just another means o f providing customers w ith access to the samePre-72 Recordings that they could obtain and enjoy by other comm ercial means. The intangibleproperty appropriated and used is the same, and the harm to the ow ners is the same. There is nofactual or legal reason to carve out Sirius XM 's means of comm ercial use digital audiotransmission from the established exclusive property rights of owners of Pre-72 Recordings.These exclusive rights should apply regardless of the means b y wh ich a defendant uses Pre-72Recordings and sells these recordings to the public.

Collectively, Erickson, Heilman, and BlueBeat applied the well-developed elements ofCalifornia com mon law causes of action for misappropriation, unfair comp etition, and conversionto Pre-72 Recordings. The BlueBeat court summarized the elements of these claims as applied tothe copying, distribution, and digital public performance of Pre-72 Recordings as follows:

For a successful m isappropriation claim, a p laintiff must show that(1) the plaintiff has invested substantial time and money indevelopmen t of its ... property; (2) the defendant h as appropriatedthe [property] at little or no cost; and (3 ) the plaintiff has beeninjured by the defendant's conduct.... Under California Civil Code 980(a)(2), the author of an original work of authorship consistingof a sound recording initially fixed prior to February 15 , 1972, hasan exclusive ownership therein ... against all persons except onewho indep endently makes or duplicates another sound recording thatdoes not directly or indirectly recapture the actual sounds fixed insuch prior sound recording.For an unfair com petition claim und er California Business andProfessions Code 17200, plaintiff must show anything that canproperly be called a bu siness practice and that at the same time isforbidden by law.... Section 17200 borrows violations from otherlaws by m aking them independ ently actionable as unfair competitivepractices ... [and] a practice may be deemed unfair even if notspecifically proscribed by some other law. ... Under CaliforniaBusiness and Professions Code 17200, unfair com petition ...include[s] any unlawful, unfair or fraudulent business act or practiceand unfair, deceptive, untrue or misleading advertising ....Finally, for a conversion claim, a plaintiff has to show ow nership orright to possession of property, wrongful disposition of the property


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1 right and damages. BlueBeat, 765 F. Supp. 2d at 1205 (citations andquotations om itted). 82These legal principles apply to the un authorized exploitation by digital transmission ofperformances embodied in Pre-72 Recordings every bit as much as they apply to the un authorizedreproduction or distribution of the same performances em bodied in Pre-72 Recordings. Nothingin the case law has negated the existence of a digital performance right in Pre-72 Recordings, orhas limited or restricted an owner's property interest in Pre-72 Reco rdings to physical or digitalreproduction or distribution rights.

B. he Policies And Principles Of C alifornia Law Confirm The E xistence Of ADigital Performance Right In Pre-72 Recordings.The decisions in Erickson and Heilman to confirm ow nership rights in Pre-72 Recordings

were prem ised on established comm on law principles, embodying California public policy. Thesecases recognized that a defendant may not gain substantial profit by circumvent[ing] thenecessity of expending skill and money in acquiring the artists and recording their performances,and that providing a return to those who do expend skill and money encourages furtherinvestment and invention. Erickson, 2 Cal. App. 3d at 5 37-38. The courts in both cases supportedtheir conclusions with a line of unfair com petition cases, including the sem inal decision in INS,248 U .S. 215 (1918). These and other cases confirm that the valuable performances in Pre-72Recordings should be and are protected from appropriation or u se by digital transmission.

