Un-Blurring Substantial Similarity: Aesthetic Judgments and Romantic Authorship in Music Copyright Law

Un-Blurring Substantial Similarity: Aesthetic Judgments and Romantic Authorship in Music Copyright Law
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By Nicole Lieberman*


By refusing to acknowledge[1] the aesthetic judgments inherent in determining copyright disputes,[2] American courts have plagued our copyright law with subjective bias[3] and doctrinal confusion. To avoid the appearance of impropriety, since at least 1903[4] courts have side-stepped clearly defining foundational concepts such as “originality,”[5] “authorship,” and “infringement.” As such, they have failed to provide a meaningful methodology for determining when a work infringes the copyright of another.[6] By instead relying on the impossibly vague “substantial similarity” test,[7] courts have crafted an impressionistic doctrine that has drifted far from copyright’s original economic purpose of incentivizing creation.

While copyright infringement requires proof of copying, mere copying is not the end of the inquiry, as “[t]rivial copying is a significant part of modern life.”[8] Thus, proof of copying, or “copying-in-fact,” is only a threshold issue for proving infringement.

Copying-in-fact can be shown through direct evidence, such as testimony, but with witnesses and honest thieves often lacking, copying is most often shown by circumstantial evidence. Indirect proof of copying is provided by evidence creating an inference that the defendant copied – typically a combination of evidence of access to the plaintiff’s work and similarities probative of copying. While courts allow expert analysis and dissection to aid them in inferring copying, the largely unguided impression of lay observers determines the more exacting question of misappropriation.[9]

Yet determining misappropriation requires an understanding of the “axiom of copyright law that the protection granted to a copyrightable work extends only to the particular expression of an idea and never to the idea itself.”[10] Application of the “idea/expression” distinction requires delicate line-drawing to decide the appropriate “‘level of abstraction’ at which one defines the ‘idea’ that merges with the subject’s expression.”[11] But fact finders are unlikely to understand on their own which “ideas” are excluded or what elements fall into the category of “ideas.” While jury instructions can theoretically work to inform jurors to exclude such elements, “in practice jurors aren’t going to know what things are, for example, scène à faire[12] in the music industry, without some testimony on standard chord progressions.”[13] Thus, jurors are not likely to understand such an ephemeral distinction between ideas and expression, especially when applied to areas in which they lack expertise, as is often the case with copyright.[14] Because the issue of misappropriation is so dependent on the interpretation of these underlying principles of copyright law, classifying the issue as purely a question of fact for the jury requires reconsideration.[15]

Courts recognize the need for expert analysis and dissection in determining infringement in cases involving computer software. Distinguishing computers as “complex” and having elements dictated by limited options, courts apply a special test to ensure only protected elements are considered for infringement purposes. Yet they proscribe such guidance when the “aesthetic arts” are at issue, failing to recognize traditions unique to genres, that all art is capable of being broken down into constituent elements, and that such elements are dictated by genre and functional constraints. Courts have assumed that art is intuitive, simply reflecting emotions, and capable of being understood by anyone. Their narrow understanding of art comes from our law’s founding.

Copyright arose in an era where the courts viewed creativity as coming from a place of pure autonomous genius,[16] but this romantic view of aesthetics is a relic of the past: a counteraction to the age of enlightenment and rationalization. The reality is that creative borrowing is almost unavoidable and results in widespread use of unprotected elements from preexisting works. Without expert guidance and the ability to dissect protectable and unprotectable elements, judges and jurors are “more likely to find infringement in dubious circumstances, because they aren’t properly educated on the difference between protectable and unprotectable elements.”[17]

Due to the prevalence of music copyright infringement suits, and the fact that music is more perceptively derivative than other media,[18] it seems disproportionately plagued by the courts’ bias for traditional aesthetics. But music, like all arts, is inherently complex and technical,[19] and few “ordinary observers” know the elements and factors that go into its creation,”[20] especially with works of less familiar genres. Thus, fact finders are easily misled into finding substantial similarity based on unprotectable elements.[21]

While music may be uniquely crippled by our current copyright regime, the problems plaguing music copyright stem directly from a lack of guidance where it is arguably most needed: the technical issue of misappropriation.[22] With fact finders less likely to detect similarities attributable to common sources in unfamiliar aesthetic, the current system results in a prejudice against lesser-known aesthetics, and a bias for the traditional. [23] The result is far from encouraging aesthetic progress.

This paper will argue that to create a more encompassing[24] and objective copyright law, that fosters progress in all arts, it is vital to expand the role of analytic dissection and expert testimony to the misappropriation prong of the infringement test.

Part I of this paper provides background on the history of court treatment of music copyright and lays out the two major approaches to copyright infringement. In addition, this part outlines the foundational principle that only the expression of an idea is protectable. Part II illustrates how the tests have veered away from the original purposes and values underlying the inquiry. It argues that by relying on the ordinary observer test for misappropriation, the tests fail to accurately account for the idea-expression distinction. In outlining the problems facing music under our current copyright regime, this section shows how the problems with the audience test are particularly problematic for music, a medium in which the line between idea and expression is often not “spontaneous and immediate” to the ordinary observer.[25] The recent “Blurred Lines”[26] lawsuit serves to illustrate how the lack of objectivity in our current law results in inconsistent application, thereby diminishing incentives to create new works. More broadly, this section considers that while the problems for music are often more noticeable than for other media, they merely expose the larger inaccuracies of the audience test. Finally, Part III considers proposals for creating a more guided and objective infringement analysis. Ultimately, this paper concludes that the best solution is adopting the test for computer software, the abstraction-filtration-comparison method (AFC),[27] as a uniform test for infringement.

Requiring careful dissection of unprotected elements by the court would ensure educated decisions, and reserving the intuitive question of whether the defendant copied those elements for the trier would preserve the economic rationale of the lay listener test.[28] Effectively reversing the analysis of proof “will likely result in greater attention to the limiting doctrines of copyright law”[29] and the evolution of reasoned rule of law.[30] By basing aesthetic nondiscrimination in objective and reasoned criteria, as opposed to the “anti-intellectual and book burning” philosophy[31] of visceral impressions, the courts can determine actual illicit copying while being receptive to unconventional aesthetics.[32]

I. Historical Background of Music in Copyright

While copyright law struggles to deal with the fine arts as a whole,[33] particular problems arise in the context of musical works. These issues are rooted in the history of copyright law. Many of the problems facing music copyright lie in the fact that creators are seeking protection under a scheme created for the distinct purpose of protecting works of literature.[34] However, these problems are not unique to music. American copyright law is based on a concept of authorship ill-suited to progress in general. This section will outline the evolution of our copyright infringement doctrine. In considering the historical application of the doctrine to musical works, this section analyzes the aesthetic norms embedded within judges’ and jurors’ findings of infringement.

A. Music’s Initial Encounters in Early Legislation and Case Law

Article 1, Section 8 of the Constitution authorizes federal legislation “[t]o promote the Progress of Science and useful Arts,”[35] but gives little guidance in defining the scope of the copyright system. The original Copyright Act of 1790 extended protection only to maps, charts, and books.[36] Though musical compositions were routinely registered under the 1790 Act as “books,”[37] it was not until the Copyright Act of 1831 that Congress expressly extended protection to musical compositions. Congress’s early failure to provide well-crafted protection for musical compositions is hardly surprising given the 1790 Act’s roots in Great Britain’s Statute of Anne, which covered only the distinct category of “books.”[38]

With no other protection available against infringers, composers naturally came to seek protection of their works through copyright.[39] Yet utilizing a scheme created for “written” works meant obtaining copyright protection solely with respect to the underlying composition, “the notated, written score, including the music and any lyrics.”[40] While seemingly analogous, music as a performing art is “often related in some way to performance” and must be understood by reference to its context, that is, elements outside the composition.[41] Though federal law since 1976 has applied copyright protection to musical recordings, including some performance elements such as percussion, recordings are treated as distinct expressions with separate copyright protection.[42] Consequently, musical compositions are protected only within the restrictive framework of the “musical work,” which is defined as a combination of melody and harmony.[43]

More problematically, courts analyzing music copyright cases tend to place undue weight on melody, rather than harmony and rhythm,[44] failing to consider the complexity of music and a realm of possible distinguishing features. Focusing on elements of music that “lend themselves to notation”[45] may seem adequate in analyzing works from European musical traditions, which typically have predominant harmonic and melodic structures,[46] but doing so fails to consider music in its totality. Because music is inherently relational,[47] our perception of musical works, and their meaning, is dependent on the context in which notes and pitches in the melody are played.[48] Elements such as timbre and spatial organization are also relevant to the way we hear music and to the similarities we perceive. Consequently, “originality is better viewed as a function of the interaction and conjunction of these elements than of any element alone.”[49]

Neglecting to consider the totality of elements in musical works, while ill-suited even to classical traditions, most drastically affects works outside of Western traditions. The main aesthetic features of non-Western music often fall outside the confines of the court’s emphasis on melody and notation. Most notably, hip-hop, which finds its roots in certain African musical traditions, features a dominant “oral tradition,” evidenced in the practice of rapping, and complex rhythmic structures with less emphasis on melodic and harmonic structures. Moreover, such traditions predominately feature the element of musical borrowing through the practice of sampling, looping, and interpolation. These features are also found in other African American musical genres, including blues, jazz, rhythm and blues, gospel, Soul, rock, reggae, funk, disco, and rap, and are found mixed with all types of music today.[50] Electronic music producers are now producing hip-hop tracks,[51] and even pop-country artists are making rhythm-centric tracks that reference hip-hop culture. Not surprisingly, entering the arena puts artists at risk of facing a copyright suit. Taylor Swift recently faced a $42 million infringement claim for using the lyric “haters gone hate,” a staple in hip-hop culture and music, [52] in her recent dance-pop track “Shake it Off.”[53] Despite the prevalence of non-notational elements, copyright’s bias for written work places works that do not fit the mold “at the bottom of the hierarchies of taste,”[54] making findings of original elements in allegedly infringing works more difficult to obtain.

Borrowing similarly conflicts with Western ideals of creativity and originality, with the result that music has historically been disvalued. Records from the time of the Statute of Anne’s enactment are telling of the hostile attitudes facing music. While literature was held in high esteem for its educative role, music was seen as an unnecessary luxury that served merely as entertainment.[55] In Pyle v. Falkener,[56] an early case brought under the Statute of Anne, defendant publishers argued that, in contrast to works of literature, authorship of music required “a high standard of originality to qualify for protection under any legal theory.”[57] Underlying their challenge was the commonly held notion that composers “merely borrowed” from “[o]ld [t]unes which had been [u]sed in [c]ommon by all persons for many years before…” and as such have no proprietary rights.[58]

Such disparaging views of music are less surprising when one considers the rise of the Romantic view of authorship in the nineteenth and twenties centuries.[59] Unlike the classical conception of authorship, which “conceives of art as imitating universal truths and ideas,” and thus contemplates the evolutionary nature of art, the Romantic view conceptualizes the creation of art “as a process that reflect[s] the emotions and personality of the individual artist.”[60] With the Romantic view informing cultural assumptions, originality often came to be defined as requiring independent creation, “which essentially appears to rule out or significantly limit borrowing.”[61]

With the functional and genre constraints inherent to music,[62] tensions existed early on in applying copyright to musical works. Yet “use of existing works has historically been a core feature of the musical composition process”[63] and the artistic process in general. The courts’ neglect to appreciate the reality of borrowing has often resulted in overbroad copyrights, extending protection to more than just the particular arrangement of the literal elements of a work.[64] Additionally, by failing to recognize distinguishing features of songs that lie outside the melody and notation, courts often find infringement based on unprotected elements. Genres that explicitly sample existing works, such as hip-hop, have been hit hardest. As a result, the courts are perpetuating a bias for traditional aesthetics at the expense of progressive and unfamiliar artistic movements.[65]

B. The Idea-Expression Distinction

Early on, courts using the idea-expression dichotomy to distinguish between unprotectable and protectable aspects of works did so on the basis of tangibility. Though the courts still use these terms in filtering out unprotectable elements, changing views on the nature of the artistic process have distorted the original tangibility basis, leading to ad hoc judicial determinations. With the rise of the Romantic view, artistic works in their entirety came to be regarded as reflecting the artist’s contributions.[66] As a result, perceptions regarding the moral (and thus, intellectual property) rights of an artist expanded to include more than just the particular arrangement of the literal elements of a work.

Originally, American copyright law viewed “ideas” as “intangible, unexpressed concept[s] that existed only in the author’s mind.”[68] Therefore, copyright protected only the tangible[69] “expression,” or the “arrangement of words which the author has selected to express the idea.”[70] The rationale served the purposes of the intellectual property clause well, since free access to ideas is critical to the development of creative works.[71] Moreover, the right granted did not include a right over certain words used, because “they are the common property of the human race.”[72] This early approach was consistent under the classical conception of the creative process, which views the artist as portraying an intangible idea or truth which “cannot and should not be captured or controlled by one artist.”[73]

However, with the rise of the Romantic view in the nineteenth and twenties centuries,[74] Congress no longer limited “expression” to the arrangement of the literal elements of the copyrighted work, but expanded it to include underlying “original” conceptual elements as well.[75] In 1909, Congress both enlarged the category of works eligible for protection and expanded the rights provided to copyright owners, including use of the work in a different medium.[76] Protection under the Act was no longer limited to the literal form or features of the expressed idea, but extended to elements of a work that are intangible and conceptual.[77] In applying the new act, the Supreme Court in Kalem Co. v. Harper Bros.[78] found the defendant’s film to infringe upon the plaintiff’s copyright in the book Ben Hur because the film expressed the same underlying idea, or plot, albeit in an entirely different medium.[79]

It became clear that balanced against the idea-expression distinctions is the countervailing consideration that copyright infringement cannot be limited to exact copying, “else a plagiarist would escape by immaterial variations.”[80] The problem is one of line-drawing: at what point is a variation distinguishable enough to “sufficiently alter a work’s substantial similarity to another so as to negate infringement,” without extending protection to the underlying idea of the plaintiff’s work?[81]

Views on the nature of art and the creative process have only continued to evolve and become more inconsistent with the idea-expression dichotomy.[82] The conceptual art movement advanced the rejection of any distinction between an artist’s idea and the ultimate expression.[83] As conceptual artist Sol LeWitt stated, “the idea or concept is the most important aspect of the work. When an artist uses a conceptual form of art, it means that all of the planning and decisions are made beforehand and the execution is a perfunctory affair. The idea becomes a machine that makes the art.”[84] In rejecting the Formalist tradition, which defined art by its form and structure, conceptual art judges art by what it contributes to the conception and definition of “art.”[85] Even an unchanged item from the grocery store, like a box of Brillo soap pads,[86] can be art if framed in a new way.

With Romantic and neo-romantic views challenging classical aesthetic theory, no universally accepted philosophical or objective basis remains for distinguishing ideas from expression in works of art. Continuing to use the terms leaves courts to make infringement decisions on the basis of their own subjective assessments of a work’s artistic value.[87] Judicial determinations of what constitutes the “idea” versus the “expression” have come to reflect personal assumptions and experiences. Courts tend to find elements of a work to be an “idea” when they are familiar with the work’s aesthetic tradition and can recognize the elements as commonplace.[88] Conversely, courts are more likely to find elements of works in less familiar traditions to be original “expression,” making them more inclined to find later uses infringing.[89] As the Ninth Circuit admitted, “‘At least in close cases, one may suspect, the classification [of idea and expression] the court selects may simply state the result reached rather than the reason for it.’”[90] Thus, with changing views on the creative process, “it is no longer necessary or valuable or even possible to dissect a work of art to uncover the universal truths or ideas which must remain freely available to all future authors.”[91]

Distinguishing between ideas and expression is perhaps most illusory in the context of music, due to the relatively limited number of compositional choices when compared with literary works.[92] Western music, at issue in most copyright suits, is primarily written in the tonal system, an organized and relational system of tones (e.g., the notes of a major or minor scale) in which one tone becomes “the central point to which the remaining tones are related.”[93] Because there are a limited number of possible pitch and harmonic relationships, options within tonal music are somewhat dictated by the system.[94] Moreover, because the tonal system is built on a hierarchy of predominate chords and pitches,[95] certain “patterns and tendencies are . . . common to virtually all musical works composed in the tonal system.”[96] The distinction between these unprotectable ideas and the original expression thereof is difficult to see, and thus the room for bias is most apparent.[97]

C. Evolution of the Copyright Infringement Tests

Courts since the nineteenth century have attempted to separate the issue of copyright infringement into two issues. First, “Copying-in-Fact”: did the defendant see and copy from the copyrighted work or did he create his work independently?; second, “Misappropriation”: did the defendant appropriate too much of the protected work?[98] The first question is used as an evidentiary tool to infer copying from access or “striking similarity,”[99] while the second focuses on the liability issue.[100] The degree of similarity between the two works is relevant to both the inquiries;[101] the phrase “probative similarity” is often used in reference to the first inquiry, while “illicit similarity” is used for the second.

Courts in the 1900s maintained the distinction between the copying-in-fact and misappropriation inquiries. A “substantial similarity” test was used for the copying-in-fact inquiry to determine whether the degree of similarity between the defendant’s and the plaintiff’s work was substantial to the point of being probative of actual copying. [102] The focus was solely on whether the defendant had copied “the labors of the original author.”[103] As such, before comparing the two works for similarities, the court filtered out unprotected elements from the plaintiff’s work, including those that were “well known and in common use.”[104]

In determining misappropriation—that is, whether the defendant copied enough of the plaintiff’s work to be held liable—courts looked to the economic or aesthetic value of what the defendant copied: if the portions extracted “embody the spirit and the force of the work…they take from it that in which its chief value consists.”[105] In this context, courts often used the adjective “substantial” to refer to the qualitative value of what was copied.[106]

As precedent evolved, courts began to combine the structure of these two prongs. As a result, courts have often confused the economic purpose of the misappropriation prong: finding infringement based solely on quantitative similarity without taking account of the unprotected elements in the original work. The analysis of the two major copyright tests below outlines how this confusion arose and focuses on the problems the misappropriation prong are causing for copyright.

1. Second Circuit Copying/Unlawful Appropriation Test

In Arnstein v. Porter,[107] the litigious Ira B. Arnstein sued the American songwriter and composer Cole Porter, alleging that many of Porter’s songs infringed the copyrights of songs written by Arnstein.[108] The Second Circuit conducted an influential bifurcated test,[109] which requires a plaintiff to prove (1) copying-in-fact and (2) illicit copying (unlawful appropriation) to establish infringement.[110]

i. Copying-in-Fact

The first prong of the Arnstein test is satisfied with the showing of (a) access; and (b) sufficient similarity, which is “probative” of copying: “The stronger the proof of similarity, the less the proof of access that is required.”[111] Thus, if similarities are so “striking” so as to “preclude the possibility that plaintiff and defendant independently arrived at the same result,” evidence of access may not be necessary.[112] Of course, the converse is not true because “access without similarity cannot create an inference of copying.” [113]

To evaluate the likelihood of copying versus independent creation, expert testimony and “analytic dissection”[114] are admissible.[115] However, the two works are to be compared in their entirety, including both protectable and non-protectable material.[116]

ii. Unlawful Appropriation

Only if the threshold issue of copying-in-fact is shown does the court move to the question of misappropriation.[117] Having established copying-in-fact, the issue of unlawful appropriation is a question of fact. Therefore, the fact finder must determine whether the taking went so far as to constitute infringement under the “substantial similarity” test.[118] That is, would the ordinary observer, unless he set out to detect the disparities, be disposed to overlook them and regard the aesthetic appeal of the two works as the same?[119] The second part of the Arnstein test is “related to the nineteenth century concern with the value of what the defendant had copied” as it asks whether the similarity “relates to material of substance and value in plaintiff’s work.”[120] However, the Arnstein test departs in some ways from earlier definitions of infringement by looking to the reaction of the “ordinary observer.”[121]

In determining misappropriation, the Arnstein test looks to “the response of the ordinary lay hearer.” That is, rather than making a purely subjective determination, the trier of fact is meant to determine the issue “in light of the impressions reasonably expected to be made upon the hypothetical ordinary observer.”[122] Because the court reasoned that the value of the work lay solely in the opinion of its intended audience, it held that expert testimony on the “impression made on the refined ears of musical experts” was “utterly immaterial.”[123] While seeming to realize the difficulty in discovering the views of the imaginary “ordinary observer,”[124] the court stated that expert testimony was permitted for the limited purpose of “assist[ing] in determining the reactions of lay auditors.”[125]

Moreover, because the court determined that the value of the works lay in their final form as impressed upon the ordinary observer, it instructed that detailed analysis and careful dissection were inappropriate.[126] Therefore, according to Arnstein, works were to be considered in their entirety, again including both protectable and non-protectable material.[127] The trier was left to depend on “some visceral reaction” as the basis for determining misappropriation.[128]

If the case involves “comprehensive non-literal similarity”[129] – that is, similarity in the overall structure of the works – the trier must make a value judgment of “whether defendant took from plaintiff’s works so much of what is pleasing to the ears of lay listeners, who comprise the audience for whom such popular music is composed, that defendant wrongfully appropriated something which belongs to the plaintiff.”[130] In a case of “fragmented literal similarity,” or verbatim copying of constituent elements, an analogous value judgment must be made, but here only with respect to the protectable portions of plaintiff’s work that have been taken.[131] Dissimilarities between materials alleged to be infringing are “significant because they mitigate any impression of similarity.”[132] Dissimilarities in other aspects of the defendant’s work, except to the extent they create an overall different impression, “typically are not significant.”[133] As Judge Learned Hand said, “no plagiarist can excuse his wrong by showing how much work he did not pirate.”[134] Thus, if the defendant copies from the plaintiff’s work, it does not matter if he adds significant material of his own,[135] resulting in what might be a transformative new work.

Consequently, under Arnstein, “[i]nstead of using some objective standards or criteria based on economic impact or quantity, courts [are] to determine infringement on an unpredictable, impressionistic basis.”[136]

iii. Further Developments and Confusions of the Arnstein Test

Although the Second Circuit in Arnstein conducted two separate inquiries into the level of similarity between the two works,[137] namely to establish copying-in-fact and then to determine misappropriation, confusion ensued from the dual use of the term “substantial similarity.” As a result of this confusion, in Ideal Toy Corp. v. Fab-Lu Ltd,[138] the Second Circuit essentially combined the issues into one subjective test. By misinterpreting the element of misappropriation identified in Arnstein as “merely an alternative way of formulating the issue of substantial similarity” rather than as an independent step, the Second Circuit stated that copyright infringement is shown solely by “substantial similarity” between the two works based on the reaction of the ordinary observer.[139] The court effectively reduced the test for prima facie copyright infringement to (1) access, and (2) misappropriation, thereby failing to consider copying-in-fact.[140] Therefore, the court rejected dissection, analysis, and expert testimony entirely and did not think it necessary to analyze the similarities between the works to determine the likelihood of independent creation.[141] By basing the entire copyright infringement inquiry on the subjective impression of those untrained in the arts, the court neglected to protect against a finding of infringement based on purely unprotectable and unoriginal elements. The Ideal Toy test fails to deal with the fundamental principle of copyright law that seeks to protect merely the expression of ideas rather than ideas themselves.[142] Unfortunately, Ideal Toy’s interpretation of the Arnstein test largely influenced the way modern courts use “substantial similarity” in determining infringement.[143]

Luckily, some courts have maintained the Arnstein two-part inquiry. In Universal Athletic Sales Co. v. Salkeld,[144] the Third Circuit restored Arnstein’s bifurcated approach in holding that a plaintiff must prove copying and “that copying went so far as to constitute improper appropriation.”[145] Moreover, the court recognized that “substantial similarity to show that the original work has been copied is not the same as substantial similarity to prove infringement.”[146]

More inherently problematic is the fact that the Salkeld court maintained Arnstein’s limits on expert analysis and dissection in determining misappropriation.[147] As a result, the Salkeldtest likewise fails to provide any objective standards or criteria for determining how much similarity is necessary to constitute misappropriation.[148]

Though courts instruct the fact finder to find misappropriation only if the defendant’s work copies not merely the idea, but ‘the expression of the idea,’ this “vague formula” is a reformulation, not a solution, to the problem of determining “what sort of similarity short of the verbatim will constitute substantial similarity.”[149] Thus, the ordinary observer continues to be left with “the impossible task of comparing only protected expression in determining substantial similarity without engaging in any thoughtful dissection or analysis of the works.”[150]

2. Ninth Circuit: “Total Concept and Feel”

The Ninth Circuit’s framework, laid out in Sid & Marty Krofft Television Prods., Inc. v. McDonald’s Corp,[151] represents the second main approach to determining copyright infringement. Although not a music infringement case, the “extrinsic/intrinsic” test developed by the Krofft court has been influential in many copyright disputes, including those involving music.[152] In recognizing that the ordinary observer is unlikely to be able to separate idea from expression in comparing two works without dissection or analysis, the Ninth Circuit proposed its own two-step test that attempts to ensure that there is “substantial similarity not only of the general ideas but of the expressions of those ideas as well.”[153] Though the test was later reformulated to include specific expressive elements during the extrinsic inquiry, as discussed in in Part I.ii.c., understanding the original formulation is key to examining its foundational flaws.

i. Extrinsic Test

The first step, or the “extrinsic” analysis, as originally cast by the Krofft court, was an objective comparison by the court for similarity in ideas.[154] Only if a substantial similarity of objective criteria under the “extrinsic” test is found do courts consider misappropriation under the “intrinsic” analysis.[155] Thus, the extrinsic test aims to limit protection to protectable elements by first filtering out unprotectable elements, including ideas, facts, and scènes à faire, and then determining whether the allegedly infringing work is “substantially similar to the protectable elements of the artist’s work.”[156]

According to the Ninth Circuit, in filtering out unprotected elements the extrinsic test incorporates the idea-expression dichotomy by limiting the scope of copyright protection to expression. As the court stated:

By creating a discrete set of standards for determining the objective similarity of literary works, the law of this circuit has implicitly recognized the distinction between situations in which idea and expression merge in representational objects and those in which the idea is distinct from the written expression of a concept….[157]

Courts conducting the extrinsic test “must take care to inquire only whether the protectable elements, standing alone, are substantially similar.”[158] Therefore, analytic dissection and expert testimony presented by the plaintiff on the similarities between the plaintiff’s work and defendant’s work are recommended.[159]

In performing the analytic dissection, courts are instructed to list and analyze the “measurable, objective elements” of the works,[160] including “the type of artwork involved, materials used, and the subject matter.”[161] For literary works, courts have listed such elements as “plot, theme, dialogue, mood, setting, pace, characters, and sequence of events.”[162] Because these factors do not readily apply to visual works of art, the court looks to the “objective details of the appearance.”[163] Without attempting to provide an exhaustive list of relevant factors, the court in Ninth Circuit listed such elements as “the subject matter, shapes, colors, materials, and arrangement of the representations.”[164]

Though described as a factual question, because it bases the question on objective criteria rather than the response of the trier, the extrinsic test may often be decided as a matter of law.[165]

ii. Intrinsic Test

Much like the Second Circuit’s ordinary observer test, the intrinsic test is entirely subjective and based on the “response of the ordinary reasonable person” to the “total concept and feel” of a work,[166] excluding expert testimony and dissection. Similar to the Arnstein court’s language of “lay [persons], who comprise the audience,”[167] the Krofft court suggested that the fact finder’s reaction be geared towards that of the intended or likely audience.[168] In a suit involving the characters in a children’s television show, the court stated, “The present case demands an even more intrinsic determination because both plaintiffs’ and defendants’ works are directed to an audience of children.”[169] Therefore, the court limited the inquiry to the understanding of a child and found substantial similarity despite noted differences. Without expert testimony to aid the trier in determining whether children might detect distinctions, the court relied on the triers’ subjective belief that children would be unlikely to notice minor distinctions.[170]

iii. Further Developments and Confusions of the Krofft Test

In Shaw v. Lindheim,[171] the Ninth Circuit modified the extrinsic/intrinsic test in recognition of the fact that district courts were not limiting the extrinsic test to a comparison of ideas.[172] Recognizing that the similarity of ideas prong is often shown by “focusing on the similarities in the objective details of the works,”[173] the Shaw court explained that the extrinsic/intrinsic test is no longer divided by an analysis of ideas and expression.[174] Rather, the extrinsic test is an objective analysis of specific “manifestations of expression,” while the intrinsic test is a subjective analysis of expression by the fact finder, which is no more than the lay observer’s visceral reaction which is “virtually devoid of analysis.”[175] Though the Shaw court recognized that the test was “more sensibly described as objective and subjective”[176] courts have confusingly continued to use the extrinsic/intrinsic language. Moreover, subsequent cases have left the analysis of improper appropriation to the jury analyzing the works as a whole.

In Swirsky v. Carey,[177] the Ninth Circuit applied the extrinsic/intrinsic test to a case involving musical works. Swirsky and his co-writer filed a copyright infringement suit claiming that Mariah Carey’s song “Thank God I Found You” plagiarized their song “One of Those Love Songs.”[178] The court rejected the district court’s approach to the extrinsic test, which involved a “measure-by-measure comparison of melodic note sequences.”[179] The Ninth Circuit felt comparing notes would fail to consider other relevant elements such as “harmonic chord progression, tempo, and key” as “it is these elements that determine what notes and pitches are heard in a song and at what point in the song they are found.”[180] precisely which elements the court should consider, explaining in dicta that the copyright framework is difficult to apply to aesthetic works such as music which are “not capable of ready classification into . . . constituent elements” the way literary work can be classified into “plot, themes, mood, setting, pace, characters, and sequence of events.”[181]

The Ninth Circuit’s opinion in Swirsky is also relevant for its proposition that substantial similarity can be found based on a combination of elements, “even if those elements are individually unprotected.”[182] For example, in Three Boys Music Corp. v. Bolton,[183] the Ninth Circuit upheld the jury’s finding that two songs were substantially similar due to the presence of the same five individually unprotectable elements: “(1) the title hook phrase (including the lyric, rhythm, and pitch); (2) the shifted cadence; (3) the instrumental figures; (4) the verse/chorus relationship; and (5) the fade ending.”[184] Even though courts filter out unprotected elements such as expression that are commonplace within a genre, they reconsider these elements in examining whether there is a unique combination of elements.[185] However, the protection granted to a unique combination of elements is “thin,” applying only to the combination itself, not the individual elements, and protecting only against “virtually identical” copying.[186]

II. The Roots, Flaws, and Legacy of Arnstein

Though Arnstein remains the majority approach to analyzing copyright infringement,[187] the opinion has attracted much criticism. This part will begin by detailing the flaws of Arnstein, and its progeny, including Krofft. Arguing that Arnstein lacks objectivity by relying on the “impression” of the lay observer and limiting the use of expert testimony,[188] this section will consider courts’ classification of misappropriation as a subjective factual question for the jury, rather than as a legal question with its own standard. This part will argue that the treatment of the “aesthetic arts” as incapable of technical analysis is the root of its subjective treatment of misappropriation. Finally, this part will argue that in relying on the general public, untrained in artistic assessment, the courts risk finding infringement based on similarities that are attributable to common sources.[189]

A. Problems with Arnstein and the Ordinary Observer

Without detailed analysis, filtering out unprotectable ideas, or guidance from experts on the artistic merits of the works at issue, little assurance remains that jurors will decide the issue of misappropriation in keeping with the law. This section will explore why relying on the reaction of laymen is problematic in the context of copyright law. While jury instructions attempt to solve the problem, this part will examine why such abstract guidance is often more confusing than helpful, as judges themselves seem baffled by the blurry line of where an idea ends and its expression begins.

While the ordinary observer test attempts to utilize the “reasonable person” standard found in other areas of the law, its application to copyright is not analogous. In areas such as tort law, the trier is capable of placing himself in the defendant’s shoes to assess the defendant’s actions.[190] In copyright, because the trier often lacks the defendant’s artistic background, the trier cannot reasonably put himself in the defendant’s shoes to consider whether he would have been constrained to copy from the plaintiff in order to achieve the given result.[191] Consequently, the trier is asked to assess the defendant’s actions as if he is an “average lay observer” reacting to whether the defendant’s work appears to have been copied from the plaintiff’s work.[192] Yet copyright is meant to protect artists from the theft of the fruits of their labor, not from the “impression” of theft.[193] While the “spontaneous and immediate” impression of theft is “important evidence,” it cannot be the end-all-be-all test.[194] Given the complexities of copyright law,[195] the ordinary observer simply is not capable of accurately detecting very real appropriation.[196]

While the ordinary observer test has logical value in protecting the artist’s interest in the potential fruits of his labor by looking to the response of the specific market from which those fruits would derive,[197] its methodology for making that determination is lacking. One problem is that it is not clear the trier has knowledge of what constitutes the “lay listener’s” response,[198] especially considering the multitude of possible reactions even among a “target” audience.[199] While expert testimony is permitted to inform the fact finder on the views of the target audience, it is questionable whether qualifying as a music expert establishes “an expertise in the aural perceptions of a lay hearer.”[200] Put another way, “whether an expert, highly educated in the field of music theory, analysis, and history, can in fact hear again as a lay listener is speculative at best.”[201]

Prohibiting expert dissection and analysis on the ultimate issue of misappropriation deprives the trier of information that may be helpful in hearing the music through the ears of the “audience for whom such popular music is composed.”[202] As Professor Nimmer pondered:

If what is to be protected is literary theft, and not the impression of literary theft per se, why, we may wonder, must the view be “uncritical,” and why must there be no suggestion and pointing to similarity, if that suggestion would prove helpful to the trier in seeing that all or a part of plaintiff’s work formed the basis for all or a part of defendant’s work?[203]

Experts could note similarities dictated by the particular type of work at issue that are “most likely insignificant to the ears of the targeted audience familiar with that form or type of work,”[204] thereby helping to ensure that infringement is not found based on common sources or coincidence,[205] and conversely, ensuring that very real appropriation does not go undetected.[206] As Justice Clark, dissenting in Arnstein, noted, the jury is not “‘pre-eminently fitted to decide questions of musical values,’ which are different from an ordinary fact-finding exercise.”[207]

Perhaps the outcome in Arnstein, and thus the bases of our modern law, can be explained by the views of Justice Frank, who wrote for the majority. Frank believed that some judicial decisional processes “like the artistic process, involve[d] feelings that words cannot ensnare” since they contain “overtones inexpressible in words.”[208] For Frank, music was the prime example “of a hunch that was intrinsically incapable of disaggregation.”[209] He wrote, “a melody does not result from the summation of its parts; thus to analyze a melody is to destroy it. It is a basic, primary unit.”[210] Similar language is found in opinions today, including the Ninth Circuit case Swirsky cited earlier.

Attempting to break down what was underlying Frank’s opinion, one commentator argued that the Arnstein court’s exclusion of expert testimony and dissection seemed rooted in the court’s fact-skepticism and unwillingness to entrust the explanation of similarities to experts, preferring instead a “subjective determination,” perhaps in the hopes that a lay-jury trial would confirm the judge’s own subjective hunches.[211]

While courts typically rely on lay jurors to apply the law to the facts of a case at hand,[212] it seems naïve to believe jurors are capable of understanding the complexities of copyright law, particularly the ever elusive idea-expression distinction.[213] Federal judges themselves have found the doctrine difficult to apply,[214] and for good reason as “precision in marking the boundary between the unprotected idea and the protected expression . . . is rarely possible.”[215] Determining what is an “idea” versus an “expression” requires more than mere application of the law; it requires interpretation of the law and consideration of policy. Even with a basic understanding of copyright law, applying the doctrine to music is still more difficult. “What of a song’s music is ‘idea’ and what is ‘expression’?”[216]

While jury instructions attempt to inform jurors of the law,[217] in practice instructions are often an inconsistent, “confusing welter of legal jargon” that may wrongly suggest that any copying, including copying of an idea, counts as infringement.[218] Moreover, clarity in keeping the two different “substantial similarity” inquiries distinct, both in purpose[219] and procedure, is often lacking. Because both the Arnstein and Krofft tests forbid expert testimony on the ultimate issue of misappropriation, fact finders will often have to consider expert analysis and dissection on alleged similarities during the copying-in-fact or extrinsic inquiries, but somehow disregard such testimony on the misappropriation or intrinsic inquiry.[220] “Especially in complex cases, [it is] doubt[ful] that the ‘forgetting’ can be effective when the expert testimony is essential to even the most fundamental understanding of the objects in question.”[221] Moreover, courts often fail to clearly explain the two-step inquiry and the need to disregard testimony presented on the first issue in determining the second.

For example, consider a well-known music plagiarism case, Selle v. Gibb,[222] where the plaintiff, a part-time musician and composer, sued the Bee Gees, alleging that the Bee Gees’ “How Deep is Your Love” infringed the copyright of his song, “Let It End.”[223] Without evidence of access, Selle sought to establish copying-in-fact by showing substantial similarity between the two songs, relying heavily on expert testimony.[224] Yet in making the misappropriation determination, the jury was neither instructed to disregard the expert’s testimony on substantial similarity, nor informed of the two distinct steps of the Arnstein test.[225] Instead, the jury instructions combined the copying-in-fact and misappropriation steps, explaining that “[t]o prove substantial similarity plaintiff must establish…that the average person would recognize [defendant’s song] as having been appropriated from parts of [plaintiff’s song].”[226]

Consider also the jury instructions in the recent “Blurred Lines” trial. Judge Kronstadt’s first instruction to the jury on the copyright infringement standard said that any copying of original elements is unlawful:

Anyone who copies original elements of a copyrighted work during the term of the copyright without the owner’s permission infringes the copyright….[If] 1. the Gaye Parties are the owner of a valid copyright; and 2. the Thicke Parties copied original elements from the copyright work….your verdict should be for the Gaye Parties.[227]

According to this instruction alone,[228] whether the copied element is an unprotectable idea is irrelevant. In attempting to explain the extrinsic/intrinsic analysis, Kronstadt further suggested that copying an idea can count as infringement. Kronstadt instructed the jury to consider similarities in ideas, as well as expression, on the extrinsic test, but he failed to tell the jurors to disregard any similarity in ideas when considering the “concept and feel” during the misappropriation inquiry.[229] Following this questionable guidance seems to be the exact mistake the jury made in finding that Robin Thicke and Pharrell Williams infringed the copyright in Marvin Gaye’s song “Got to Give it Up” by creating their stylistically similar song, “Blurred Lines.”[230]

Fundamentally, the problem with the audience test is that by wholeheartedly relying on the lay juror, the test erroneously treats the question of misappropriation as a pure question of fact. Infringement is far less intuitive, and more complex, than ordinary negligence. Just as the testimony of medical experts is necessary in negligence cases in the context of medical malpractice, copyright is dependent on a technical analysis of works which jurors know little about. Determinations of infringement necessarily involve ad hoc line-drawing that affects artistic incentives and the public’s access to art works. While it is possible to limit and tailor the test, as it stands, it has been disappointingly inaccurate and has been often used as a “verbal formula to explain results otherwise reached.”[231]

B. Krofft: Reconciling Arnstein and the Idea-Expression Dichotomy?

While the court in Krofft seemed to recognize the problems with the Arnstein test in its failure to ensure copyright infringement was only found on a similarity of expression, the Ninth Circuit neglected to explain how its own test would resolve any of the problems presented by the Second Circuit approach.[232] In laying out vague criteria for defining ideas versus expression, the Ninth Circuit left lower courts and artists to their own devices in figuring out where to draw the line.[233] The court itself noted that the extrinsic test is “turbid waters.” “Nevertheless,” it continued, “the test is our law and we must apply it.”[234] Applying the test to artistic works is even more problematic. As the court said in Swirsky, “the extrinsic test provides an awkward framework to apply to copyrighted works like music or art objects, which lack distinct elements of idea and expression.”[235]

By failing to state whether a lack of substantial similarity in ideas is relevant for copying or misappropriation, or both,[236] the extrinsic/intrinsic test fails to isolate the issue of copying from the issue of misappropriation. Focusing on the idea-expression distinction improperly frames the question. Similarity of ideas found during the extrinsic inquiry may be probative of copying, but such similarity does not prove copying of protected expression. Furthermore, the Ninth Circuit never made clear how the ordinary observer could determine if there is a similarity of expression while refraining from dissection and analysis. If anything, fact finders in the Ninth Circuit are left with less expert guidance than in the Second Circuit, as the Second Circuit at least allowed testimony to inform the trier of the intended audience’s likely views rather than leaving them guessing.

As in other jurisdictions using the term, courts applying Krofft struggle to define “substantial.” The focus ranges from audience confusion,[237] to the substantiality relative to the overall work,[238] to the aesthetic or financial value of the portion of the work copied.[239] In the Krofft decision itself, because the works at issue were directed at children, the court focused on the impact of the “total concept and feel” of the works “upon the minds and imaginations of young people.”[240] Thus, some courts adopting the extrinsic/intrinsic framework utilize an “intended audience” test for works that appeal to an audience with “specialized expertise,”[241] therefore allowing the use of expert testimony. Yet such works have been narrowly construed and usually only include computer software.[242] Most courts applying the Ninth Circuit test determine the likelihood of audience confusion by simply comparing the “total concept and feel” of the works to the ordinary observer as determined by jurors with no specialized training or expertise.[243]

Courts that look to the value of the elements at issue criticize the “total concept and feel” approach for failing to maintain the idea-expression distinction during the misappropriation analysis. As the Ninth Circuit stated in Cooling Systems & Flexibles, Inc. v. Stuart Radiator,[244] “What is important is not whether there is substantial similarity in the total concept and feel of the works . . . but whether the . . . amount of protectable expression in Cooling Systems’ catalog is substantially similar to the equivalent portions of [the defendant’s] catalog.”[245] The court in Cooling Systems stated that the intrinsic test must take into consideration the nature of the elements that were allegedly infringed,[246] reasoning that “the fewer the methods of expressing an idea, the more the allegedly infringing work must resemble the copyrighted work in order to establish substantial similarity. . . .”[247] Yet the court continued to prohibit the aid of dissection, analysis, and expert testimony, failing to explain how an ordinary observer lacking expertise could make such a determination.[248]

C. The Modern Music Dilemma

While creators of musical works have struggled to extend copyright beyond its natural borders since the Statute of Anne was enacted, the inexact fit of music in our copyright doctrine has only become more obvious with the invention and popularity of sampling technology. Since the advent of digital sampling technology in the 1960s, the art of taking a portion, or sample, of a sound recording and repurposing it to make a different song has become engrained in nearly every popular musical genre.[249] Yet, after the industry-shattering decisions in Grand Upright Music, Ltd. v. Warner Brothers Records Inc.,[250] and Bridgeport Music, Inc. v. Dimension Films,[251] which resulted in a bright-line rule against de minimis copying of even three notes of a sound recording,[252] artists need to seek licensing rights to sample a sound recording. However, the costs to do so are often prohibitive, both in terms of negotiating fees and contacting often-elusive copyright owners.[253] Consequently, many artists have turned to re-creating segments of prior musical compositions for use in their own works, a practice known, at least in the hip-hop industry, as “interpolation.”[254] Though creative borrowing of this type is deeply embedded in art history, after the Blurred Lines verdict it seems songs that interpolate prior works are also at risk of extinction.