In INS, the parties (INS and the Associated Press ( AP )) were competitors in thegathering and publication of news, w hich they sold to newspapers for an annual subscription ormembership fee. AP alleged that INS appropriated AP's news through a variety of means,including by copying new s items from early editions of AP's member papers and copy ing anddisseminating the substance of AP's articles to the public. The Court held that AP was entitled toprotect an intangible property interest in its timely co llection and distribution of its new s pieces asagainst their appropriation (by publication) by INS:

Plaintiffs expect to prove all the elements of a violation of these causes of action; however, theissue here is the existence of the righ t, not its violation.9


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[T]o both [parties], news matter, however little susceptible ofownership or dominion in the absolute sense, is stock in trade, to begathered at the cost of enterprise, organization, skill, labor andmoney, and to b e distributed and sold to those who w ill pay moneyfor it, as for any other m erchandise. Regarding the new s, therefore,as but the m aterial out of w hich both parties are seeking to makeprofits at the same time and in the same field, we hardly can fail torecognize that for this purpose, and as between them, it must beregarded as quasi property, irrespective of the rights of either asagainst the public....[D]efendant, by its very act, admits that it is taking material that hasbeen acquired by com plainant as the result of organization and theexpenditure of labor, skill, and money, and which is salable bycomplainant for money, and that defendant in appropriating it andselling it as its own is endeavoring to reap where it has not sown,and by disposing of it to new spapers that are competitors ofcomplainant's mem bers is appropriating to itself the harvest of thosewho have sown . Stripped of all disguises, the process amounts to anunauthorized interference with the normal operation ofcomplainant's legitimate bu siness precisely at the po int where theprofit is to be reaped, in order to divert a material portion of theprofit from those w ho have earned it to those who have not; withspecial advantage to defendant in the competition because of the factthat it is not burdened with any part of the expense of gathering thenews. The transaction speaks for itself, and a court of equity oughtnot to hesitate long in characterizing it as unfair competition inbusiness. 248 U.S. at 236, 239-40.

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The basic concepts and po licies espoused by INS namely, that one may not reap whereit has not sown by profiting from the product of skill, labor and money of another were adoptedvirtually verbatim by the Court in Erickson, relying extensively on INS. See 2 Cal. App. 3d at531-33. The INS doctrine is firmly embedded in California law and the policies it articulates are aprecise fit to this case. See, e.g., Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327,1342 (1990) (listing elements of m isappropriation cause of action and citing INS); HollywoodScreentest of America, Inc. v. NBC Universal, Inc., 15 1 Cal. App. 4th 631, 65 0 (2007) (elementsof misappropriation cause of action include the defendant has appropriated the 'thing' at little orno cost, such that the cou rt can characterize defendant's actions as 'reaping where it has n otsown'. ); see also Metropolitan Opera, 101 N .Y.S. 2d at 490 (unfair competition by recording andselling copies of radio broadcasts and taking material that has been acquired by complainant as aresult of organization and the exp enditure of labor, skill, and money, and which is salable by

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comp lainant for money, and that defendant in approp riating it and selling it as its own isendeavoring to reap where it has not sown....").

It follows that the comm on law necessarily m ust, and does, adapt to keep pace w ith andmeet technological changes and developments that create new ways to reap where one has notsown." See, e.g., Ojala v. Bohlin, 178 Cal. App. 2d 292, 301 (1960) ( The legal concept of unfaircompetition has evolved as a broad and flexible doctrine with a capacity for further growth to meetchanging conditions. . . . ); see also Law Offices of Mathew Higbee v. Expungement AssistanceServices, 214 Cal. App. 4th 5 44, 55 1 (2013) ( [w]ith passage of time and accompanying epochalchanges in industrial and economic conditions, the legal concept of unfair competition broadenedappreciably. ). As technology and circumstances have evolved, the comm on law governing Pre-72 Reco rdings also has evolved, and the scope of rights has taken shape. This flexibility to adaptto new technologies and new circumstances was demo nstrated in Erickson, where the courtapplied traditional comm on law p rinciples to the copying and distribution of Pre-72 R ecordingsthat were fixed in a then-new medium, tape cartridges. Erickson was decided in response to taperecording technology that changed the playing field by enabling the w idespread, unauthorizedcopying and distribution to the public of tape recorded copies of sound recordings to the publicwithout paying the owners. 2 Cal. App. 3d at 528; see H.R. Rep. No. 92-487 at 19 (1971)(Statement of Chaitinan, Comm ittee on the Judiciary: The widespread availability and use ofphonograph record and tape-playing m achines, particularly the comp aratively inexpensive cassetteor cartridge tape players, give added impetus to piracy of sound recordings. ).