While we may be lacking strong evidence that copyright actually encourages creativity,[255] copyright can suppress the creation of works of a specific nature.[256] After Grand Upright put “the fear of God” in recording companies, artists releasing a record on a major label were forced to clear every sample used.[257] As a result, songs composed of various samples from multiple sources were no longer possible. Records like Paul’s Boutique by the Beastie Boys, which is almost entirely composed of 104 samples, would be “financially and bureaucratically impossible” today.[258] Each sample would have to be cleared by obtaining two different licenses from two different rights holders: the owner of the sound recording and the owner of the underlying composition. To make matters more complicated, additional licenses are needed if the sampled song contains samples itself, as is increasingly the case today.

While artists can obtain a compulsory license to create a cover of a prior song, using only a portion of a song while substantially altering “the melody or fundamental character of a work” falls outside of the range of the statutory license,[259] even though doing so entails more originality and less substantial similarity.[260] Newcomers are back in the position of having to seek permission and pay whatever rights holders demand,[261] or face the risk of hefty legal judgments and court costs.

For well-known songs, the costs to license are often as high as 100% of the royalties generated by the new song, and sometimes higher. Mark Ronson, a music producer and sampling guru, analogizes the process of creating his debut album, Here Comes the Fuzz, to the process of producing the fictional musical in the play, The Producers. In creating the track, “Ooh Wee,” Ronson wanted to sample two different songs by two different artists: a drum sample from Dennis Coffey’s song “Scorpio,” and a string sample from a cover of Boney M’s song “Sunny.” Collectively, the owners of the rights wanted 125% of the song’s royalties. Believing the samples to be necessary to the “emotional effect” and “toughness of the beat,” Ronson said he had to do it: “I had to pro-rate my entire album down so I could rob this song to pay that guy….”[262] In hindsight, the decision may have made his career, as the song ended up being the lead single and a chart-topper.[263]

Rights holders can always refuse clearance entirely, as they often do. When musician and producer Danger Mouse put out The Grey Album, which splices together samples from The White Album[264] by the Beatles with an a cappella version of The Black Album by rapper Jay-Z, the recording company that holds the Beatles’ copyright was able to prevent the album’s distribution, despite approval from both Jay-Z and the surviving members of the Beatles.[265]

Since Grand Upright, it has become largely impossible to create songs using more than one or two samples. As a result, industry practice and the sound of hip-hop music abruptly changed. Artists turned to heavily interpolating a few samples per song, particularly from artists who are amenable to having their music sampled. Dr. Dre’s production style, which was highly influential in spawning an entire era in hip-hop, changed from outright sampling to heavily interpolating the 1970s funk band, Parliament.[266] Dre’s style changed hip-hop forever, as G-funk, defined by Parliament’s influence, became the most popular genre in hip-hop during the 1990s.[267]

While some artists are still producing heavily-sampled albums, it seems only those with the most obvious fair use defense are confident enough to do so without a license, perhaps recognizing the strength of their defense and realizing record companies would rather not risk setting bad precedent.[268] The D.J. Gregg Gillis, better known as Girl Talk, is perhaps the most notorious sampler; he uses hundreds of small samples on a single album, never licenses anything, generates tons of publicity, and is never sued. As Gillis put it, with so many samples, “[i]t would take you hundreds of hours of work and hundreds of thousands of dollars to clear the rights to this album even if you wanted to.”[269] Yet, Girl Talk’s business is not without harm. Both iTunes and a CD distributer refused to carry his most recent album, Night Ripper, because of legal concerns.[270]

While Girl Talk might feel confident in his defense, anyone using a sample in a more qualitatively and quantitatively significant way is likely to fear settlement fees, or worse, high statutory damages. Even with a seemingly good defense, those with less fame than Girl Talk, or Pharrell Williams, are less likely to take the risk. When part of the beauty of digital sampling technology lies in its removal of bars to entry, allowing a twenty-year-old kid to create a critically acclaimed album with cheap technology,[271] cases like Grand Upright and “Blurred Lines” leave the next Dr. Dre on the margins.

Although Dr. Dre’s debut album immortalized Parliament’s style as an entire hip-hop genre in and of itself, and the release of “Blurred Lines” landed “Got to Give it Up” back on the Billboard 200 after a decade’s long hiatus,[272] the courts have ignored the economic reality of homage and have placed it on par with theft. A justified reason for deeming musical borrowing as theft is lacking when artists of all mediums, from classic literature to appropriations art, have borrowed from their predecessors without anyone taking notice, or under the defense of “fair use.”[273] One rationale is that our copyright law is based in the romantic conception of authorship, that is, the notion that the author has the right to control the context of his work and should be able to object to “her work [being] sampled and added into a work she finds repugnant.”[274] However, applying moral rights arguments to the issue does not serve the Intellectual Property Clause’s purpose of striking a balance between economically incentivizing the production of creative works and maintaining public access to those works.[275]

The current tests do not adequately balance the impact of copyright on creativity. Rather, courts focus more on the potential harm to the plaintiff’s market[276] than on assuring “access to the raw materials that artists need to create in the first place.”[277] Progress and culture depend on the accumulation of aesthetic works. By granting property rights in creative building blocks and requiring new works to be wholly different from prior works, the courts are treating the arts like science and technology, where progress means improving. However, progress in the arts is valued for reasons beyond efficiency. Society benefits from the accumulation of artistic works and the mere experience of making them.[278] “Culture . . . is a social phenomenon. It is not the creation of one or another artist, but of many doing somewhat similar things.”[279] The scènes à faire doctrine is one way of protecting free access to artistic materials. But with jurors unable to appreciate the balance of these competing interests, we risk skewing it in a way that stifles creativity.

1. Scènes à Faire in Music: “Blurred Lines” as a Case in Point

Credited as a Billboard’s Song of the Summer for 2013,[280] and the best-selling single of 2013,[281] it is no wonder the controversies over Robin Thicke and Pharrell Williams’s song “Blurred Lines” made so many headlines. The song was controversial from its release date, featuring arguably misogynistic, “rapey” lyrics,[282] and a music video that was removed from, and then censored on, YouTube for violating the site’s policies regarding nudity.[283] Then came the copyright controversy. Marvin Gaye’s family accused Thicke and Williams of copying the “feel” and “sound” of Gaye’s “Got to Give It Up,” [284] the song Thicke even publicly noted as the influence for “Blurred Lines.”[285] Therefore, the issue in the “Blurred Lines” case revolves around whether Thicke and Williams illegally interpolated original elements of Marvin Gaye’s musical composition.

In response to the allegations, Thicke and Williams sought a declaratory judgment that “Blurred Lines” did not infringe upon “Got to Give It Up.”[286] When that failed, and inevitably backfired with the Gaye family filling a cross-complaint, the plaintiffs moved for summary judgment, claiming that the eight alleged similarities between the songs are based on elements of Gaye’s sound recording that are not part of the copyright that Gaye’s family claims to own.[287] According to the Gaye family’s expert report, these eight“substantially similar features” include: (1) the signature phrase; (2) hooks; (3) hooks with backup vocals; (4) the core theme in “Blurred Lines” and the backup hook in “Got to Give It Up”; (5) backup hooks; (6) bass melodies; (7) keyboard parts; and (8) unusual percussion choices.[288] The family’s expert also alleged that the songs share similar “departures from convention such as the unusual cowbell instrumentation, omission of guitar and use of male falsetto.”[289]

Though most of these elements are not part of the underlying composition, and the melodies of the two songs are arguably completely different (“one’s minor and one’s major. And not even in the same key”[290]), the court found that the Gaye family made a sufficient showing of substantial similarity to satisfy the extrinsic test and the issue went to trial.[291] The jury found against Thicke and Williams with a judgment topping $7.3 million, one of the largest ever in music copyright history.[292] While Thicke’s and Williams’s fortune and fame seem unlikely to be tarnished, with each of them earning over $5 million for the song itself, [293] the verdict shows how misguided results can be under our infringement tests. In misapplying the already confusing Ninth Circuit test for substantial similarity, the court protected musical style and genre under the guise of protecting an original combination of elements. As one composer and producer put it, the court “made it illegal to reference previous material. . . . I’m never going to come up with something so radically different that it doesn’t contain references to something else.”[294] While the creators of “Blurred Lines” have already decided to appeal the verdict,[295] if it is upheld, artists on the margin, who are less willing to take on legal fees and whose work is less in tune with romantic authorship, will be discouraged from “creating any new songs that evoke the feel of the music that inspired them in their youth.” Further, “with the length of copyright we have these days, artists who want to feel confident that their musical influences are in the public domain are going to have to go all the way back to ragtime.”[296]

The verdict reached is procedurally problematic for a few reasons. Under the current Ninth Circuit test, the court erred in allowing the jury to hear excerpts of the sound recordings for “Got to Give It Up” and “Blurred Lines,”[297] which contained elements that are not part of Gaye’s written composition and, therefore, not part of his copyright.[298] Though the background chatter, party noise, and percussion, are common to both songs and contribute to the instinctive feeling that “Blurred Lines” “reminds” us of “Got to Give It Up,” they are totally irrelevant to the issue of substantial similarity.[299] Yet, these elements seemed to sway the jury in reaching its verdict.

Many, if not all, of the elements in “Got to Give It Up” are unoriginal staples in funk music, from the walking down funky bass line to the falsetto and melisma hook,[300] but Judge Kronstadt, applying the extrinsic test on summary judgment, held that a genuine issue of material fact existed either on the similarity to protectable elements, or on the similarity to an original combination of elements.[301] To show that the allegedly infringing elements are unprotectable scènes à faire, the defendants’ expert cited multiple prior songs that used many of the same allegedly infringing elements.[302] Judge Kronstadt still ruled that the testimony was not sufficient, citing Swirsky for the idea that the defendants failed to show that the plaintiff’s work is “more similar” to prior works than it is to the defendants’ work.[303] Yet the issue in Swirsky, and here, was whether the individual elements are scènes à faire, not whether the works as a whole are unoriginal.[304] Thus, Kronstadt’s reliance on Swirsky’s “more similar to prior works” language is misplaced, and bypasses actual consideration of the protectability of the elements themselves.[305] The court thereby failed to dispose of the issue of whether the defendants copied original elements on summary judgment, leaving the question to the jury.

In erroneously applying the “more similar” to prior works test to the works as a whole, Kronstadt further failed to consider the actual test for copying a combination of unprotectable elements: whether the works are “virtually identical.” As Pharrell and Thicke argued, the requirement for originality in a combination of unoriginal elements is much more stringent than the usual “some minimal level of creativity.”[306] The elements need to be “numerous enough and their selection and arrangement original enough that their combination constitutes an original work of authorship.”[307] Furthermore, infringement can only be found if the defendant’s work is “virtually identical” to the copyrighted work.[308] While many might say the two songs sound similar, with entirely different melodies and lyrics, one cannot maintain that the songs are “virtually identical,” especially when the misappropriation inquiry is supposed to be based solely on the written melodies, chords, and lyrics.[309] Even still, copying that is virtually identical may fall within the merger doctrine – that is, it may be an unavoidable product of using the same idea, which as discussed above is not a protectable interest.[310]

Because Judge Kronstadt determined that Pharrell and Thicke failed to meet the stifling burden of “more similar” to prior works on summary judgment, the final decision went to the jury to be based on their spontaneous reaction unguided by musicologists and uninstructed by the court on the “virtually identical” standard. Thus, the simple instinct that “Blurred Lines” felt like “Got To Give It Up” determined the verdict, regardless of the law. Yet, if the “feel of a work is sacrosanct,” many songs would be illegal for simply being a part of a “derivative and rigid genre,” as is often the case in music.[311]

When genres and subgenres have been inspired by one song, privatizing common elements can only do harm. Musicians like Marvin Gaye still have the incentive to create, especially with the notoriety and revitalized publicity that comes with a new artist referencing an old song. A reference from today’s stars can make a music legend. Snoop Dogg’s cover of Slick Rick’s 1985 hit “La Di Da Di,” and Notorious B.I.G.’s sample of it in “Hypnotize Me,” made Slick Rick’s song the most sampled rap song of all time. Dr. Dre’s use of the drum-break from The Wintons’ “Amen, Brother” started a narrative that led this little known band to have arguably the most sampled song of all time. The Amen Break has been used in over 1,700 songs and has become the basis for drum-and-bass and jungle music.[312]

Despite the notoriety and financial benefits of being sampled, by looking to our skewed notions of authorship, both judges and juries alike are trigger-happy to find copyright infringement when there is so much as a waft of homage. Their intentions are well wrought in a desire to protect the “genius” of artists loved by generations. However, that desire is based on notions of fairness, and copyright was never meant to protect artists’ moral rights in their works. Incentives to create have always been the only concern, balanced against maintaining public access to creative works. Yet “discussions of copyright and its goals frequently conflate the compensatory and control aspects of copyright on the incentive side.”[313]

If we expand the copyright in an original selection and arrangement to find infringement when any song includes just some of its elements, the blurry standard determining how many elements count as copying will result in risk-averse content creators. When nothing is truly original or avant-garde in music, the safe route in creating content is not clearly laid out either. Even if artists can be completely progressive, it is not clear they will be rewarded for doing so. Popular content is popular for a reason, and the benefits of creating it will be limited to the lucky first comers who hold a monopoly on elements they did not even create simply because they strung them together first. The success of “Blurred Lines” might be due, at least in part, to its ability to incorporate so many nostalgic funk clichés at once, all in the context of a modern pop song. Moreover, the enjoyment derived by the public from having an expanse of options to choose from will be lost. Of course, the effects of prohibiting “inspired works” will touch on industries beyond music, covering the fine arts, dance, and anything covered by copyright.

III. Considering Dissection and Reversed Questions of Law and Fact

When copyright infringement is meant to prohibit the copying of protectable elements of a work, it seems that the audience test, unguided as it is, can “play no useful role” in fulfilling the goals of copyright law.[314] Expert testimony and analytic dissection are necessary to maintain the distinction, both at the copying and misappropriation stages of the inquiry. More specifically, courts should be informed fully of the broader contexts within which specific artistic works are created.

While some courts recognize Arnstein’s limits and allow expert testimony when works are of a “highly technical nature,” thus far only computer software has met this characterization.[315]

The courts’ unwillingness to see “aesthetic arts, such as music, visual works or literature” as sufficiently complex to warrant the aid of expert guidance is merely an artifact of indoctrinated opinions on the nature of aesthetics. Yet with culture becoming ever more aware of its recombinant nature,[316] and the arts becoming increasingly technical in the age of digitalization, it is necessary to alter the current infringement tests in order to encompass varying artistic theories.

Courts need to act as gatekeepers, preventing an onslaught of needless and threatening litigation by deciding whether there is a cognizable claim of misappropriation and identifying the unprotectable elements in a work before sending the intuitive issue of copying to the trier. There have been many scholarly suggestions for reforming the two-part test. This part considers adoption of a proposal first suggested by Nimmer and expanded by Professor Lemley: extending the “abstraction-filtration-comparison” (AFC) test for computer software to all cases deciding copyright infringement.[317]

First adopted by the Second Circuit in Computer Associates v. Altai,[318] the AFC test requires the court to identify which aspects of the program constitute its expression versus ideas (“abstraction”), remove from consideration unprotectable ideas (“filtration”), and only then compare whether the defendant copied the protectable elements (“comparison”).[319]

Following Altai, the AFC test was widely adopted in determining substantial similarity in the non-literal aspects of computer programs. However, as Nimmer notes, “there is no reason to limit it to that realm.”[320] In fact, the AFC method is more consistent with the Supreme Court’s definition of infringement (along with ownership of a valid copyright) as the “copying of constituent elements of the work that are original.”[321] Whether expert testimony is permitted, and to what extent, is left to the discretion of the district court.[322] This approach allows the court flexibility in determining the necessity of expert testimony depending on the complexity and nature of the works at issue. A court might therefore determine that the issue of substantial similarity in a case involving generic pop songs would best be determined by lay jurors, but in most cases where songs mix genres and traditions, the court would need the testimony of experts well versed in the nature of the art at issue.

Given that nearly every circuit already permits expert testimony on both prongs of the copyright infringement test in software cases,[323] adopting the AFC test wholeheartedly seems like a more feasible path to altering the current framework than other suggested reforms.[324] In fact, the Tenth Circuit already applies the AFC test for all copyright infringement cases, and the Sixth Circuit uses a variation of the Tenth Circuit test.[325] As discussed above, expanding the role of analytic dissection and expert testimony will result in better maintenance of the idea-expression distinction and respect for the limits to copyright protection. Moreover, allowing expert testimony in guiding the jury will solve the problem of juries having trouble disregarding the testimony they hear on the copying-in-fact prong in deciding misappropriation.

Professor Lemley suggests a further change: reserving the issue of misappropriation to the court as a question of law, to be determined on summary judgment. The role of the jury would be preserved in leaving the intuitive issue of whether the defendant copied as a question of fact.[326] According to Lemley, this seems to be the “practical import” of the AFC test.[327] Reversing the judge-jury role would better serve the interests of copyright, as the issue of which elements are protectable and unprotectable in any given work implicates substantial policy considerations and interpretation of the law better suited for a judge well-versed in the law.

Moreover, by providing written judicial opinions, this altered framework would allow a reasoned jurisprudence to develop on the issue of which elements are protected. The transparency and predictability of the law would allow artists a safe harbor and guaranteed protections in creating new works, thereby preventing the chilling effects of a potentially devastating lawsuit.

Taking reform a step further, Professor Balganesh suggests reversing the order of the test.[328] That is, have the court determine misappropriation as a question of law on summary judgment, filter out what is sent to the jury, and then have the jury determine the question of copying-in-fact of “protected expression.” The jury would still hear evidence on the issue of “protected expression,” including expert testimony on whether elements are scènes à faire or original in the area or genre, and even on the ultimate issue of similarity between the works and probative similarity. The jury would also hear the judge’s own dissection from the first step.[329] Balganesh argues that reversing the framework would encourage disposition on summary judgment, providing judges with a real gate-keeping role.[330] Moreover, it removes the subjectivity of the audience test, which he argues was based in mere skepticism towards rules, judges, and the law.[331]

While reversing the ordering might offer the benefit of preventing the judge’s determination of misappropriation from improperly influencing the jury’s probative similarity analysis, almost every court has adopted some version of the Arnstein-Krofft test,[332] which might make it difficult to persuade courts to do exactly the opposite.

At least preliminarily, extending the AFC approach seems more feasible and the need for dissection and expert testimony most ripe. Allowing the judge to determine the question of misappropriation as a matter of law, while preserving the issue of copying-in-fact for the jury, removes the inherent subjectivity and messiness of the audience test while complying with the constitutional mandate of jury trials in copyright lawsuits.[333] Furthermore, it uses juries for the role they are best suited for: the intuitive and fact-dependent question of whether the defendant copied.

On both questions, expert testimony can aid the court in understanding the nature of the work at issue. The controversy over sampling, for example, focuses on the taking rather than the contribution. Yet, experts in musicology know that sampling can be transformative. As D.J. Shadow put it, sampling is a way to reintroduce a person’s music to people “in a completely different context than the way they originally intended.”[334] Mark Ronson similarly explained that through sampling artists insert themselves in a narrative and push that narrative forward.[335]

An expert might testify that sampling extends an African American oral tradition known as “signifying,” a type of word play that draws attention to the cultural significance of the words.[336] For example, an expert could explain that the Beastie Boys’ line “I shot a man in Brooklyn just to watch him die” places Johnny Cash’s line “I shot a man in Reno just to watch him die” in a new setting – a hip-hop anthem called “Hello Brooklyn” – thereby removing the ideas of consequences and regret found in the context of Cash’s murder ballad.[337] An expert could note that while sampling might intuitively seem like theft, it is no more so theft than quoting a passage from another book in a novel.[338] Rather, sampling is a form of textual revision and a literary device through which text speaks to text.[339] Through sampling, 2 Live Crew relied on repetition of the key elements of “Oh, Pretty Woman” to achieve a parody of the song.[340]

Our current framework for copyright infringement fails to inform courts of the artistic merits behind our most illustrative and progressive artistic movements. In perpetuating the courts’ biases, copyright is its own worst enemy, stifling innovation where it is most likely to happen: on the margins.


Though the problems with copyright pose unique problems for music, these problems reflect the larger difficulties in our current copyright law. Our infringement doctrine inhibits progress by making “substantial similarity” the end-all-be-all test. The generalized focus on substantial similarity leaves homages and similarities inherent in the genre subject to findings of infringement because the law, like our culture, sees derivative works as unworthy. But what is originality? As music producer and sampling guru Mark Ronson said in an interview with NPR: “Well, what’s the T.S. Eliot quote, which apparently he even stole from Picasso, about ‘Genius steals…?’ ‘Good artists borrow, great artists steal.’”[341] How we define “Progress of Science and useful Arts” is rooted in the dominant cultural beliefs of aesthetic value, but innovation comes with embracing progressive ideas and more of them.[342] The law needs to protect a new kind of originality, one that might not fit the Romantic mold, but that re-conceptualizes and re-frames preexisting works and provides listeners with a different experience than the original. The most important question should be what the newcomer added: how they took influences to make something new, because progress never involves creating something from nothing.

* J.D. Class of 2016, New York University School of Law; B.A. Philosophy, Politics, and Law, magna cum laude, Binghamton University. The author would like to thank Professor Christopher Sprigman for his inspiration and guidance and the 2016-2017 Editorial Board of the NYU Journal of Intellectual Property and Entertainment Law for their encouragement.

[1] See Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903) (“It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.”).

[2] See generally Alfred C. Yen, Copyright Opinions and Aesthetic Theory, 71 S. Cal. L. Rev. 247, 251, 285–86 (1998) (arguing that “judges necessarily make decisions of aesthetic significance in copyright” as implicit in determining whether elements are “public domain,” or if they are “protected material.” Moreover, substantiality rests on “how sensitive” courts are to the degree of quantitative and qualitative similarity between two works).

[3] Id. at 251 (“[S]ince no aesthetic perspective can be neutral and all-encompassing, aesthetic bias becomes inherent in copyright decisionmaking . . . .”).

[4] See, e.g., Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930); Brandir Int’l, Inc. v. Cascade Pac. Lumber Co., 834 F.2d 1142 (2d Cir. 1987); Carol Barnhart Inc. v. Economy Cover Corp., 773 F.2d 411, 415–18, 420 (2d Cir. 1985).

[5] See Olufunmilayo B. Arewa, From J.C. Bach to Hip Hop: Musical Borrowing, Copyright and Cultural Context, 84 N.C. L. Rev. 547, 565(2006) (“Although originality is not explicitly included in the Intellectual Property Clause of the U.S. Constitution, it is a fundamental assumption of current copyright law that originality is implicitly mandated by the Constitution’s references to ‘authors’ and their ‘writings.’”) (citations omitted); see also U.S. Const. art. I, § 8, cl. 8 (“The Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”).

[6] See generally Amy B. Cohen, Masking Copyright Decisionmaking: The Meaninglessness of Substantial Similarity, 20 U.C. Davis L. Rev. 719, 720 (1987).

[7] H.R. Rep. no. 94-1476, at 61-62 (1976); S. Rep. No. 94-473, at 71 (1975) (“[A] copyrighted work would be infringed by reproducing it in whole or in any substantial part, and by duplicating it exactly or by imitation or simulation.”) (emphasis added).

[8] Davis v. Gap, Inc., 246 F.3d 152, 173 (2d Cir. 2001).

[9] Shyamkrishna Balganesh, The Questionable Origins of the Copyright Infringement Analysis, 68 Stan. L. Rev. 791, 805 (Forthcoming 2016).

[10] Atari, Inc. v. N. Am. Phillips Consumer Electric Corp., 672 F.2d 607, 614-15 (7th Cir. 1982).

[11] Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[a][i] (2002).

[12] Scène à faire is the notion that certain similarities in the basic idea will require similarities in the expressions used to develop that idea. For example, “if two scenarios wish to treat the unprotected idea of police life in the South Bronx, one court has determined it would only be natural to depict ‘drunks, prostitutes, vermin and derelict cars,’ juxtaposed against hard drinking Irish cops chasing fleeing criminals.” Id. (citations omitted).

[13] Mark A. Lemley, Our Bizarre System for Proving Copyright Infringement, 57 J. Copyright Soc’y U.S.A. 719, 738 (2009) (alteration in original).

[14]See infra Part II.A (discussing how this need for, and lack of, special expertise in copyright makes the “ordinary observer” test a poor extension of the rationale underlying the negligence standard used in areas such as tort law).

[15] Balganesh, supra note 9, at 805 (explaining that the misappropriation inquiry requires procedural, substantive, and theoretical considerations).

[16] See generally Arewa, supra note 5 (noting that American copyright law is founded on the unrealistic conception that creativity necessarily comes from a place of pure autonomous genius).

[17] Lemley, supra note 13, at 739 (citing Ann Bartow, Copyrights and Creative Copying, 1 U. Ottawa L. & Tech. J. 77 (2003) (suggesting that this has been the result)).

[18] See generally Jeffrey Cadwell, Expert Testimony, Scenes A Faire, and Tonal Music: A (Not So) New Test for Copyright Infringement, 46 Santa Clara L. Rev. 137 (2005) (arguing functional constraints make music prone to tendencies and commonalities).

[19] See generally Alice Kim, Expert Testimony and Substantial Similarity: Facing the Music in (Music) Copyright Infringement Cases, 19 Colum.-VLA J.L. & Arts 109, 124–125 (Fall 1994/Winter 1995) (arguing that music operates by such complexities and intricacies, especially in today’s technological world as “all pieces of music, contain elements of ‘melody, harmony, . . . rhythm [,] . . . [t]imbre (tonal quality), tone, pitch, tempo, spatial organization, consonance, dissonance, phrasing, accents, note choice, combinations, interplay of instruments, . . . bass lines, and the new technological sounds.’”) (quoting Debra Presti Brent, The Successful Music Copyright Infringement Suit: The Impossible Dream, 7 U. Miami Ent. & Sports L. Rev. 229, 248–49 (1990)).

[20] See id. at 124.

[21] Callie L. Pioli, Copyright: Infringement v. Homage, (September 17, 2015, 8:11 AM), (noting that the lesson from the Blurred Lines decision is that “creating music ‘reminiscent’ of an era or paying homage to the genre-creating greats of past decades may not hold as a defense to copyright infringement under the current substantial similarity framework.”).

[22] See Cadwell, supra note 18, at 127 (arguing that an analogy between music and software does not seem inappropriate and thus proposing that the substantial similarity test does not suit the technical nature of music as well as permitting expert testimony would).

[23] See generally Arewa, supra note 5, at 581, 584-85 (arguing that in viewing classical composers as artistic geniuses, failing to appreciate their practice of borrowing from the past, and hip-hop artists as mere craftsmen, legal discourse is perpetuating culturally rooted prejudices against the “other,” as most modern genres originated in African cultures).

[24] Id. at 587(“this vision of musical authorship based upon notions of creativity, invention, originality and even genius is far too restrictive a representation of musical creation.”).

[25] Harold Lloyd Corp. v. Witwer, 65 F.2d 1, 18 (9th Cir. 1933), cert. denied, 296 U.S. 669 (1933).

[26] Eriq Gardner, ‘Blurred Lines’ Jury Orders Robin Thicke and Pharrell Williams to Pay $7.4 Million, Hollywood Rep. (March 10, 2015, 2:33 PM),

[27] This test is currently reserved for computer software cases. See Computer Assocs. Int’l, Inc. v. Altai, Inc., 982 F.2d 693, 707 (2d Cir. 1992) (“Professor Nimmer suggests, and we endorse, a ‘successive filtering method’ for separating protectable expression from non-protectable material.”).

[28] Cf. id.

[29] Lemley, supra note 13, at 741.

[30] Balganesh, supra note 9, at 855-58.

[31] Arnstein v. Porter, 154 F.2d 464, 478 (2d Cir. 1946) (Clark, J., dissenting) (“Further, my brothers reject as ‘utterly immaterial’ the help of musical experts as to the music itself (as distinguished from what lay auditors may think of it, where, for my part, I should think their competence least), contrary to what I had supposed was universal practice . . . .”).

[32] See generally Robert Kirk Walker & Ben Depoorter, Unavoidable Aesthetic Judgments in Copyright Law: A Community of Practice Standard, 109 Nw. U.L. Rev. 343, 376 (2015) (proposing that experts brief the court on the aesthetic norms and traditions that inform the works at issue so that the hypothetical viewer is not limited to any specific aesthetic theory and can react sensitively to the nature of the work presented).

[33] See Barton Beebe, Intellectual Property Law and the Problem of Aesthetic Progress, Inaugural Lecture of the John M. Desmarais Professorship of Intellectual Property Law, NYU Law News (Feb. 3, 2014), (discussing the courts’ failure to recognize that the framers intended to quarantine the fine arts from copyright law, as evident in the progress clause specifying “useful arts,” and the resulting lack of a developed idea of what aesthetic expression means); see also Walker & Depoorter, supra note 32, at 344-45 (explaining how courts shy away from judging art for fear that they are “incompetent to do so”) (citing Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903)(“It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.”)).

[34] Michael W. Carroll, The Struggle for Music Copyright, 57 Fla. L. Rev 907, 934 (2005).

[35] U.S. Const. art. I, § 8, cl. 8 (alteration in original).

[36] See Act of May 31, 1790, ch. 15, 1 Stat. 124.

[37] William F. Patry, Copyright Law and Practice, The Bureau of National Affairs (2000), available at

[38] 8 Anne, ch. 19 (1710) (Eng.),

[39] The first copyright action for a musical work, Bach v. Longman, 98 Eng. Rep. 1274, 1275 (K.B. 1777), was brought under the Statute of Anne by Johann Christian Bach on account of unauthorized editions, published by music publishers Longman & Lukey, of two Bach works, a lesson and a sonata. “Bach brought the suits seeking to effect legal changes to provide composers with copyright protection equal to that of authors.” Arewa, supra note 5, at 557–58.

[40] Arewa, supra note 5, at 568.

[41] Id. at 556.

[42] See 17 U.S.C. § 102(a)(7) (2000) (granting copyright protection to sound recordings).

[43] Paul Théberge, Technology, Creative Practice and Copyright, in Music and Copyright at 140 (Lee Marshall and Simon Frith eds., 2nd ed. 2004).

[44] Arewa, supra note 5, at 556.

[45] Id. at 625.

[46] Id.

[47] Id. at 556-57.

[48] Id. at 557.

[49] Id. at 626 n.445 (citing Aaron Keyt, Comment, An Improved Framework for Music Plagiarism Litigation, 76 Cal. L. Rev. 421, 432 (1988)).

[50] Id. at 614.

[51] See, e.g., LIVELOVEASAPVEVO, A$AP ROCKY – Wild For The Night (Explicit) ft. Skrillex, Birdy Nam Nam, YouTube (Feb. 10, 2016),

[52] Youyoung Lee, OVER IT: It’s Time To Retire The Word “Haters,” The Huffington Post: The Blog (June 25, 2013, 4:50 PM), (citing as an example the song “Players Gon’ Play,” by the all-girl group 3LW).

[53] Michael Epstein, Taylor Swift Is Being Sued for $42 Million for Singing “Haters Gonna Hate” in “Shake it Off,” Flavorwire (Nov. 2, 2015),

[54] See Arewa, supra note 5, at 622.

[55] Carroll, supra note 34, at 949 (citing Charles Burney, A General History of Music (Dover 2d ed. 1957)); see also id. at 952 (arguing that by limiting protection to books, as opposed to single songs, the Statute of Anne was enacted only to protect “those who had advanced the cause of learning by producing books.”).

[56] C33/442 London Public Record Office (1772), reprinted in Ronald J. Rabin & Steven Zohn, Arne, Handel, Walsh, and Music as Intellectual Property: Two Eighteenth-Century Lawsuits, in 120 J. of the Royal Musical Ass’n 112, 140-45 (1995).

[57] Carroll, supra note 34, at 950.

[58] Id. (citing Pyle, C33/442 London Public Record Office, at 143).

[59] Peter Jaszi, Contemporary Copyright and Collective Creativity, in The Construction of Authorship: Textual Appropriation in Law and Literature 29, 40 (Martha Woodmansee & Peter Jaszi eds., 1994) (“Eighteenth-century theorists . . . minimized the element of craftsmanship . . . in favor of the element of inspiration, and they internalized the source of that inspiration. That is, the inspiration for a work came to be regarded as emanating not from outside or above, but from within the writer himself.”).

[60] Amy B. Cohen, Copyright Law and the Myth of Objectivity: The Idea-Expression Dichotomy and the Inevitability of Artistic Value Judgments, 66 Ind. L.J. 175, 203 (1990); see also Arewa, supra note 5, at 566 n.80 (Romantic ideals emphasize “original ideas rather than ‘successive elaborations of an idea or text by a series of creative workers.’”).

[61] Arewa, supra note 5, at 566.

[62] At least music composed in the twelve-tone scale.

[63] Arewa, supra note 5, at 590.

[64] As a consequence, “inspired work was made peculiarly and distinctively the product – and the property – of the writer.” Id. at 566-67 n.82.

[65] Arewa, supra note 5, at 592.

[66] Cohen, supra note 60, at 204.

[67] Id. at 201.

[68] Holmes v. Hurst, 174 U.S. 82, 86 (1899).

[69] See, e.g., White-Smith Music Publ’g Co. v. Apollo Co., 209 U.S. 1, 17 (1908) (holding that a perforated piano roll used to create the sounds of a musical composition did not infringe the copyright in the underlying musical composition because “[a] musical composition is an intellectual creation which first exists in the mind of the composer. . . It is not susceptible of being copied until it has been put in a form which others can see and read. The statute has not provided for the protection of the intellectual conception apart from the thing produced . . . .”).

[70] Holmes, 174 U.S. at 86.

[71] Cohen, supra note 60, at 206.

[72] Holmes, 174 U.S. at 86 (“[C]ertain words . . . are as little susceptible of private appropriation as air or sunlight[.]”); see also Johnson v. Donaldson, 3 F. 22, 24 (S.D.N.Y. 1880) (“A copyright secures the proprietor against the copying, by others, of the original work, but does not confer upon him a monopoly in the intellectual conception which it expresses.”).

[73] Cohen, supra note 60, at 231.

[74] Id.

[75] Id. at 204–206 (“If art was no longer viewed as the formal expression of fundamental, abstract ideas, but rather as the expression of the individual feelings of the particular artist, then the view that copyright should protect only the author’s specific way of expressing the ideas, but not those fundamental, abstract ideas themselves, had lost its philosophical basis.”).

[76] Act of Mar. 4, 1909, ch. 320, § 1(b), (d), (e), 35 Stat. 1175 (providing the copyright owner with the exclusive right to transform the protected work into different formats, including the right to dramatize a nondramatic work, to translate a literary work or “to make any other version thereof,” to perform works publicly, and to "make any arrangement or setting of it or of the melody of it in any system of notation or any form of record in which the thought of an author may be recorded and from which it may be read or reproduced.”).

[77] Cohen, supra note 60, at 206 (citing Benedetto Croce’s view that “the essence of artistic activity is not the production of an external physical object, but an internalized aesthetic synthesis of impressions and sensations.”).

[78] Kalem Co. v. Harper Bros., 222 U.S. 55 (1911).

[79] Id. at 63.

[80] Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930).

[81] Nimmer, supra note 11, at § 13.03[a][i].

[82] See Cohen, supra note 60, at 207.

[83] Id. (citing John Dewey, Art as Experience 8, 49-52, 56, 64-65 (1934)).

[84] Sol LeWitt, Paragraphs on Conceptual Art, Artforum (June 1967),

[85] See id.

[86] Take, for example, Andy Warhol’s Brillo Boxes. By reframing the household-cleaning product as art, Warhol instilled in the Brillo box an entirely different meaning. Instead of representing a product or brand identity, Warhol’s Brillo Boxes stood for the Pop Art movement’s challenge to the dominant view of elitist aesthetics, and represented the idea that anything can be art. As philosopher Arthur Danto put it, the Brillo Boxes were the “end of art” as we know it because they marked the point at which art became so conscious of itself that it became apparent that in art “anything goes…that there were no stylistic or philosophical constraints.” Id.

[87] See Cohen, supra note 60, at 232.

[88] Id. at 212; see, e.g., Nichols v. Universal Pictures Corp., 45 F.2d 119 (2d Cir. 1930), cert. denied, 282 U.S. 902 (1931) (finding stories of star-crossed lovers too common to be protectable, despite both stories involving a relationship between a Jewish family and an Irish family, a secret marriage between the son and daughter of these two families, a conflict between the two fathers, and an ultimate reconciliation); Steinberg v. Columbia Pictures, 663 F. Supp. 706, 708–09 (S.D.N.Y. 1987) (discussing the plaintiff’s fame and the popularity of his work in finding the defendant’s work infringing); Cohen supra note 60, at 229 (“[A]nother factor that affects a court’s determination of where to draw the line between idea and expression in a given case involving literary works is the relative commercial success of the works at issue and the reputations of their creators.”).

[89] See, e.g., the recent Blurred Lines verdict discussed infraat Part II.C.1.

[90] Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (2d Cir. 1982).

[91] Cohen, supra note 60, at 231.

[92] Cadwell, supra note 18, at 157; see also Arewa, supra note 5, at 556.

[93] Bruce Benward & Marilyn Saker, Music: In Theory and Practice (7th ed., McGraw Hill 2003).

[94] See generally Cadwell, supra note 18, at 155–57.

[95] Id. See generally Carol L. Krumhansl & Lola L. Cuddy, A Theory of Tonal Hierarchies in Music, in Music Perception 51 (M.R. Jones et al. eds., 2003).

[96] Cadwell, supra note 18, at 158.

[97] Id.

[98] See Yen, supra note 2, at 284.

[99] “Striking similarity” is similarity that is “so striking that the possibilities of independent creation, coincidence and prior common source are, as a practical matter, precluded.” Selle v. Gibb, 741 F.2d 896, 897 (7th Cir. 1984).

[100] Cohen, supra note 6, at 724.

[101] Id. at 728.

[102] Id. at 724–27 (comparing the use of phrases such as “substantial identity” or “substantial copy” by the courts to “signify a degree or type of similarity that would be relevant” to proving whether the defendant had in fact used the plaintiff’s work, versus the use of the adjective “substantial” in relation to the economic or aesthetic value of the copyright owner’s work to determine whether the defendant could be liable for copyright infringement.). Cf. Arnstein v. Porter, 154 F.2d 464, 473 (2d Cir. 1946) (inquiring “whether defendant took from plaintiff’s works so much of what is pleasing to the ears of lay listeners, who comprise the audience for whom such popular music is composed, that defendant wrongfully appropriated something which belongs to the plaintiff.”).

[103] Cohen, supra note 6, at 725–26 (“The focus was not principally on how much or what aspects of the plaintiff’s work defendant had borrowed, but on whether defendant had copied the plaintiff’s work rather than doing his own work. The concern was with whether ‘the labors of the original author are substantially to an injurious extent appropriated by another.’”) (quoting Greene v. Bishop, 10 F. Cas. 1128, 1134 (C.C.D. Mass. 1858) (No. 5763)).

[104] Emerson v. Davies, 10 F. Cas. 615, 622 (C.C.D. Mass. 1845) (No. 4436) (noting, in comparing the similarities between tables in two arithmetic textbooks, that “[t]he question is not in what part of one or more pages the matter is found, but whether it is borrowed or pirated from the plaintiff, without any substantial alteration or difference.”). The court went on to state that “[a] copy is one thing, an imitation or resemblance another…. It is very clear that any use of materials…which are well known and in common use, is not the subject of a copy-right, unless there be some new arrangement thereof.” Id.

[105] See Story v. Holocombe, 23 F. Cas. 171, 173 (C.C.D. Ohio 1847) (No. 13497) (stating that infringement “does not depend so much upon the length of the extracts as upon their value.”).

[106] Cohen, supra note 6, at 727 (citing Folsom v. Marsh, 9 F. Cas. 342, 348 (C.D.D. Mass. 1841) (No. 4901) (stating that infringement may exist “if so much is taken, that … the labors of the original author are substantially to an injurious extent appropriated by another”) (emphasis added).

[107] Arnstein v. Porter, 154 F.2d 464 (2d Cir. 1946). See also Nimmer, supra note 11, at § 13.03[a][i].

[108] Arnstein, 154 F.2d at 467. See also Cadwell,supra note 18, at 139 n.19.

[109] Cadwell,supra note 18, at 139 n.19.

[110] Eric C. Osterberg & Robert C. Osterberg, Substantial Similarity in Copyright Law § 3.2.1.A (PLI 2015).

[111] Arnstein, 154 F.2d at 468. See also Osterberg, supra note 110, at § 3.1.1; Cohen, supra note 6, at 729 (“Although some dispute still exists as to whether the plaintiff must prove actual access or only opportunity for access, courts generally agree that showing some possibility of access is very much a part of the plaintiff’s case.”).

[112] Arnstein, 154 F.2d at 468.

[113] Nimmer, supra note 11, at § 13.03[a][i].

[114] A piece-by-piece examination of the works’ constituent parts or elements. See Osterberg, supra note 110, at § 3.4.

[115] Cohen, supra note 6, at 731.

[116] Nimmer, supra note 11, at § 13.03[a][i].

[117] Id.

[118] See Castle Rock Entm’t, Inc. v. Carol Pub. Group, Inc., 150 F.3d 132, 137 (2d Cir. 1998). See also Osterberg, supra note 110, at §§ 3-4.

[119] Osterberg, supra note 110, at § 3.1.2 (citing Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir. 1960)).

[120] Cohen, supra note 6, at 732.

[121] Id.

[122] Carol Barnhart, Inc. v. Econ. Cover Corp., 773 F.2d 411, 422 (2d Cir. 1985) (Newman, J. dissenting) (emphasis added).

[123] Arnstein v. Porter, 154 F.2d 464, 473 (2d Cir. 1946).

[124] See Yen, supra note 2, at 291 (“[D]ifficulties arise because the ordinary observer is not a real person whose views may be discovered.”).

[125] Arnstein, 154 F.2d at 473.

[126] Id. at 468.

[127] Nimmer, supra note 11, at §13.03[a][i].

[128] Cohen, supra note 6, at 732.

[129] Nimmer, supra note 11, at § 13.03[a][i]. The terms “comprehensive non-literal similarity” and its counterpart, “fragmented literal similarity,” emerge from this treatise but they have gained widespread judicial acceptance.