New technological developments tap into new sources of value inherent in an own er'sintellectual property. In the present environmen t, what w as true for unlawful du plication and saleof Pre-72 Recordings as described by Erickson in 1969, is just as true today for d igitaltransmission of Pre-72 Recordings. It is unfair for others to take the value belonging to the ow nerof that property without authorization or compen sation. The precise means by w hich a defendantappropriates and uses that property interest is not the issue. Rather, the issue is that (1) theplaintiff has invested effort, skill and money in its endeavor, by virtue of which, the plaintiff has

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created something of value, and (2) the defendant has appropriated and profited from that valuableproperty. Erickson, 2 Cal. App . 3d at 5 37. That is the case whether the value is realized by thesale of CDs, as in Erickson, or, as with Sirius XM, by the sale of subscriptions for digitaltransmissions of those same recordings. By populating its channels with many of Plaintiffs' mostvaluable recordings, Sirius XM has engaged in precisely the type of reaping without sowingarticulated in Erickson and INS. Indeed, many of the channels to which Sirius XM sells accesswould not exist were it not for Plaintiffs' Pre-72 Recordings. Sirius XM had no hand in creatingthese recordings, yet profits handsomely from them.

C. he Plain Language A nd Structure Of C alifornia Civil Code Section 980C onfirm T he Existence Of A n Exclusive Digital Public Performance R ight InPre-72 Recordings.California comm on law copyright, codified in Civil Code S ection 980, provides a separate

basis for a state law digital performance right in P re-72 Recordings. H istorically, that statute wasworded broadly to confirm exclusive ownership rights in various types of comm on lawproperty. See generally 13 B. E. Witkin, Summ ary of California Law, 46, 47 (10th ed. 2005).Its scope has been interpreted expansively. See, e.g., Smith v. Pa ul, 174 Cal. App. 2d 744, 746-5 8(1959) (then Civil Code Section 980(b) applied to architectural designs, plans, and specifications,even though not specifically m entioned); Williams v. W eisser, 273 Cal. App. 2d 726, 730 (1969)(then Civil Code Section 980(a) applied to professors' lectures). In that context, in 1982California added protection for Pre-72 Recordings by statute when it amended C ivil Code Section980 to explicitly provide comprehensive, exclusive rights to owners of Pre-72 Recordings:

The author of an original work of authorship consisting of a soundrecording initially fixed prior to February 15 , 1972, has an exclusiveownership therein until February 15 , 2047, as against all personsexcept one who independently makes or duplicates another soundrecording that does not directly or indirectly recapture the actualsounds fixed in such prior sound recording, but con sists entirely ofan independent fixation of other sounds, even though such soundsimitate or simulate the sounds contained in the prior soundrecording. Civ. Code 980(a)(2) (emphasis added).

26W hen it was amended, this new Section 980(a)(2) continued to use the same broad

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against all persons. The plain language of the statute does not limit in any way the scope of theexclusive rights that are reserved to owners of Pre-72 Recordings. The inclusive statutory

language w as neither inadvertent nor imprecise. It tracked terms that have been defined inCalifornia law for over 100 y ears. See Civ. Code 65 4 (defining Property as The ownershipof a thing is the right of one or m ore persons to possess and use it to the exclusion of others ...Mlle thing of which there may be ownership is called property. ) (emphasis added); id. 679( The ownership of property is absolute when a single person has the absolute dominion over it,and m ay use it or dispose of it according to his pleasure.... ) (emphasis added); see also, e.g.,Lane v. Whitaker, 5 0 Cal. App. 2d 327, 330 (1942) ( [O]wnership is the right of a person topossess and use a thing to the exclusion of others. ). These terms had been applied specifically todefine the meaning of exclusive ownership as used in an earlier version of Section 980:

There may be ownership of such products of labor or skill as thecomposition of an author and of rights created by statute (Civ. Code 65 5 ). The ownership of a thing is the right of one or more personsto possess and use it to the exclusion of others. The thing of whichthere may be ownership is called property. (Civ. Code 654).... Aproduct of the m ind is property. It is an intangible, incorporealright." Johnson v. Twentieth Century Film C orp., 82 Cal. App. 2d796, 807-08 (1947) (citing former Civ. Code 980).Years later, when the legislature enacted Section 980(a)(2), it used the same statutorily definedteims to provide that the owner of a Pre-72 Recording has the right to possess and use it to theexclusion of others and that the ownership of that property was absolute.

This plain language of Section 980(a)(2) m akes clear its intent and purpose to give ow nersof Pre-72 Recordings the sole right to use the product of their labor or skill. See CaliforniaSchool Employees Assn. v. Travis Unified School Dist., 15 6 Cal. App. 3d 242, 247 (1984) ( Weare required to give effect to statutes according to the usual, ordinary import of the languageemployed in framing them."). There is no basis for the Court to impose exceptions in Section980(a)(1) where non e exist. Cassel v. Superior C ourt, 5 1 Cal. 4th 113, 124 (2011) ( Judicialconstruction, and judicially crafted exceptions, are permitted only w here due p rocess is implicated,or where literal construction of a statute would prod uce absurd results. ). When the Legislaturechose to draft Section 980(a)(2), it pointedly did not, as it surely could have, construct the statute

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digital transmission technologies may permit consumers to enjoyperformances of a broader range of higher-quality recordings thanhas ever before been possible.... [C]urrent copyright law isinadequate to address all of the issues raised by these newtechnologies dealing with the digital transmission of soundrecordings and m usical works and, thus, to protect the livelihoods ofthe recording artists, songwriters, record companies, musicpublishers and others who depend u pon revenues derived fromtraditional record sales. S. Rep. No. 104-128, at 14 (1995 ) ( S.Rep. ).

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As Congress repeatedly recognized, new technologies affect the ways in which ...creative works are used (id. at 10) and W hese new technologies also may lead to new systemsfor the electronic distribution of phonorecords.... H.R. Rep. No. 104-274, at 12. Congress wasnot unm indful of the possibility that technological developments could well cause substantialchanges in existing systems for public delivery of sound recordings. S. Rep. 104-128, at 11.Accordingly, Congress's expressed purpose was to ensure that performing artists, recordcomp anies, and others whose livelihood depends upon effective copyright protection for soundrecordings will be protected as new technologies affect the way in w hich their creative works areused. Id. at 10. More specifically, the digital performance right was the result of a concern onthe part of Congress to protect record companies and recording artists from the danger of reducedrecord sales due to technological advances enabling high-quality copying by a large num ber oflisteners. Bonneville Intl Corp. v. Peters, 15 3 F. Supp. 2d 763, 778-79 (E.D. Pa. 2001), aff d347 F.3d 485 (2003). As the Bonneville court explained, [t]he motivating force behind Congress'creation of the limited public performance right w as the desire to protect record com panies andrecording artists from a reduction of record sales threatened by technological developments,specifically interactive and subscription services m ade possible by the em ergence of digital audioservices capable of delivering high-quality transmissions of sound recordings. Id. at 767, citingS. Rep. at 14-15 ; H.R. Rep. No. 104-274 at 5 -9, 12-13. Again, in 1998, in enacting the DigitalMillennium Copyright Act (comm only known as the DM CA ), Congress reiterated its objectiveto ensure that recording artists and record com panies will be protected as new technologies affect

the ways in which their creative works are used. H.R. Conf. Rep. No. 105 -796, at 79 (1998).