[130] Id. See also Arnstein, 154 F.2d at 473 (deeming it “an issue of fact which a jury is peculiarly fitted to determine.”).

[131] Nimmer, supra note 11, at § 13.03[a][i].

[132] Eric Osterberg, Copyright Litigation: Analyzing Substantial Similarity, 1, 7 Practical Law Intellectual Property & Technology, available at

[133] Id.

[134] Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir. 1936).

[135] Osterberg, supra note 132, at 7.

[136] Nimmer, supra note 11, at §13.03[a][i].

[137] Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946).

[138] See Ideal Toy Corp. v. Fab-Lu Ltd., 266 F. Supp. 755 (S.D.N.Y. 1965), aff’d, 360 F.2d 1021 (2d Cir. 1966).

[139] Id. at 1022 (stating that the plaintiff need only show substantial similarity between the two works, which is present when “an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work.”).

[140] See Cohen, supra note 6, at 733.

[141] Id. at 737.

[142] The idea-expression dichotomy is essential to copyright law, as only the expression of ideas is protectable. 17 U.S.C. § 102(b) (1982) (excluding from the subject matter of copyright “any idea, procedure, process, system, method of operation, concept, principle, or discovery.”).

[143] Cohen, supra note 6, at 735 (deeming the court’s test in Ideal Toy the “Traditional Approach”) (citing Novelty Textile Mills v. Joan Fabrics Corp., 558 F.2d 1090, 1093 (2d Cir. 1977). Novelty Textile Mills found infringement because to lay eyes, the fabrics were “almost identical;” however, the court never analyzed the similarities to determine the likelihood of independent creation or the likelihood of copying.

[144] Universal Athletic Sales Co. v. Salkeld, 511 F.2d 904, 907 (3d Cir. 1975), cert. denied, 423 U.S. 863 (1975) (“[S]ubstantial similarity to show that the original work has been copied is not the same as substantial similarity to prove infringement.”).

[145] Cohen, supra note 6, at 747 (citing Salkeld, 511 F.2d at 907).

[146] Id.

[147] Id.

[148] Id. at 737 (“By relying upon the ordinary observer test alone and thus rejecting dissection, analysis, and expert testimony, the courts were deprived of the evidence necessary to analyze properly the likelihood of independent creation.”).

[149] Nimmer, supra note 11, at § 13.03[A][1].

[150] Cohen, supra note 6, at 749; cf. Nimmer, supra note 11, at § 13.03[A][1][a] (“Obviously, no principle can be stated as to when an imitator has gone beyond the ‘idea,’ and has borrowed its ‘expression.’ Decisions must therefore inevitably be ad hoc.”) (citing Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir. 1960)).

[151] See generally Sid & Mart Krofft Television Prods., Inc. v. McDonald’s Corp., 562 F.2d 1157 (9th Cir. 1977).

[152] Cadwell, supra note 18, at 150.

[153] See Krofft, 562 F.2d at 1164 (“We believe that the court in Arnstein was alluding to the idea-expression dichotomy which we make explicit today.”); see also Cohen, supra note 6, at 753 (“The Ninth Circuit recognized that the ordinary observer is unlikely to be able to separate idea from expression in comparing two works without dissection or analysis.”).

[154] Krofft, 562 F.2d at 1164.

[155] Id. at 1165 (establishing that the question is whether the defendant took “so much of what is pleasing to the audience” to be held liable).

[156] Osterberg, supra note 110, at § 3-3-3.

[157] Shaw v. Lindheim, 919 F.2d 1353, 1360 (9th Cir. 1990).

[158] Cavalier v. Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002).

[159] Id.

[160] Shaw, 919 F.2d at 1359.

[161] Cadwell, supra note 18, at 151.

[162] Shaw, 919 F.2d at 1359.

[163] McCulloch v. Albert E. Price, Inc., 823 F.2d 316, 319 (9th Cir. 1987) (noting that a conclusion that two works are “‘confusingly similar in appearance’ is tantamount to finding substantial similarities in the objective details of the [works].”) (citing Litchfield v. Spielberg, 736 F.2d 1352, 1356 (9th Cir. 1984)).

[164] Cavalier, 297 F.3d at 826; see also Smith v. Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996) (applying Shaw‘s rule to musical motifs).

[165] Cavalier, 297 F.3d at 826.

[166] Sid & Mart Krofft Television Prods., Inc. v. McDonald’s Corp., 562 F.2d 1157, 1164 (9th Cir. 1977).

[167] Arnstein v. Porter, 154 F.2d 464, 473 (2d Cir. 1946).

[168] Krofft, 562 F.2d at 1166–67. (“We do not believe that the ordinary reasonable person, let alone a child, viewing these works will even notice that Pufnstuf is wearing a cummerbund while Mayor McCheese is wearing a diplomat’s sash.”) (emphasis added).

[169] Id.

[170] See Julie E. Cohen et al., Copyright in a Global Information Economy, Companion Website,

[171] 919 F.2d 1353 (9th Cir. 1990); see also Cavalier v. Random House, Inc., 297 F.3d 815, 822 (9th Cir. 2002).

[172] Shaw, 919 F.2d at 1357 (explaining that they were comparing “every element that may be considered concrete”).

[173] Litchfield v. Spielberg, 736 F.2d 1352, 1356 (9th Cir. 1984).

[174] See Shaw, 919 F.2d at 1357.

[175] Id.

[176] Id.

[177] Swirsky v. Carey, 376 F.3d 841, 844–45 (9th Cir. 2004).

[178] Id. at 843.

[179] Id. at 847.

[180] Id. at 848.

[181] Id. at 849 n.15 (quoting Metcalf v. Bochco, 294 F.3d 1069, 1073 (9th Cir. 2002) (quoting Kouf v. Walt Disney Pictures & Television, 16 F.3d 1042, 1045 (9th Cir. 1994))).

[182] Id. at 848.

[183] Three Boys Music Corp. v. Bolton, 212 F.3d 477 (9th Cir. 2000).

[184] Id. at 485.

[185] Swirsky, 376 F.3d at 850; see also Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349 (1991) (extending copyright protection to the original selection and arrangement of otherwise uncopyrightable components).

[186] Apple Computer v. Microsoft Corp., 35 F.3d 1436, 1442, 1447 (9th Cir. 1994).

[187] Dawson v. Hinshaw Music Inc., 905 F.2d 731, 733 (4th Cir. 1990) (describing Arnstein as “the source of modern theory”); see also Lemley, supra note 13, at 719.

[188] Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946).

[189] As Professor Nimmer suggests, conversely, it may also cause very real appropriation to go undetected. Nimmer, supra note 11, at § 13.03[E][2].

[190] Id.

[191] Id.

[192] Id.

[193] Id.

[194] Id.

[195] See Balganesh, supra note 9, at 794 (“Copyright’s infringement analysis has been variously described as ‘bizarre,’ ‘mak[ing] no sense,’ ‘viscid,’ and ‘problematic.’”); see also Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1232 (3d Cir. 1986) (noting the doubtful value of the ordinary observer test in cases involving complex subject matter unfamiliar to most members of the public).

[196] Especially when applied to complex works, such as computer software and music and with complicating circumstances of the transformation of a work into a different medium. Nimmer, supra note 11 at § 13.03[E][2].

[197] Id.; cf. Hein v. Harris, 175 F. 875, 876 (C.C.S.D.N.Y. 1910) (explaining that the ultimate inquiry is whether the average person’s ear would find the two melodies substantial similar because the pecuniary value of a composition rests in the public taste).

[198] Michael Der Manuelian, The Role of the Expert in Music Copyright Infringement Cases, 57 Fordham L. Rev. 126, 131 (1988) (describing how the trier must determine, not his own personal reaction to the similarities between the two works, but the reaction of the “average lay hearer.”); see id. at n.145 (citing Copyright Infringement Actions: The Proper Role for Audience Reactions in Determining Substantial Similarity, 54 S. Cal. L. Rev. 385 (1981) (“[Q]uestioning value of lay observer test when copyrighted matter is targeted for a particular, identified audience”)).

[199] Cohen, supra note 6, at 765.

[200] Manuelian, supra note 198, at 133.

[201] Id.

[202] Id. at 146.

[203] Nimmer, supra note 11, at § 13.03 [E][2].

[204] Manuelian, 198, at 146.

[205] Id. at 145.

[206] Nimmer, supra note 11, at § 13.03 [E][2].

[207] Balganesh, supra note 9, at 810 (citing Arnstein v. Porter, 154 F.2d 464, 479 (2d Cir. 1946) (Clark, J. dissenting)).

[208] Id. at 845.

[209] Id.

[210] Id.

[211] Id. at 846.

[212] Id. at 810. This was a practice Justice Clark said he generally promoted, unlike his adversary Justice Frank (citing Judge Frank’s two extrajudicial writings).

[213] Id. at 800; see also Nimmer, supra note 11, at § 13.03 [E][2] (“[T]he idea/expression dichotomy…depends on the level of abstraction at which one defines the “idea” that merges with the subject expression).

[214] Manuelian, supra note 198, at 139.

[215] Id. (citing Franklin Mint Corp. v. National Wildlife Art Exch., Inc., 575 F.2d 62, 65 (3d Cir. 1978)).

[216] Id.

[217] See, e.g., Williams v. Bridgeport Music, 2:13-cv-06004-JAK-AGR (2015), available at (hereinafter, Blurred Lines Jury Instructions).

[218] Wendy Gordon, “How the jury in the ‘Blurred Lines’ case was misled,” THE CONVERSATION (March 17, 2015, 5:47 AM),; see, e.g., Balganesh, supra note 9, at 794 (“[T]he Ninth Circuit chose to "withdraw" its model jury instructions on the analysis recognizing that no amount of abstract guidance could resolve the indelible complexity that the [copyright infringement] analysis routinely engenders.”).

[219] Gordon, supra note 218 (“Instruction 28 makes it looks like ‘substantiality’ only matters for proof of the first criterion – ‘Did they copy?’ But if a juror thinks she already has the answer to that first question – from evidence such as Thicke’s own words to GQ – she might conclude that she doesn’t need to assess ‘substantiality’ as well. (That is, she might ignore the second criterion.) So, again, it could look to a careful juror as if any copying of the Gaye composition brings liability.”).

[220] See Manuelian, supra note 198, at 139.

[221] Id. at 145.

[222] Selle v. Gibb, 741 F.2d. 896 (7th Cir. 1984).

[223] See Manuelian, supra note 198, at 140.

[224] Id. (citing Gibb, 741 F.2d at 901).

[225] Id. at 143, n.137 (“The instructions to the jury do not distinguish the similarities evidencing copying from the substantial similarity from which "the average person would recognize ‘How Deep Is Your Love’ as having been appropriated from parts of ‘Let It End.’”) (citing Gibb, 741 F.2d at 1079).

[226] Id. at 144.

[227] See Gordon, supra note 218 (citing Instruction 27); see also Blurred Lines Jury Instructions, supra note 217 at 28.

[228] Gordon, supra note 218 (alluding to Blurred Lines Jury Instructions at 31, where eventually Instruction No. 30 corrects this mistake, noting the jury “must not consider in your comparison (1) ideas, as distinguished from the expression of those ideas” but stating “[n]onetheless, the distorted message of Instruction 27 echoes throughout.”).

[229] Id.

[230] See Nimmer, supra note 11, at §13.03[A][1].

[231] Id. at §13.03[E][b] (suggesting that the courts discard the audience test entirely and adopt the abstraction-filtration-comparison method used in cases involving infringement of computer programs and factual compilations.).

[232] Cohen, supra note 6, at 757.

[233] Id. at 754-755.

[234] Swirsky v. Carey, 376 F.3d 841, 848 (9th Cir. 2004) (citing Metcalf v. Bochco, 294 F.3d 1069, 1071 (9th Cir. 2002)).

[235] Swirsky, 376 F.3d at 848.

[236] Cohen, supra note 6, at 745 n.81.

[237] Id. at 742.

[238] Id.

[239] Thus, in the music context, taking the “heart” of a song, or the portion that makes the song appealing and valuable, is a substantial taking. See id.; Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) (overturning the district court’s finding of infringement where the defendant used the “heart” of the plaintiff’s song under the fair use defense); Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946) (asking “whether defendant took from plaintiff’s works so much of what is pleasing to the ears of lay listeners, who comprise the audience for whom such popular music is composed, that defendant wrongfully appropriated something which belongs to the plaintiff.”); Eisenman Chem. Co. v. NL Indus., 595 F. Supp. 141, 146 (D. Nev. 1984) (holding that the defendant’s manual copied “virtually verbatim” from the plaintiff’s manual and thereby appropriated the plaintiff’s labor and skill to publish a rival work).

[240] Sid & Marty Krofft TV Prods. v. McDonald’s Corp., 562 F.2d 1157, 1166 (9th Cir. 1977).

[241] Nimmer, supra note 11, at § 13.03[E][4].

[242] Id.

[243] Cohen, supra note 6, at 756; see, e.g., Three Boys Music v. Bolton, 212 F.3d 477, 485 (9th Cir. 2000) (upholding the jury’s determination that the defendant’s song has a substantially similar “total concept and feel” to the plaintiff’s song); see also Osterberg, supra note 110, at 3-37.

[244] Cooling Sys. & Flexibles, Inc. v. Stuart Radiator, 777 F.2d 485 (9th Cir. 1985).

[245] Id. at 493.

[246] Cohen, supra note 6, at 756–57.

[247] Cooling Sys., 777 F.2d at 491.

[248] Cohen,supra note 6, at 757.

[249] See, e.g. How Hip-Hop Works, Stuff You Should Know: The Podcast, (tracing the birth of hip-hop to Jamaica, where DJs began using two turntables at once to play extended doctored versions of popular songs that isolated the percussive breaks, while “toasting” or rapping over the beat).

[250] Grand Upright Music, Ltd. v. Warner Brothers Records Inc., 780 F. Supp. 182 (S.D.N.Y. 1991) (ruling that sampling without permission can qualify as copyright infringement in holding rapper Biz Markie liable for sampling Gilbert O’Sullivan’s song “Alone Again (Naturally)” in his song “Alone Again.”).

[251] Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005) (holding that the Beastie Boys’ three note sampling of George Clinton’s song “Get Off Your Ass and Jam” infringed the sound recording and creating a bright line rule that de minimis analysis does not apply to sound recordings).

[252] Id. at 801; see generally Mark R. Carter, Applying the Fragmented Literal Similarity Test to Musical-Work and Sound-Recording Infringement: Correcting the Bridgeport Music, Inc. v. Dimension Films Legacy, 14:2 Minn. J. L. Sci. & Tech (2013) (arguing that courts should engage in an analysis of the quantitative and qualitative significance of a sampled sound recording rather than creating a bright line rule); cf. Lesley Grossberg, A Circuit Split at Last: Ninth Circuit Recognizes De Minimis Exception to Copyright Infringement of Sound Recordings (June 21, 2016), (a recent circuit split arose after the Ninth Circuit ruled in VMG Salsoul, LLC v. Ciccone, 824 F. 3d 817 (9th Cir. 2016), that the de minimis exception to copyright infringement applies to sound recordings. Though Salsoul may offer hope to samplers by tipping “the weight of the authorities heavily on the side of recognizing a de minimis exception,” litigious copyright holders can still find a favorable forum in circuits bound by Bridgeport. Moreover, it remains to be seen if courts will extend Salsoul to use of the underlying composition.).

[253] See Neil Weinstock Netanel, Copyright’s Paradox 21 (2008).

[254] Mickey Hess, Is Hip Hop Dead?: The Past, Present, and Future of America’s Most Wanted Music 106 (2007); interpolation allows the artist to simply pay the holder of the rights in the composition, usually a songwriter, without needing to pay the artist and the record company as well.

[255] Copyright’s failure to encourage creativity may simply be proof that its protection is overreaching, since creative incentives and normative protections exist regardless of the law as it stands. See, e.g., Jodie Griffin, The Economic Impacts of Copyright, PUBLIC KNOWLEDGE, (last accessed Feb. 7, 2016) (“evidence suggests ‘most sound recordings sell in the ten years after release.’”).

[256] Arewa, supra note 5, at 630.

[257] Id.

[258] Joe Fassler, How Copyright Law Hurts Music, From Chuck D to Girl Talk, THE ATLANTIC, Apr. 12, 2011, (“Capitol Records would lose 20 million dollars on a record that sold 2.5 million units.”).

[259] Arewa, supra note 5, at 638; see also 17 U.S.C. § 115(a)(2) (2000) (requiring that the compulsory licensing arrangement not change the basic melody or fundamental character of the work).

[260] See HESS, supra note 254, at 106 (“Dr. Dre, one of hip hop’s biggest producers, says that he prefers [sheet music] interpolation to sampling because working from sheet music allows him more control of the sound: he can ask studio musicians to play it the way he wants it.”).

[261] Guy Raz & Mark Ronson, Why Would More Than 500 Artists Sample The Same Song?, NPR (June, 2014, 9:57 AM), Explaining the process of seeking sampling rights, producer Mark Ronson said,

Basically, you go to the person that wrote it, or maybe the person that owns that song now – because it could have been sold, the rights to it, years ago. You have to play them your song, and then you guys kind of come to agreement about how much you’re going to give them. I mean, if you use a tiny two seconds of a Led Zeppelin song, it doesn’t matter how important it is to your song – you can pretty much guarantee you’re going to give up 100 percent of your publishing to Jimmy Page and Robert Plant. Id.

[262] Id.

[263] The song charted at number 15 on the UK Singles Chart. Billboard, May 26, 2007.

[264] This is the commonly used name for their LP, The Beatles.

[265] Jillian C. York, The Fight to Protect Digital Rights Is an Uphill Battle, but not a Silent One, THE GUARDIAN (Apr. 24, 2010, 12:38 AM)

[266] Dr. Dre, ‘The Chronic’ at 20: Classic Track-By-Track Review, BILLBOARD (Dec. 15, 2012),

[267] See P-Funk, RATE YOUR MUSIC, (last visited Sept. 20, 2015).

[268] Mike Masnick, Why Hasn’t The Recording Industry Sued Girl Talk?, TECHDIRT (July 8, 2009, 8:32 AM),

[269] Alex Mayyasi, The Economics Of Girl Talk, PRICENOMICS (Apr. 11, 2013) (quoting David Post, Girl Talk:, Volokh Conspiracy (Nov. 19, 2010, 7:10 PM), /2010/11/19/girl-talk/),

[270] Eryc Eyl, Ripper Offer, THE PITCH (Oct.4, 2007, 4:00 AM),

[271] See, e.g., Mayyasi, supra note 269 (stating Girl Talk’s main instrument is a laptop); RZA, RZA on Gear, SKULL THEFT (citing So You Wanna Be a Record Producer, RAP PAGES, Mar. 1995), (last visited Feb. 10, 2016) (describing early hip-hop producers, like RZA of the group Wu-Tang Clan, who used basic sampling equipment, stating “‘[b]ack in ’89…all I had was a four-track, some turntables, and a drum machine.’”).

[272] Keith Caulfield, Billboard 200 Chart Moves: Marvin Gaye Sales Up 246% After ‘Blurred Lines’ Trial, BILLBOARD (Mar. 20, 2015),

[273] See, e.g., Cariou v. Prince, 714 F. 3d 694 (2d Cir. 2013); Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) (finding the defendant’s use of plaintiff’s song to be fair use because the new work was a parody); Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605 (2d Cir. 2006) (finding defendant’s use of the plaintiff’s music posters in a biographical coffee table book to be fair use because of the new purpose).

[274] George Howard, Should There Be a Compulsory License for Derivative Works?, TUNECORE (Apr. 17, 2013),

[275] H.R. REP. NO. 60-2222, at 7 (1909), reprinted in 6 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, Part S (E. Fulton Brylawski & Abe Goldman eds., 1976).

[276] Nicole K. Roodhuyzen, Do We Even Need a Test? A Reevaluation of Assessing Substantial Similarity in a Copyright Infringement Case, 15 J. L. & POL’Y, 1375, 1418-19 (2008),

[277] Jennifer Jenkins, The “Blurred Lines” of the Law, CENTER FOR THE STUDY OF THE PUBLIC DOMAIN, (last visited Oct. 16, 2016).

[278] Beebe, supra note 33 (explaining that aesthetic progress doesn’t mean that the works of Picasso are better than cave drawings).

[279] Simon Waxman, ‘Blurred Lines’ Ruling Makes Influence Illegal, AL JAZEERA AMERICA (Apr.l 4, 2015, 2:00AM),

[280] Gary Trust, Robin Thicke’s ‘Blurred Lines’ Is Billboard’s Song of the Summer, BILLBOARD (Sept. 5, 2013),

[281] Stuart Dredge, Global Music Sales Fell in 2013 Despite Strong Growth for Streaming Services, THE GUARDIAN (March 18, 2014 9:00 AM), (reporting that “Blurred Lines” sold 14.8 million units in track downloads and equivalent streams).

[282] Geeta Dayal, The Music Club, 2013, SLATE (Dec. 19, 2013, 2:44 PM), (citing lyrics like “I know you want it” and “I hate these blurred lines”).

[283] ‘Blurred Lines’ Banned by YouTube as Robin Thicke’s Video Features Nude Models, Huffington Post (April 1, 2013 5:28 PM),

[284] Zoe Chace, Robin Thicke’s Song Sounds Like Marvin Gaye. So He’s Suing Gaye’s Family, NPR PLANET MONEY (Aug. 19, 2013, 1:05 PM),

[285] Eriq Gardner, Robin Thicke Sues to Protect ‘Blurred Lines’ from Marvin Gaye’s Family (Exclusive), THE HOLLYWOOD REP. (Aug. 15, 2013, 6:13 PM),

[286] Id.

[287] Williams v. Bridgeport Music, Inc., No. LA CV13-06004 JAK (AGRx), 2014 WL 7877773, at *18-19 (C.D. Cal. Oct. 30, 2014).

[288] Frankie Christian Gaye and Nona Marvisa Gaye First Amended Counterclaims Preliminary Expert Report for Defendants at ¶ 9, 43, Williams v. Bridgeport Music, Inc., No. CV13-06004-JAK (AGRx) (C.D. Cal. Oct. 30, 2013) [hereinafter Counterclaim].

[289] Emily Miao & Nicole E. Grimm, The Blurred Lines of Copyright Infringement of Music Become Even Blurrier as the Robin Thicke v. Marvin Gaye’s Estate Lawsuit Continues, MBHB ACCESS MEDIA (Winter 2014) (quoting Counterclaim, supra note 288,

[290] Pharrell Denies ‘Blurred Lines’ Copies Marvin Gaye: ‘It’s Completely Different,’ BILLBOARD (Sept. 13, 2013),

[291] Miao & Grimm, supra note 289.

[292] Lauretta Charlton, A Copyright Expert Explains the ‘Blurred Lines’ Ruling, VULTURE (Mar. 11, 2015, 3:11 PM),

[293] Eriq Gardner & Austin Siegemund-Broka, ‘Blurred Lines’ Trial Reveals How Much Money Robin Thicke’s Song Made, HOLLYWOOD REP. (Mar. 3, 2015, 10:54 AM),

[294] Kit Walsh, The Blurred Lines Copyright Verdict is Bad News for Music, ELECTRONIC FRONTIER FOUNDATION (Mar. 11, 2015), (quoting Gregory Butler).

[295] Amar Toor, Robin Thicke and Pharrell Appeal ‘Blurred Line’’ Copyright Ruling, THE VERGE (Dec. 9, 2015, 3:30 AM),

[296] Walsh, supra note 294; see also Toor, supra note 295 (“The verdict handicaps any creator out there who is making something that might be inspired by something else….This applies to fashion, music, design . . . anything. If we lose our freedom to be inspired we’re going to look up one day and the entertainment industry as we know it will be frozen in litigation. This is about protecting the intellectual rights of people who have ideas.”) (quoting Pharrell Williams).

[297] Ed Christman, ‘Blurred Lines’ Verdict: How It Started, Why It Backfired on Robin Thicke and Why Songwriters Should Be Nervous, BILLBOARD (Mar. 13, 2015),

[298] Williams v. Bridgeport Music, Inc., No. LA CV13-06004 JAK, 2014 WL 7877773, at *10 (C.D. Cal. Oct. 30, 2014) (“[T]he lead sheets are deemed to define the scope of Defendants’ copyrighted compositions.”).

[299] Kal Raustiala & Christopher Jon Sprigman, Squelching Creativity, SLATE (Mar. 12, 2015, 12:27 PM),

[300] See infra, note 302.

[301] Williams, 2014 WL 7877773, at *19.

[302] Id. at *4, *13, and *15 (including “Low Rider” by War from 1975, “Superfly” by Curtis Mayfield from 1972 and “Funkytown” by Lipps Inc. from 1980).

[303] Id. at *19.

[304] Swirsky v. Carey, 376 F.3d 841, 850 (9th Cir. 2004).

[305] Kronstadt confuses the issue of whether the elements themselves are protected versus the issue of whether the work as a whole is a unique combination of unprotected elements, applying the test for the former in attempting to determine the latter, thereby failing to decide either issue.

[306] Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 358 (1991).

[307] Satava v. Lowry, 323 F.3d 805, 811 (9th Cir. 2003).

[308] Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1439, 1442 (9th Cir. 1994), cert. denied, 513 U.S. 1184; see also Mattel, Inc. v. MGA Entm’t, Inc., 616 F.3d 904, 915-917 (9th Cir. 2010) (finding that the district court erred in applying the substantial similarity standard for unprotectable elements, as opposed to the heightened virtually identical standard, in comparing defendant’s “Bratz” dolls to Mattel’s iconic Barbie because “small plastic dolls that resemble young females is a staple of the fashion doll market”).

[309] Chris Richards, It’s Okay if You Hate Robin Thicke but the ‘Blurred Lines’ Verdict is Bad for Pop Music, Wash. Post (March 11, 2015),

[310] Nimmer, supra note 11, at § 13.03[B][3][d], [B][3][c].

[311] Waxman, supra note 279 (citing bluegrass as an example).

[312] Landon Proctor, Video Explains the World’s Most Important 6-Sec Drum Loop, YOUTUBE (Feb. 21, 2006),

[313] Arewa, supra note 5, at 628.

[314] Nimmer, supra note 11, at § 13.03[E][1][b].

[315] Id. at § 13.03[E][4].

[316] See Erin Geiger Smith, What’s the (Fair) Use?, NYU Law Mag. (2014), (discussing the “latest incarnation of the Internet…the phenomenon of user-generated content” and Barton Beebe’s views that “[o]pening up the conversation about aesthetic progress and what it means could lead to tweaks to copyright law that are more in line with today’s hands-on approach to cultural commentary.”).

[317] Nimmer, supra note 11, at § 13.03[F][1]; see also Lemley, supra note 13, at 734.

[318] Computer Assocs. Int’l, Inc. v. Altai, Inc., 982 F.2d 693, 713 (2d Cir. 1992).

[319] Nimmer, supra note 11, at § 13.03[F].

[320] Id.

[321] Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991).

[322] Altai, 982 F.2d at 713.

[323] Lemley, supra note 13, at 726, 733.

[324] Id.

[325] Osterberg, supra note 110, at § 3.

[326] Lemley, supra note 13, at 741.

[327] Id.

[328] Balganesh, supra note 9, at 859.

[329] Id.

[330] Id. at 860.

[331] Id. at 849.

[332] Lemley, supra note 13, at 725.

[333] U.S. CONST. amend. VII.

[334] DJ Shadow On Sampling As A ‘Collage Of Mistakes,’ NPR (Nov. 17, 2012 7:04 PM),

[335] Raz & Ronson, supra note 261.

[336] HESS, supra note 254, at 98.

[337] Id. at 99.

[338] Fassler, supra note 258 (noting that author David Shields’s novel, Reality Hunger, is made up of passages from other books, but musicians can’t make a record made up from other records).

[339] HESS, supra note 254, at 98.

[340] Id. at 99.

[341] Raz & Ronson, supra note 261.

[342] See Beebe, supra note 33.

The Current State of Pre-1972 Sound Recordings: Recent Federal Court Decisions in California and New York against Sirius XM Have Broader Implications than Just Whether Satellite and Internet Radio Stations Must Pay for Pre-1972 Sound Recordings

The Current State of Pre-1972 Sound Recordings: Recent Federal Court Decisions in California and New York against Sirius XM Have Broader Implications than Just Whether Satellite and Internet Radio Stations Must Pay for Pre-1972 Sound Recordings
By Steve Gordon* and Anjana Puri** A pdf version of this article may be downloaded here.  


Federal copyright law applies to sound recordings, but only to those fixed, i.e., produced, on or after February 15, 1972.[1] Recordings produced prior to that date are subject to protection under the laws of the individual states until 2067.[2] A recent spate of lawsuits has raised the issue of whether Sirius XM’s satellite service and Pandora’s satellite service have the right to play sound recordings produced prior to February 15, 1972, without permission from, and without paying, the owners of the copyrights in those recordings or the artists performing on them. Pandora and Sirius XM currently are not paying SoundExchange for pre-1972 recordings.[3] Both companies contend that since federal law, which recognizes public performance rights for digital performances of sound recordings, does not apply to pre-1972 recordings, they do not need permission from the owners of the copyrights in such sound recordings or the artists who performed them.[4] Pre-1972 recordings include some of the most iconic records of all time, including records featuring such artists as Billie Holiday, Frank Sinatra, Elvis Presley, Miles Davis, The Beatles, the Rolling Stones, the great artists of the Motown era such as the Supremes and Temptations, and countless others. Pre-1972 recordings account for about 5 percent of plays on Pandora and 15 percent at Sirius XM,[5] which highlights the importance of the issue for both companies. In 2013 SoundExchange paid out $590 million to artists and owners of sound recording copyrights (usually record companies).[6] Of that amount, Pandora paid approximately $300 million[7] and Sirius paid approximately $200 million.[8] As of December 2014, there are six lawsuits questioning Sirius XM and Pandora’s position that they do not have to pay for pre-1972 recordings. Of these six cases, there have been three decisions, all of them against Sirius XM. In September 2014 a California federal court found that Sirius’ policy violated a 1982 California statute specifically designed to protect pre-1972 recordings.[9] In November of the same year, Sirius XM suffered another major defeat in New York when the Southern District found that although New York had no statute protecting sound recordings, the state’s common law required Sirius to secure permission to play pre-1972 recordings.[10] The same court wrote another decision rejecting a motion to reconsider its original opinion.[11] Although these federal trial court decisions clearly implicate whether or not Sirius and Pandora have to pay for pre-1972 recordings, the decisions have even broader implications for the music industry as a whole. In fact, if the decisions are upheld, this could lead to massive additional litigation in California and/or New York against broadcasters, and physical venues such as nightclubs, that currently pay nothing for playing recorded music, and ultimately lead to passage of federal legislation that would for the first time require terrestrial radios throughout the United States to pay to play recorded music. To understand those implications, it is necessary to provide some history of the music business with respect to public performance rights.

I. Brief History of Copyright and Public Performance Rights for Recorded Music

In 1897, the federal copyright law was amended to protect public performance rights in musical compositions.[12] This meant that venues such as bars, taverns, honky-tonks and nightclubs[13] at which songs were publicly performed had to acquire licenses to perform them. Sound recordings did not exist at the time. In 1914, a group of prominent writers (including Irving Berlin, Jerome Kern and John Philip Souza), and their music publishers, came together to form the American Society of Composers, Authors and Publishers (ASCAP) to collect royalties from venues that played their songs for the public. Monies generated by the public performance of songs received a major boost when commercial radio emerged in the 1920s. ASCAP started offering a blanket license to radio stations for the right to play any musical composition in its repertoire. ASCAP collects the licensing fees and then distributes them back to its songwriter and publisher members. However, in 1939 ASCAP announced a substantial increase in its blanket license fees for radio. This prompted the National Association of Broadcasters (NAB) to create a new public rights organization (PRO). They called it Broadcast Music, Inc. (BMI). It was designed to provide a lower-cost alternative to ASCAP. As such, BMI created competition in the field of performing rights by providing an alternative source of licensing for all music users. Later, another PRO emerged in the U.S. to collect public performance royalties on behalf of contemporary classical composers, SESAC (which originally stood for Society of European Stage Authors and Composers). From the 1930s through the 1950s, the record business emerged as a significant part of the U.S. entertainment industry. The myriad of mostly small independent labels composing the record business, such as Sun Records (Elvis Presley), Atlantic (Ray Charles), Stax (Otis Redding) and Mercury (Sarah Vaughan), were led by entrepreneurs who constantly tried to get local radio stations to play their records. Often they would actually offer cash and other forms of “consideration,” a practice known as “payola,” to DJs or station managers to play their tracks. Following hearings exposing these practices in the late 1950s, Congress made it illegal for any radio station to receive consideration for broadcasting particular records unless it disclosed that fact along with the identity of the person furnishing such consideration.[14] Despite the law against payola, as recently as 2005 the record companies have been caught trying to bribe radio stations to play their records.[15] Former New York State Attorney General Eliot Spitzer prosecuted payola-related crimes in New York and settled out of court with Sony BMG Music Entertainment in July 2005, Warner Music Group in November 2005, and Universal Music Group in May 2006. The three majors agreed to pay $10 million, $5 million and $12 million respectively in fines. Spitzer’s office found that the companies had used a broad array of illegal “pay for play” tactics to secure airplay for its music, including bribing programmers with laptop computers, luxury hotel stays and even free tickets to Yankee games.[16] Nonetheless, for decades record companies have requested that Congress create a performance right for sound recordings in order to make radio stations pay them.[17] The legislative history of the 1976 Act shows that even ten years before the Act was passed the recording industry was trying to establish a public performance right in sound recordings. In the Register’s Report on the new Act submitted to Congress in May 1965, the Register of Copyrights, L. Quincy Mumford, recognized that many in the recording business wanted Congress to establish a public performance right for sound recordings:
Representatives of record companies have argued that there are no valid reasons in principle for placing sound recordings in a different category from all other works, and the American Federation of Musicians has recently adopted a formal position opposing the … bill because it would deny performers “a modicum of economic incentive and participation in the vast profits derived from the public performance of records.”[18]
But he regarded this issue as so “explosively controversial,” due to broadcasters’ fierce opposition to the grant of such right, that the chances of passing the new Copyright Act would be seriously impaired if it included any proposal for a public performance right for sound recordings. He wrote in relevant part:
“We are convinced that, under the situation now existing in the United States, the recognition of a right of public performance in sound recordings would make the general revision bill so controversial that the chances of its passage would be seriously impaired.”[19]
In fact, the broadcaster’s lobbying group, the NAB has been successful throughout the years at thwarting public performance rights for sound recordings. Although the NAB has consistently argued that broadcasters should not have to pay to play sound recordings because by playing them they promote record sales thereby benefitting both labels and artists, the political reality is that all members of Congress have radio stations in their district, and all members of Congress seek the goodwill of many of those radio stations, especially when they run for re-election. The recording industry, which is largely based in New York City, Los Angeles and Nashville, has always had far less clout. These political realities have resulted in the United States being one of the only countries in the world where radio stations do not pay for the performance of musical recordings. But subsequent to 1999, when income from recorded music started to plummet, the recording industry, led by the major labels, has been lobbying even more diligently to change the federal copyright law to make radio pay them for playing their records. The latest incarnation of this effort was the introduction in September 2013 of the Free Market Royalty.[20] Like the earlier failed Performing Rights Act of 2007 and the Performance Rights Act of 2009,[21] this Act would require AM/FM broadcasters to pay performers and copyright owners. As hard as the record industry has tried, however, the broadcasting community, led by the NAB, has pushed back by lobbying effectively against a general right of public performance in sound recordings.[22] In 1971, Congress passed the Sound Recording Act, which amended § 102 of the Copyright Act to add “sound recordings” to the list of works of authorship that receive protection. However, sound recording copyright owners were still not given the full bundle of rights usually associated with copyrights.[23] While reproduction, adaptation and distribution rights were now protected, the right of performance was not, thereby allowing broadcasters to continue to pay nothing to the labels. This served as a compromise between the recording industry, which wanted to create uniform federal protection against physical piracy rather than continue to fight against it in each state, and the broadcast community, which did not feel that it should have to pay the labels for playing their records when doing so already benefitted the recording industry by promoting record sales.[24] In 1976 Congress overhauled the old 1909 Copyright Act to conform to international standards, including changing the term of protection from a 28-year term with a renewal term of another 28 years, to 50 years after the death of a creator or 70 years for corporate works.[25] Once again, however, the broadcast community was able to persuade Congress to specifically carve-out public performance rights for sound recordings. The 1976 Act included another provision that the recording industry did not favor: a right for authors to terminate grants of copyright after 35 years.[26] The reasoning behind this right of termination was that young creators often sell or assign their copyrights for little or no money at the beginning of their careers. Congress felt that they or their families should have the right to recapture those copyrights after a certain period of time. Had this provision applied to recordings made before the implementation of the Act on January 1, 1978, any record older than 35 years would be subject to possible termination by artists, the “authors” of such sound recordings. Therefore, instead of asking Congress to apply the new Copyright Act to records made before 1972, the industry urged that those records continue to be protected exclusively by state law. Consequently, the Act specifically provided that pre-1972 sound recordings would remain subject to state statutes or copyright common law.[27] Even though the recording industry has thus far been unsuccessful in trying to obtain public performance rights under federal law, in 1995 it did manage to obtain exclusive digital public performance rights. The Digital Performance Right in Sound Recordings Act (DPRA)[28] granted owners of a copyright in sound recordings an exclusive right “to perform the copyrighted work publicly by means of a digital audio transmission.”[29] The DPRA was enacted because the recording industry was able to persuade Congress that digital technology would threaten its business by allowing people to make perfect copies from digital transmission, thus displacing record sales. The Act received no significant opposition because it had no impact on normal broadcasters and at the time there very little digital transmission of music.[30] In the next several years, the Internet started to take off and new services such as AOL and Yahoo! were successful in getting a compulsory license through Congress as part of the Digital Millennium Copyright Act (DMCA) of 1998.[31] This meant that certain digital streaming services could use any recording without permission, provided that they qualified for licenses. The two major qualifications, codified in Section 114 of the Copyright Act, were that the services were non-interactive, that is, listeners cannot select particular songs, and that they paid the required royalty rate. Both Sirius XM and Pandora operate under that regime today. They pay royalties to SoundExchange, a not-for-profit that collects monies from statutorily covered services and redistributes that money to record companies and artists on a 50–50 basis. Yet both Sirius XM and Pandora take the position that they are not legally required to pay for pre-1972 recordings, because neither the DPRA nor DMCA apply to such recordings.

II. The Current Pre-1972 Cases

As noted above, as of the submission of this article there are six cases questioning Sirius XM or Pandora’s position that they do not have to ask for permission or pay for pre-1972 recordings. Four of the six lawsuits were brought by Flo & Eddie Inc., a corporation created in 1971 that is owned and exclusively controlled by Howard Kaylan and Mark Volman, two of the founding members of the music group “The Turtles.”[32] Flo & Eddie Inc. started three lawsuits against Sirius XM in California, New York and Florida, and filed another one against Pandora in California. We discuss the recent decisions in favor of Flo & Eddie in California and New York below. Additionally, the recording industry—lead by Capitol, a wholly owned label of Universal Music—is suing Sirius XM in California[33] and Pandora in New York.[34] All of these suits raise the issue of whether digital music services must ask permission to play pre-1972 recordings.[35] The issue presented in these six cases is immensely important because it has implications that go far beyond just whether Pandora and Sirius XM should be paying for pre-1972 records. As we discuss in more detail in Part III below, if owners of pre-1972 sound recordings are found to have exclusive public performance rights, this would implicate many other businesses which play sound recordings publicly, including not only terrestrial radio, broadcast TV and cable, but also any other physical place that plays recorded music such as bars, restaurants, nightclubs, arenas, stadiums, amusement parks, department stores and malls. Indeed, if decisions favoring the plaintiffs in these cases are upheld on appeal, they may not only change the landscape of music licensing in the states in which they are decided, but could also form the basis for changing U.S. copyright law to finally protect public performance rights for all sound recordings.