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These same considerations namely, to protect the property rights of record com paniesand recording artists from new w ays in which their creative works are used comm ercially,specifically, digital transmission apply to and provide further support for the existence of adigital performance right under California law. The amend ments to the Copyright Act enacted bythe DPRA were driven by the need to adapt the statute to technological change. However, unlikethe Copyright A ct, which previously excluded performan ce rights for sound recordings, Californiahas long provided evolving an d flexible comm on law protection to intellectual property, includingPre-72 Recordings, and broad, exclusive statutory protection specifically to Pre-72 Recordings.Thus, both California Civil Code Section 980 and California common law accom modate andinclude a digital performance right in Pre-72 Recordings. That property right is made all the mo revaluable and necessary by the ability to offer high-quality transmissions of Pre-72 Recordings tothe pub lic.

There is no basis or authority to construe California law to provide less protection to digitaltransmissions of Pre-72 Recordings than federal law does to P ost-72 Recordings, especially wh enCalifornia traditionally has, if an ything, provided greaterprotection for sound recordings than hasfederal law. See, e.g., Goldstein, 412 U .S. at 5 46 (affirming California protection for soundrecordings at a time w hen no federal protection existed). In practical terms, there is no legal orlogical reason why Sirius XM should have to pay, for exam ple, for the right to digitally transmit tothe public a Justin Bieber recording but not pay for m ost of the iconic recordings of the Beatles orthe Rolling Stones, or, for that matter, to pay for the right to transmit the Rolling Stones' StartMe Up" (1981) but not their "(I Can't Get No) Satisfaction" (1965).

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ConclusionCalifornia comm on law and C ivil Code Section 980 both provide that unauthorized

exploitation of perform ances embo died in Pre-72 Recordings v iolates the exclusive rights of theirowners. Whether such exploitation is by the sale of CDs, digital downloads, or digitaltransmissions is not the point. The digital transmission of Pre-72 Recordings to the public is the

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equivalent of copying and distributing those recordings to the public. Failing to comp ensate fordigital transmissions causes the same harm and loss of revenue as does un authorized distributionof CDs or unau thorized downloading of digital copies embodying those sound recordings. Suchcomm ercial exploitation of Pre-72 Recordings w ithout authorization violates a fundamental rightto control the use of property and unfairly appropriates artistic performances produced by[plaintiff's] effort, and [defendant] profits thereby to the disadvantage of [plaintiff]. Erickson, 2Cal. App. 3d at 537. By publicly performing Pre-72 Recordings owned by Plaintiffs by means ofa digital audio transmission w ithout authorization or com pensation, Sirius XM is misappropriatingPlaintiffs' exclusive property interests under California law. Plaintiffs ask the Co urt to accept andadopt their proposed jury instruction in its entirety.

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DATED: February 3, 2014 espectfully submitted,MITCHELL SILBERBERG & KNUPP LLPRUSSELL J. FRACKMANMARC E. MAYEREMILY F. EVITT

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SERVICE LISTFred R. Pu glisiValerie E. AlterJay RamseyKent RaygorSheppard Mullin Richter & H ampton LLP1901 A venue of the Stars, Suite 1600Los Angeles, CA 90067Phone: 310-228-3733Fax: 310-228-3933E-mails: fpuglisi@ sheppardmullin.com ;[email protected] ;[email protected] ;[email protected] for DefendantSirius XM Radio Inc.

R. Bruce RichBenjamin E. MarksTodd LarsonJohn GerbaBruce MeyerWeil, Gotshal & M anges LLP767 Fifth AvenueNew York, NY 10153Phone: 212-310-8029Fax: 212-310-8007E-mails: bruce.rich weil.com ;[email protected] ;[email protected] ; john.gerba@w eil.com ;[email protected] for DefendantSirius XM Radio Inc.Michael S. ObermanKramer Levin Naftalis & Frankel LLP1177 Avenue of the Am ericasNew York, NY 10036Phone: 212-715-9100Fax: 212-715-8000E-mail: [email protected] for DefendantSirius XM Radio Inc.

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Label Sirius

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Transcript of Label Sirius