A. Judge Gutierrez’s Decision

Flo & Eddie Inc. won a decisive victory against Sirius in federal trial court in California[36] on September 22, 2014, when Judge Paul Gutierrez granted Flo & Eddie’s motion for summary judgment. Judge Gutierrez declared:
The Court finds that copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording. See Cal. Civ. Code § 980(a)(2). Accordingly, the Court GRANTS summary judgment on copyright infringement in violation of § 980(a)(2) in favor of Flo & Eddie.[37]
As discussed in detail below, Judge Gutierrez’s decision was based on his reading of legislative intent underlying § 980(a)(2) of the California Civil Code. That section, which was enacted in 1982, reads as follows:
The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording.[38]
The court reasoned the language of the statute itself was “the most reliable indicator of legislative intent.”[39] The court focused on the words “exclusive ownership” in a sound recording “as against all persons” and found that the plain meaning of these words was to give all rights in sound recordings to their owners to the exclusion of others. The court observed that there was nothing in the statutory language to suggest that the legislature intended to exclude any right or use of the sound recording from the concept of ‘exclusive ownership.’ He inferred from this that “the legislature did not intend to further limit ownership rights, otherwise it would have indicated that intent explicitly.” Judge Gutierrez concluded, “copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording.”[40] It is clear that, if upheld, this decision would mean that both Pandora and Sirius XM would have to seek permission and pay for pre-1972 recordings in California. However, would nightclubs, bars and restaurants, as well as radio and TV stations have to seek permission to play and pay performance royalties for pre-1972 records in that state? On its face, yes. Gutierrez’s interpretation of California law would make the exclusive right of public performance in sound recordings apply to any public performance of a pre-1972 recording, whether on a digital service or otherwise, including performances in terrestrial radio or television broadcasts, nightclubs, restaurants, bars and any other public places. In other words, they would all have to seek permission from the copyright owner of each pre-1972 recording—usually the record company.[41] The owners of such recordings could then charge any amount they wished, or deny permission altogether. On October 6th, 2014, Sirius XM announced that it would appeal Judge Gutierrez’s ruling. In the meantime, all the other lawsuits against it and Pandora are ongoing.
1. Criticism of Gutierrez’s Decision
It is questionable whether Judge Gutierrez’s decision will be upheld on appeal. By his own analysis he was supposed “to ascertain the intent of the drafters so as to effectuate the purpose of the law.”[42] However, Judge Gutierrez basically ignored the intent made manifest in the legislative history. Instead, as discussed above, he relied on the statutory language itself, on the basis that it “is generally the most reliable indicator of legislative intent.”[43] His decision rejected Sirius’ reliance on legislative history, noting that:
Sirius XM’s attempts to insert ambiguity into the textual language fail because Sirius XM relies on information outside the statutory language to find that ambiguity in the first place. See Opp. ¶ 7:5–19, 16:20–17:4; see People v. Hagedorn, 127 Cal. App. 4th 734, 743 (2005) (“Courts generally resort to legislative history to resolve ambiguities, not to create them”). Regardless, the legislative history of § 980(a)(2) is consistent with the Court’s textual reading of the statute.[44]
First he lays out in his opinion Sirius’ interpretation of the legislative history, which does in fact support its position, and then completely ignores both Sirius’ interpretation and the legislative history itself. Sirius argued that the 1982 revision of the California Civil Code was motivated by the preemption provisions of Section 301(c) of the Copyright Act, which, as of its implementation 1978, had made much of the former version § 980 obsolete. The revision was needed to clarify what state-level protections remained. The former version of § 980 was very broad and did not distinguish between different types of copyrightable property:
The author or proprietor of any composition in letters or art has an exclusive ownership in the representation or expression thereof as against all persons except one who originally and independently creates the same or a similar composition.[45]
This broad protection was necessary to protect unpublished works since the federal law did not offer such works any protection. But after the implementation of the new Copyright Act, federal law for the first time became available for unpublished works. So, according to Sirius, the California legislature rewrote its sweeping provision to narrow it to the areas of the law that it still had the authority to regulate. Therefore, it replaced the above subsection with subsection (a)(1), pertaining to works “not fixed in any tangible medium of expression” such as live theatre and concerts, and subsection (a)(2), pertaining to pre-72 sound recordings. This narrowing of state-regulated subject matter tracked the federal Copyright Act’s preemption provisions.[46] Accordingly, Sirius argued, the California legislature did not expand or limit ownership rights in sound recordings by its 1982 amendment. Rather, it excluded works of authorship in other mediums of expression from the law because it no longer had authority to regulate copyrights of those works. Sirius’ position is correct. The documents comprising the legislative history are replete with discussions that the bill was simply trying to conform California law to the pre-emption provisions of the federal law.[47] In fact, the Patent, Trademark, and Copyright Section of the California Bar, in endorsing the then new legislation, specifically found this to be the exclusive purpose of § 980(a).[48] But instead of seriously considering Sirius’ argument, which he summarizes in one paragraph in his opinion,[49] Judge Gutierrez fails to even address it. Instead, he makes another argument based on statutory construction:
As the California legislature clearly considered the Federal Copyright Act when drafting its 1982 amendment, § 980(a)(2)’s similarities to and differences from the federal law can further reveal the legislature’s intent regarding sound recording rights.[50]
Instead of actually looking at the legislative history, as Sirius did, Gutierrez embarks on a comparison of the actual language of the Act and its revision in an attempt to support his conclusion that California intended to protect public performance rights in sound recordings. He points out that the language in § 980(a)(2) that excludes from protection “one who independently makes or duplicates another sound recording” is almost identical to the wording in Section 114(b) of the Copyright Act.[51] Gutierrez then observes that Section 114 “contains other expressly stated limitations,” specifically, “[t]he exclusive rights of the owner of copyright in a sound recording … do not include any right of performance[.]”[52] He concludes that since the California legislature did not include this other limitation in § 980, it intended to protect public performance rights. This seems to the authors to be a huge stretch. As discussed above, for decades the recording industry has tried to achieve a public performance right in sound recordings, and for decades the broadcast community has been able to prevent this from happening. If the state legislature wanted to establish a public performance right for sound recordings, and thereby overturn many years of music industry practice and make broadcasters, bars, restaurants, nightclubs as well as other places that play records pay record companies for the first time in California history, as well as the history of the United States, it seems inconceivable that there would be no mention of the right of public performance in the legislative history or the law. Moreover, if Judge Gutierrez had honestly analyzed the legislative history, he would have to deal with this elephant in the room: the legislation passed without opposition.[53] It seems obvious to the authors that no one thought that the intent was to create a right that would stand music licensing on its head in California. If the statute clearly stated that pre-72 recordings had a right of public performance, it is unbelievable that almost every radio network, TV station, restaurant chain, hotel, motel and bar or their trade associations would not have loudly protested. Therefore, it seems almost irrational to impute the intent that Gutierrez found in the statute. In sum, the legislative history makes it clear that the 1982 revision of § 980(a) was only about conforming California law with the pre-emption provisions in the 1976 Copyright Act. If the legislature wanted to (i) announce the existence of a right no one in the entire entertainment business thought existed and (ii) change more than 100 years of business practice, it would have mentioned such a sweeping change in both the legislative history and the statute. If Judge Gutierrez did not ignore the legislative history, he clearly ignored the intent manifested in that history.

B. Judge McMahon’s Decisions

Judge Colleen McMahon of the Southern District of New York denied Sirius’ motion for summary judgment against Flo & Eddie’s complaint alleging that Sirius XM Radio committed common law copyright infringement by publicly performing pre-72 sound recordings of the Turtles. McMahon found that “general principles of common law copyright dictate that public performance rights in pre-72 sound recordings do exist.”[54] McMahon based this conclusion on a series of New York court decisions that afforded public performance rights to holders of common law copyrights in works such as plays[55] and films.[56] McMahon acknowledged that no particular case specifically upheld public performance rights in a sound recording. Indeed, she wrote that “the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century.”[57] But she discarded that history by going on to assert:
….acquiescence by participants in the recording industry in a status quo where recording artists and producers were not paid royalties while songwriters were does not show that they lacked an enforceable right under the common law—only that they failed to act on it.[58]
Judge McMahon concluded that New York common law protects public performance rights in all copyrightable works, including sound recordings. She ended her decision by writing:
New York has always protected public performance rights in works other than sound recordings that enjoy the protection of common law copyright. Sirius suggests no reason why New York—a state traditionally protective of performers and performance rights—would treat sound recordings differently.[59]
1. Sirius XM’s Motion for Reconsideration
Following its defeat for summary judgment, Sirius XM retained O’Melveny & Myers as its new legal counsel, and filed a motion for reconsideration of the district court’s decision. O’Melveny predicated its entire motion on one case, RCA Manufacturing Co. v. Whiteman,[60] decided by the Second Circuit in 1940. Although Whiteman did concern sound recordings and New York law on common law copyrights, neither Sirius’ prior attorneys nor the judge had addressed it at all in the prior proceeding. O’Melveny specifically depended on certain language written by none other than the legendary jurist, Learned Hand, who wrote the opinion for the three-man court. O’Melveny argued that the following statements from Hand’s opinion stood for the proposition that New York common law does not recognize public performance rights for sound recordings:
Copyright in any form, whether statutory or at common-law, is a monopoly; it consists only in the power to prevent others from reproducing the copyrighted work. W.B.O. Broadcasting Corporation has never invaded any such right of Whiteman; they have never copied his performances at all; they have merely used those copies which he and the RCA Manufacturing Company, Inc. made and distributed.[61]
Judge McMahon, however, was far from impressed with this argument and went as far as characterizing its reliance on Whiteman as “clear error” in her opinion denying the motion.[62] Whiteman concerned the public performance rights of Paul Whiteman, a well-known orchestra conductor, who made a series of sound recordings on the RCA label in the 1930s. The recordings were sold to the public, but the records each bore the legend, “Not Licensed for Radio Broadcast.” Despite the legend, WNEW, which was owned by W.B.O. Broadcasting, played some of Whiteman’s recordings without permission from Whiteman nor RCA.[63] RCA then sued W.B.O. for common law copyright infringement. Writing for a three-man court, Judge Hand found in favor of W.B.O. The basis for his decision was his determination that under New York common law the sale of the records constituted a “publication,” and that since publication divested works of common law copyright, RCA lost any copyright protection it might have had. In rejecting Sirius’ motion, Judge McMahon found that the statements by Judge Hand that it relied on were irrelevant to the holding in Whiteman. She also observed that even if that language had been relevant to the holding, subsequent New York State court decisions disagreed with the outcome in Whiteman and, in recognizing this development, the Second Circuit itself reversed the holding in Whiteman.[64] Judge McMahon pointed out that the holding in Whiteman concerned whether RCA lost its copyright in the recordings by “publishing” them by offering them for sale to the public. Although the Whiteman court answered in the affirmative, it did not decide exactly what rights may have been forfeited by publication, or whether the right of public performance was among them. So, the language on which Sirius relied was, at best, dicta. Judge McMahon found that Sirius’ interpretation of Hand’s language was a “stretch,” and that Sirius had also interpreted that language entirely out of context. She observed:
Indeed had Whiteman been predicated on the absence of a public performance right in sound recordings, the entire discussion of whether RCA’s common law rights were divested by publication would have been superfluous; RCA could not possibly have “lost” via publication a right that never existed in the first place.[65]
Finally, she found that even if Whiteman stood for the proposition that Sirius asserted, its motion would fail because “Whiteman has been overruled, so it stands for nothing at all.”[66]

III. Possible Consequences of the Decisions if Upheld on Appeal

The decisions in both New York and California have broader implications than just whether Sirius XM or other digital services must pay to perform pre-72 sound recordings. Neither decision includes any language that would limit protection of public performances rights in sound recordings to digital transmissions. Indeed both decisions were based on cases (McMahon) or a statute (Gutierrez) that pre-dated the digital era. So logically, there is no reason why they would not apply to all forms of public performance of sound recordings. The balance of this article deals with possible consequences of the decisions. But, for now, it is important to point out that if these decisions are upheld on appeal they would profoundly change the landscape of music licensing in the United States. For the first time in U.S. history, not only would radio and television stations have to pay for the performance of music recordings, but so would every bar, restaurant, nightclub, retail store, mall, amusement park, bowling alley and any other public establishment that plays music. Such a sweeping change could have dramatic consequences for the entire music industry, as set forth below.

A. Impact on Likelihood of Success of the RESPECT Act

On May 29, 2014, the Respecting Senior Performers as Essential Cultural Treasures Act, or the RESPECT Act,[67] was introduced in Congress. If passed, this legislation would require digital music services that transmit sound recordings under the statutory license provided under Section 114 of the Copyright Act, including Sirius and Pandora, to pay royalties for sound recordings fixed before February 15, 1972, in the same manner as they pay royalties for sound recordings protected by federal copyright that are fixed after such date.[68] As discussed above, sound recordings fixed before February 15, 1972, are currently governed by state laws and are not subject to federal copyright laws—specifically, Section 114 of the Copyright Act, which requires music services to pay a performance royalty for transmitting such recordings. The RESPECT Act would also specifically “[prohibit] an infringement action against a transmitting entity from being brought under a state law if the appropriate royalty is paid under this Act.”[69] Both Sirius and Pandora have opposed the bill. In fact, David Frear, the president of Sirius XM, testified before the U.S. House of Representatives that the proposed RESPECT Act would:
….further exacerbate the irrational disparity between digital services and terrestrial radio (which would remain exempt from paying performance royalties for any recordings), create a new payment obligation on a narrow set of licensees, and bestow a one-sided windfall on owners of recordings created 70 or 80 years ago, without advancing in the least the foundational purpose of copyright law: providing an incentive for the creation of new recordings.[70]
However, the cases currently being litigated against Sirius and Pandora could have a direct impact on the passage of the RESPECT Act by changing the position of Sirius and Pandora. Here’s why: The RESPECT Act, if passed, would affirm Sirius’ and Pandora’s rights to play pre-1972 sound recordings without the permission of the record companies. As long as they paid the statutory rate set up by the DMCA, neither the record companies nor any other owners of pre-1972 recordings could prohibit Sirius or Pandora from playing those records. In other words, the RESPECT Act could actually help Sirius and Pandora. Without it, the sound recording copyright owners could demand big upfront advances as well as greater royalties than Sirius and Pandora are currently paying for post-1972 recordings. The RESPECT Act was initially referred to the Judiciary Committee, which handles any possible amendments to the Copyright Act. That Committee passed the bill on to the Subcommittee on Courts, Intellectual Property, and the Internet for consideration. That Committee held hearings on copyright law reform, including the RESPECT Act, but took no further action in the last session of Congress. Therefore, the Act would have to be re-introduced in order to move forward. As of the submission of this article for publication, the legislation has not been re-introduced in Congress. Supporters of the Act such as SoundExchange, RIAA, NARIS and others have had no official comment; however, they may be in the process of evaluating their opportunity to get even more protection for sound recordings than offered by the RESPECT Act, which is limited to digital transmission of pre-72 recordings. (See Section C. below).

B. Possible Class Action Suits against Terrestrial Radio and Physical Venues That Play Pre-72 Sound Recordings

Another consequence of the decisions reported in this article is that either could serve as the legal basis of a class action lawsuit on behalf of copyright owners of recordings by legacy artists against terrestrial broadcasters and physical venues in New York and/or California. Judge McMahon practically invited such a suit in her opinion by writing:
….the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century. So does certain testimony cited by Sirius from record industry executives, artists and others, who argued vociferously before Congress that it was unfair for them to operate in an environment in which they were paid nothing when their sound recordings were publicly performed. That they were paid no royalties was a matter of statutory exemption under federal law; that they demanded no royalties under the common law when their product as ineligible for federal copyright protection is, in many ways, inexplicable.[71]
As discussed above, she went even further and specifically pointed out that the recording industry’s “acquiescence . . . in the status quo,” where sound recording copyright owners did not receive royalties from public performance of their works while owners of copyrights in musical compositions did, did not show “that they lacked an enforceable right under the common law—only that they failed to act on it.”[72] McMahon’s remarks encourage, and even seem to invite, owners of pre-72 sound recordings to “act” on the public performance rights she recognized that they have. A class action lawsuit representative of all owners of pre-1972 recordings would be a logical way of accepting that invitation.[73] Such a class action lawsuit could have a monumental impact on the landscape of music licensing by making radio and physical venues actually pay for the performance of sound recordings for the first time. But damages would be hard to prove. Since pre-1972 sound recordings are not subject to federal law, statutory damages, which provide for up to $150,000 per work for willful infringement, are not available, so the plaintiffs would have to show that the performance of their recordings actually caused them financial harm. No doubt, the defendants would argue that the public performance of the recordings promoted record sales, thus actually benefiting the plaintiffs financially. On the other hand, if the plaintiffs could convince a court to issue an injunction against any further performances of their recordings, they may well be able to extract a large financial settlement. Of course, such a suit may be premature until the Second Circuit has reviewed McMahon’s ruling. One thing is certain: Sirius is appealing the decision.[74] Of course, if Judge Gutierrez’s decision is upheld by the 9th Circuit, one could expect similar consequences. But, based on our analysis of the two decisions, as presented above, the authors believe McMahon’s decision has the greater likelihood of being affirmed.

C. Will Terrestrial Radio Finally Agree to Pay to Play Sound Recordings?

As discussed above, the recording industry has for many years lobbied Congress to make terrestrial radio stations pay the industry to play its records. The NAB has consistently thwarted those efforts. If either McMahon’s or Gutierrez’s decision is upheld on appeal, the recording industry, as represented by the RIAA, could use such a favorable decision as leverage to finally secure the NAB’s cooperation in passing legislation that would for the first time require radio stations to pay for performing sound recordings. That leverage would flow from the RIAA’s agreement to forego launching lawsuits against terrestrial radio stations in California and/or New York in return for the NAB’s cooperation. It should be noted that the nation’s largest radio network, Clear Channel, has already signaled its agreement to pay for performance of sound recordings on terrestrial radio. In 2013, the network made a deal with Big Machine, the record label for Taylor Swift, Tim McGraw and Rascal Flatts. Under that deal, Clear Channel agreed to pay for the terrestrial broadcast of Swift’s records in exchange for a lower royalty for the digital broadcast of her records on Clear Channel’s internet radio service, iHeartradio.[75] This deal recognized that although terrestrial radio stations presently pay nothing to play records, internet radio stations are paying far too much. The additional leverage of a favorable decision for Flo & Eddie at the appellate level could be precisely the additional leverage required to persuade the NAB to join Clear Channel in a compromise.


The victories of Flo & Eddie in federal courts in New York and California, if upheld on appeal, may have consequences far beyond whether Sirius and Pandora have to pay for performing pre-1972 sound recordings. In fact, they may not only directly lead to massive additional litigation on behalf of legacy artists, but also to a revolution in music licensing in the United States by resulting in terrestrial radio stations paying for the performance of any sound recording for the first time in the history of the U.S. If owners of pre-1972 sound recordings are found to have exclusive public performances rights, such a decision would implicate many other businesses that play sound recordings publicly besides Sirius or Pandora, including not only terrestrial radio, broadcast TV and cable, but also any other physical place that plays recorded music such as bars, restaurants, nightclubs, arenas, stadiums, amusement parks, department stores and malls. Indeed, if decisions favoring the plaintiffs in these cases are upheld on appeal, they may not only change the landscape of music licensing in the states in which they are decided, but could also form the basis for changing U.S. copyright law to finally protect public performance rights for all sound recordings.
* Steven R. Gordon (NYU Law 1981) is an entertainment attorney specializing in music, television, film and video. He also provides music and sample clearance services for producers and distributors of documentaries, feature films, TV shows, ad campaigns, concert videos, musical theater and stand-alone digital projects. He is the author of The Future of the Music Business (Hal Leonard 4th ed. 2015). Mr. Gordon can be reached at
** Anjana Puri is a young entertainment lawyer and associate of Mr. Gordon who works in all areas of his practice including independent films, reality television shows and music licensing. She received her JD from Benjamin N. Cardozo School of Law (2014) and received her B.A. in International Development Studies from UCLA (2010). She can be reached at
[1] Sound Recordings Act, Pub. L. No. 140, 85 Stat. 39 (1971).
[2] 17 U.S.C § 301(c).
[3] Sound Exchange is the non-profit collection agency set up to receive royalties from non-interactive digital radio services, including Sirius XM and Pandora, and to redistribute such royalties to sound recording owners and artists.
[4] This issue does not come up for interactive services such as Spotify or Rhapsody. As discussed later in this article, Pandora and Sirius are non-interactive and qualify for a compulsory license under the Digital Millennium Copyright Act. But Spotify and Rhapsody do not. They must therefore secure licenses from the owners the sound recordings, which are usually record companies. If Spotify and Rhapsody refused to pay for any pre-1972 recordings, the labels could deny permission to use any of their recordings.
[5] Glenn Peoples, SoundExchange Launches Campaign for Royalties on pre-1972 Recordings, Billboard (May 29, 2014),
[6] Sound Exchange collected total royalties in the amount of $656 million dollars in 2013 with operating administrative costs of 4.5%. SoundExchange Draft Annual Report for 2013 Provided Pursuant to 37 C.F.R. § 370.5(c), SoundExchange, 4 (Mar. 2013),
[7] Angus MacDonald, Pandora Is Now Over 50% SoundExchange’s Royalty Collections; Implications for Webcasting IV, Rain News (Apr. 10, 2014),
[8] The amount contributed by Sirius to SoundExchange is based on the fact that gross income for Sirius in 2013 was $2.15 billion, of which Sirius was required to pay 9% to SoundExchange. See Sirius XM Holdings Inc. Annual Financials, MarketWatch, (last visited Jan. 25, 2015) (providing Sirius’ gross revenue from 2009 to 2013); Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 78 Fed. Reg. 23,054 (Apr. 17, 2013) (to be codified at 37 C.F.R. pt. 382) (determining the rates and royalty payments Sirius must make to SoundExchange from 2013 to 2017).
[9] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 2:13-CV-05693, 2014 WL 4725382 (C.D. Cal. Sept. 22, 2014).
[10] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13 Civ. 5784 (CM), 2014 WL 6670201 (S.D.N.Y. Nov. 14, 2014).
[11] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13 Civ. 5784 (CM), 2014 WL 6670201 (S.D.N.Y. Dec. 12, 2014).
[12] Circular 1a: A Brief History Introduction, United States Copyright Office, (last visited Jan. 28, 2015).
[13] Landmarks Preservation Commission, Webster Hall and Annex, The Greenwich Village Society for Historic Preservation (Mar. 18, 2008),
[14] 47 U.S.C. § 317 (1960). Some historians believe that the payola laws were actually a racist reaction to labels that were encouraging radio stations to play “race” music by such African American artists as Chuck Berry, Little Richard and James Brown.
[15] Jeff Leeds, Universal Music Settles Big Payola Case, N.Y. Times, (May 12, 2006),
[16] Id.
[17] H. Comm. on the Judiciary, 89th Cong., Supplementary Reg.’s Rep. on the General Revision of the U.S. Copyright Law (Comm. Print 1965).
[18] Id. at 51.
[19] Id.
[20] Free Market Royalty Act, H.R. 3219, 113th Cong. (2013).
[21] Performing Rights Act, H.R. 4789, 111th Cong. (2007); Performing Rights Act, H.R. 848, 111th Cong. (2009).
[22] However, as discussed below, the record companies were successful in persuading Congress in 1995 to create an exclusive public performance right for digital transmissions of sound recordings.
[23] Sound Recording Act of 1971, Pub. L. No. 92–140, 85 Stat. 391 (1971).
[24] H. Comm. on the Judiciary, supra note 18, at 51–52.
[25] These periods were later extended 20 years each.
[26] 17 U.S.C. § 304(c) (2002).
[27] 17 U.S.C. § 301(c) (1998): “With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.”
[28] 17 U.S.C. § 106(6) (2002).
[29] Id.
[30] The only significant player in digital transmission of music was a little company based in Horshal Pennsylvania called Music Choice.
[31] Provisions relevant to public performance rights for digital transmission of sound recordings codified at codified at 17 U.S.C. §114(d)–(j) (2010).
[32] Although of Flo & Eddie’s suits are structured as class actions potentially representing any owners of pre-78 copyright owners although to date, class action status has not been certified in any of these cases. If the class is certified in any particular case, any other pre-1972 copyright owner will be able to opt-in to the class and will be entitled to their pro-rated share of damages in that particular case. The potential total damages would be based on Sirius and Pandora’s plays of all pre-1972 sound recordings.
[33] Capitol Records, LLC v. Sirius XM Radio Inc., No. BC-520981 (Cal. Supp. Ct., Sept. 11, 2013). The plaintiffs included Capitol Records LLC, Sony Music Entertainment, UMG Recordings Inc. and Warner Music Group Corp. as well as ABKCO Music & Records Inc.
[34] Capitol Records, LLC v. Pandora Media, Inc., No. 651195/2014 (Sup. Ct. N.Y. filed Apr. 17, 2014). This lawsuit included the same plaintiffs as the case against Sirius.
[35] SoundExchange has also brought a separate suit against Sirius XM, but the issue in that case is not whether Sirius XM should have to pay to play pre-1972 Sound Recordings. The royalties that Sirius XM must pay under the statutory license are set periodically in regulations prescribed by the federal Copyright Royalty Board (“CRB”). Under those regulations Sirius must pay SoundExchange a percentage of “Gross Revenues.” SoundExchange claims that starting in 2007 Sirius underpaid for the statutory license by devising its own definition of Gross Revenues—a definition that substantially reduced its royalty payments to SoundExchange. See Complaint, SoundExchange Inc v. Sirius XM Radio Inc., No. 1:13-cv-01290 (D.D.C. Aug. 26, 2003), available at
[36] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 2:13-CV-05693, 2014 WL 4725382 (C.D. Cal. Sept. 22, 2014).
[37] Id. at 9.
[38] Cal. Civ. Code § 980(a)(2) (West 2007).
[39] Flo & Eddie, Inc., 2014 WL 4725382 at *5 (quoting Esberg v. Union Oil Co., 28 Cal. 4th 262, 268 (2002) (citing People v. Lawrence, 24 Cal. 4th 219, 230 (2000)).
[40] Gutierrez buttressed his conclusion by pointing out that the legislature specifically excluded cover recordings (i.e., “independent fixation of other sounds” that imitate the original recording) from the bundle of exclusive rights enjoyed by owners of sound recordings. He reasoned if they intended to exclude public performance rights, they would have made that an additional exclusion.
[41] Most artists who enter into recording agreements with record companies do not retain the copyright in their sound recordings. Generally, recording agreements contain a “work for hire” clause under which the record label becomes the sole owner of the copyrights in each recording produced under the agreement.
[42] Flo & Eddie, Inc., 2014 WL 4725382 at *4 (quoting from Esberg v. Union Oil Co., 28 Cal. 4th 262, 268 (2002) (citing Preston v. State Bd. of Equalization, 25 Cal. 4th 197, 213 (2001)).
[43] Id. at *4 (quoting Esberg, 28 Cal. 4th at 268) (citing People v. Lawrence, 24 Cal. 4th 219, 230 (2000)).
[44] Id. at *6 (emphasis added).
[45] Cal. Civ. Code § 980 (1942) (current version at Cal. Civ. Code § 980 (West 2007)).
[46] See 17 U.S.C. § 301(a) (1998): “On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.”
[47] According to the legislative history the purpose of that amendment was only to “maintain rights and remedies” in sound recordings. See Assemb. Comm. on Judiciary, 1981–1982 Reg. Sess., Rep. on AB 3483 (Katz), at 1–2 (Ca. 1982) (emphasis added). The purpose of the amendment was also to make “technical and minor policy changes in the State copyright laws in order to conform with Federal Law.” See Cal. Dept. of Fin., 1981–1982 Reg. Sess., Enrolled Bill Rep. on AB 3483 (1982) (emphasis added).
[48] Letter from Exec. Comm. of the Patent, Trademark and Copyright Section, of the State of California, to Members, Board of Governor, of the State of California (October 27, 1981) (on file with authors).
[49] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. CV 13-5693 PSG, 2014 WL 4725382 at *6 (C.D. Cal. Sept. 22, 2014).
[50] Id. at *7 (emphasis added).
[51] Id. at *4.
[52] Id. at *7 (citing 17 U.S.C. § 114(a) (2010)).
[53] According the Legal Affairs department of the Governor’s Office: “There is no known opposition to the bill.” Legal Affairs Dep’t of the Governor’s Office, Enrolled Bill Rep. on AB 3483 (Katz) (Ca. Aug. 13, 1982). The same enrolled report confirms Sirius’ contention that the bill was intended to conform California law to the federal copyright law: “This bill, sponsored by the State Bar’s Patient [stet], Trademark and Copyright Section, amends California law to conform to the Federal Copyright Act of 1976.” Brief for Sirius XM Radio, Inc. at 14, Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 2:13-cv-05693, 2014 WL 4725382 (C.D. Cal. Sept. 22, 2014) No. 13-CV-5693 PSG (RZx), 2014 WL 5590867.
[54] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13-Civ.-5784 (CM), 2014 WL 6670201, at *15 (S.D.N.Y. Nov. 14, 2014).
[55] See Palmer v. De Witt, 47 N.Y. 532, 535–36, 540–41 (1872); Roberts v. Petrova, 213 N.Y.S. 434, 434–37 (Sup. Ct. 1925); French v. Maguire, 55 How. Pr. 471, 472–73, 479–80 (N.Y. Sup. Ct. 1878).
[56] See Brandon Films, Inc. v. Arjay Enter., Inc., 230 N.Y.S.2d 56, 57–58 (Sup. Ct. 1962); Roy Exp. Co. v. Columbia Broad. Sys., Inc., 672 F.2d 1095, 1097–99, 1101–04 (2d Cir. 1982) (applying New York law) (recognizing a public performance right in compilations of film clips).
[57] Flo & Eddie, Inc., 2014 WL 6670201 at *11.
[58] Id.
[59] Id. at *15.
[60] RCA Mfg. Co. v. Whiteman, 114 F.2d 86 (2d Cir. 1940).
[61] Id. at 2.
[62] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13 CIV. 5784 CM, 2014 WL 7178134, at *1 (S.D.N.Y. Dec. 12, 2014).
[63] RCA Mfg. Co. v. Whiteman, 28 F. Supp. 787 (S.D.N.Y. 1939).
[64] Flo & Eddie, No. 13 Civ. 5784(CM), 2014 WL 7178134, at *4 (S.D.N.Y. Dec. 12, 2013) (citing Capitol Records v. Mercury Records Corp., 221 F.2d 657, 663 (2d Cir. 1955)).
[65] Flo & Eddie, 2014 WL 7178134, at *3.
[66] Id. at *4.
[67] RESPECT Act, H.R. 4772, 113th Cong. (2014).
[68] In accordance with rate-setting pursuant to Section 114, Pandora currently pays SoundExchange a “per stream” royalty of .0013 cents for its free service and .0023 for streams on its premium service. That means it must pay the applicable fraction of a penny for the stream of every song. Sirius XM in contrast pays a percentage of its “gross income.” That percentage is currently 9.5%. However, Sirius XM excludes from its gross revenue an amount of money commensurate with the amount of pre-1972 recordings that it plays on its service, which it claims is approximately 15%. In fact, in a separate lawsuit filed against Sirius, SoundExchange claims that this deduction is unjustifiable. In its lawsuit, filed in Washington, D.C. federal court in August 2013, SoundExchange argued, “[r]ather than paying a percentage of Gross Revenues as that term is defined in the federal regulations, Sirius XM devised its own definition of Gross Revenues—a definition that substantially reduced its royalty payments to SoundExchange.” Eriq Gardner, SiriusXM Sued Over Alleged Underpayment of Royalties, The Hollywood Reporter (Aug. 27, 2013, 8:13 AM),
[69] Congressional Research Service, Summary: H.R.4772—113th Congress (2013–2014),, (last visited Feb. 1, 2015).
[70] Music Licensing Under Title 17: Hearing Before the Subcomm. on Courts, Intellectual Prop., and the Internet of the H. Comm. on the Judiciary, 113th Cong. 2 (2014) (written statement of David J. Frear, Chief Financial Officer, Sirius XM Holdings Inc.) (emphasis omitted).
[71] Flo & Eddie, Inc. v. Sirius XM Radio, Inc., No. 13 CIV. 5784 CM, 2014 WL 6670201, at *11 (S.D.N.Y. Nov. 14, 2014) (citations omitted) (emphasis added).
[72] Id.
[73] See Jonathan Stempel, Sirius XM is dealt new setback in Turtles copyright lawsuit, Reuters (Jan. 15, 2015, 6:54 PM),
[74] Lisa Shuchman, A Bad Precedent Trips Up O’Melveny in a Big IP Case, The American Lawyer (Jan. 5, 2015),
[75] Big Machine Label Group and Clear Channel Announce Groundbreaking Agreement, (Jun. 6, 2012),

Song on Wire: A Technical Analysis of ReDigi and the Pre-Owned Digital Media Marketplace

Song on Wire: A Technical Analysis of <em>ReDigi</em> and the Pre-Owned Digital Media Marketplace
By James Huguenin-Love* Download a PDF version of this article here.  


If you have ever impulsively purchased the latest trendy song on iTunes[1] and then, 34 repetitious plays later, wondered, “Did I really need that?”, your salvation may have stealthily surfaced in the middle of the night only to be shot down by the sheriff before it could see the sunrise.  Just like the time you purchased that Macarena CD in 1995 and then sold it on eBay five years later for a dollar, a new wave of businesses have attempted to create a marketplace for the resale of previously owned digital media files.  Many such businesses rely on taking a cut from your resale of that Psy album you purchased online while providing you a place to sell it at a discounted price. This creative business prowess deserves applause, but media companies are less than thrilled.  Their quarrel is obvious: As the number of secondhand sales increases, the number of new sales decreases. In some instances, media companies make nothing from the secondhand sales.  Accordingly, some media companies have turned to copyright law to protect their content (and their revenue) by claiming that digital resales violate their exclusive rights[2] as owners of the content.  If the first big lawsuit[3] on this issue is any indication, such copyright challenges may successfully block the development of a secondhand digital market.  Nonetheless, the issue is far from decided.  Given the narrow holding in Capitol Records v. ReDigi, Inc., there remain viable options for startups that want to revolutionize the way digital media is bought and sold. Moreover, the ReDigi court’s reluctance to engage the finer technical aspects of digital media, as compared to traditional media, may leave the door open for disagreement by other courts. Section I of this note summarizes the facts of the ReDigi court, including an analysis of the court’s decision on reproduction and distribution rights and ReDigi’s attempted fair use and first sale defenses. Section II looks in depth at copyright law’s reproduction right and why ReDigi was unsuccessful arguing that its business method did not infringe it.  Section III identifies the technical, device-level view of digital files so that the copyright holder’s reproduction right is not necessarily infringed if the files are properly transferred.  Section IV quickly visits the distribution right under this view.  Section V looks at the policy considerations and implications surrounding the ReDigi court’s decision.  Section VI reflects on the future outlook for previously owned digital media markets.

I. ReDigi Case

On March 30, 2013, the Southern District of New York decided a case in which Capitol Records, a major music publishing company, sued ReDigi, a startup company that allowed its users to resell previously owned music, for copyright infringement.[4]  In contrast to the historical practice of selling physical objects like compact discs or vinyl records, ReDigi resold digital media that their users had previously purchased and downloaded from iTunes.  The outcome of the case turned on whether ReDigi’s service involved the creation of a new – and unauthorized – reproduction of a pre-owned digital file. Despite reassurances from ReDigi that the digital file was eliminated from the subscriber’s computer during upload to an individualized storage space hosted by ReDigi (a subscriber’s “Cloud Locker”),[5] and hence resulted in a “migration” rather than a reproduction of the media file, the court held that a violation of Capitol Record’s reproduction and distribution rights occurred once the file was stored in the Cloud Locker.[6]

A. Facts

Among the facts established at trial was the process by which a digital resale occurs. A ReDigi subscriber downloads ReDigi’s Media Manager software, which analyzes the subscriber’s computer to create a list of music files available for resale.[7]  Only files purchased via iTunes or from another ReDigi user are eligible for resale.[8]  This was a legal decision took to ensure the subscriber actually owned — instead of merely licensed — the music file so that the first sale doctrine[9] applied to all subsequent transfers.[10]  After the initial analysis, Media Manager continues to run on the subscriber’s computer in order to flag any attempts by the subscriber to copy or transfer the file to a remote device.  According to ReDigi CEO John Ossemacher, the Media Manager software contains a “really cool forensic engine that . . . determines where the song came from, whether you’re the lawful owner, whether it was moved from one computer to another and so on.”[11]  If a copy is detected, ReDigi asks the subscriber to delete it or face suspension of his account.[12] The subscriber can choose to upload any authorized file to his Cloud Locker.  The upload process is the crux of the lawsuit.  While ReDigi asserts that the upload is a migration of the original, purchased iTunes file, Capitol Records insists that any upload necessarily involves copying the file.[13]  Regardless of how one classifies the movement, no file is retained on the subscriber’s computer.[14]  Thereafter, the subscriber can choose to use the Cloud Locker to stream the music, sell the music, or transfer it back to his computer,[15] but access to the file is terminated once the subscriber sells the music to another subscriber.[16]  No money is transferred between the subscribers; instead, subscribers accumulate credits from ReDigi as compensation for the sale.  Subscribers may also purchase credits directly.  Those credits can then be used to buy additional music, but cannot be exchanged for money.[17]  Individual songs are priced between 59–79¢, which is split 20/20/60 between the seller (in the form of credits), the artist, and ReDigi, respectively.[18]

B. Reproduction Right

Artists and their record labels receive a copyright in the sound recording of their music.[19]  Sound recordings are works that result from fixation in a material object called a phonorecord, which include disks and tapes.[20]  The copyright owner has the exclusive right “to reproduce the copyrighted work in copies or phonorecords.”[21] The Southern District of New York recognized the unprecedented nature of the ReDigi case from the very beginning.  Unlike previous copyright infringement cases that involved duplication of digital files, the issue in this case was “whether the unauthorized transfer of a digital music file over the Internet — where only one file exists before and after the transfer — constitutes reproduction within the meaning of the Copyright Act.”[22] The court reasoned that the copyrighted sound recording constituted a reproduction of the phonorecord once fixed in the subscriber’s Cloud Locker after upload.  Thus, the ReDigi server — a collection of hard drives in Arizona that contained the same sound recording — represented the infringing, reproduced phonorecord.  The court did not care whether ReDigi characterize it as a transfer, migration, or pilgrimage because “[i]t is simply impossible that the same ‘material object’ can be transferred over the Internet.”[23]  The fact that the file was deleted on the subscriber’s computer was irrelevant.  Even deletion of the file located in the subscriber’s Cloud Locker would be no saving grace.  “Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right.”[24]

C. Distribution Right

The Copyright Act also provides the copyright owner the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”[25]  ReDigi did not contest that it was distributing the sound recordings.[26]  Instead, it relied on defenses under the fair use and first sale sections of the Act[27] to argue it was within its legal rights to distribute the previously owned music.

D. Fair Use and First Sale Defenses

The court promptly dismissed ReDigi’s fair use defense, weighing all four factors[28] in the analysis against ReDigi.[29]  The court was more deliberate in discarding the first sale defense since, at first glance, reselling used digital music seems akin to reselling used compact discs and vinyl records.  However, in contrast to physical sales, the court found it significant that the phonorecord, which was resold and redistributed by ReDigi, had already been unlawfully reproduced, as analyzed above.  Since the reproduction was not “lawfully made under this title,” as the first sale defense requires, the defense could provide no shield.[30]  Whereas the original phonorecord created in the subscriber’s computer hard drive would retain the benefit of the first sale defense,[31] under the court’s interpretation, that file had been deleted, and with it went the first sale defense.  Thus, the infringement of the distribution right in this case was directly tied to the court’s decision about whether an illegal reproduction occurred in the first place. The court found security in its decision due, in large part, to the Copyright Office’s report on the Digital Millennium Copyright Act, which explained why the first sale doctrine should not be extended to digital works.  The Copyright Office justified its reasoning for limiting the first sale doctrine by noting both the relative difficulty with which physical copies are transported as compared to digital copies, which tends to keep the resale market in check, as well as the fact that physical copies degrade over time, making them less desirable than new copies.[32]  On the other hand, “[d]igital information does not degrade, and can be reproduced perfectly on a recipient’s computer.  The ‘used’ copy is just as desirable as (in fact, is indistinguishable from) a new copy of the same work.”[33] The court’s proposition raises an interesting philosophical question: If digital copies are “indistinguishable,” and there is no other phonorecord with which to compare, how can the court know that the phonorecord stored on ReDigi’s server is a new phonorecord rather than the original?  This question and others will be explored in later sections.

II. Reproduction Right Pertaining to Previously Owned Digital Media

Once ReDigi lost its argument that uploading the digital music files to its Cloud Locker service was not an infringement of the copyright owner’s reproduction rights, its remaining arguments and defenses fell along with it.[34]  Thus, the critical aspect to the legality of digital media resale seems to be avoiding infringement of reproduction rights.

A. Argument Made by ReDigi

From the very start, ReDigi put itself behind the eight ball.  In one of its first memorandums to the court opposing Capitol Records’ motion for a preliminary injunction, ReDigi repeatedly, and unfortunately, referred to uploaded music files as “copies” of the music file on the subscriber’s computer.[35]  After Capitol Records exposed this vulnerability,[36]  ReDigi was left trying to explain how the word “copy” was used in its colloquial sense rather than as a term meant to describe reproduction in the legal sense.[37] ReDigi’s unfortunate characterization of its uploading process is understandable given the way modern technology has altered the meaning of several common words such as “chat” and “cookie.”  The court tried to allay fears that it based its holding on semantics by explaining that even if no copying takes place, “the fact that a file has moved from one material object—the user’s computer — to another — the ReDigi server — means that a reproduction has occurred.”[38]  If the court had accepted the theory that the file was moved, instead of copied, it would need an additional reason to believe that a new phonorecord had been created, as required to infringe the owner’s exclusive reproduction rights.  In that sense, one cannot help but feel that the opinion was written with a certain degree of skepticism towards ReDigi’s recasting of copying as migration that pervades much of the analysis.
1. Was ReDigi’s Argument Dismissed Too Casually?
No matter the operating system — Windows, Mac OS X, Linux, or Unix — all have distinct commands for “copying” as opposed to “moving” a file.  When “copying,” there are always at least two files in existence after command execution, but when “moving,” only one file exists both before and after command execution.[39]  Thus, modern technology parlance would suggest that ReDigi is well within its bounds to call its proprietary upload process a move or migration. ReDigi attempted to use this differentiation to analogize its proprietary technology to the defendant’s action in C. M. Paula Co. v. Logan, where the defendant transferred — one could say moved — copyrighted prints from the plaintiff’s greeting cards and notepads onto ceramic plaques.[40]  The images were chemically stripped from the paper they were printed on, temporarily supported by a resin emulsion, before being adhered to the ceramic plaques.[41]  The court held that the affixation of the image on the ceramic plaque was not a reproduction or duplication of the print because there was no copying involved.[42]  Key in its decision was the fact that the defendant legally purchased another print from the plaintiff every time the defendant wanted to make another ceramic plaque.  The court also held that the first sale doctrine protected the defendant from infringing the plaintiff’s “exclusive right to vend,” otherwise known as the right to distribute.[43]  “[T]he policy favoring a copyright monopoly for authors gives way to the policy opposing restraints of trade and to restraints on alienation.”[44] Since each transferred print was fixed in the resin emulsion before finally being fixed on a ceramic plaque, both of which meet the definition of new material objects, the ReDigi court could have argued that the defendant in C. M. Paula actually unlawfully reproduced each copyrighted print twice.  But the court, rightfully, did not.  Instead, it considered the holding in C. M. Paula to be based on “questionable merits” and distinguished ReDigi’s service from the chemical stripping that occurred in C. M. Paula.[45]  With chemical stripping, “the copyrighted print, or material object, was lifted from the greeting card and transferred in toto to the ceramic tile; no new material object was created.”[46]  In contrast, ReDigi’s service “creates a new material object when a digital music file is either uploaded to or downloaded from the Cloud Locker.”[47] The distinction presented by the court looks quite natural at first glance.  However, this distinction seems to be contrived through clever wordplay in the name of convenience.  For, when citing Nimmer on Copyright earlier, the court correctly wrote, “the reproduction right is the exclusive right to embody, and to prevent others from embodying, the copyrighted work (or sound recording) in a new material object (or phonorecord).”[48]  But when analyzing C. M. Paula a page later, the court loosely interchanges a “copyrighted work” with a “material object,” saying that one and the same were lifted from the card.[49]  However, the print was transferred separately of the material object; the card (which was the material object in which the print was fixed) actually peeled away.[50]  When the court’s equating of the copyrighted print to a material object is juxtaposed with its explanation of the reproduction right as preventing someone from embodying a copyrighted work in a material object, something is amiss.  It is difficult to believe that the print is a material object itself which is also embodied in another material object: the card, resin, or a ceramic tile. Without the card, resin, or ceramic tile, it strains logic to imagine an audience perceiving the print (i.e., work) when the material object is the tangible thing that allows the work to be perceived, reproduced, or otherwise communicated.[51] If the court is steadfast in its equating the copyrighted print to a material object, in disregard of the Copyright Act’s plain language,[52] then ReDigi should also be allowed to equate the copyrighted sound recording (i.e., work) to a material object as well.  In essence, ReDigi would be stripping the sound recording (print) from the subscriber’s hard drive (paper) and transferring it “in toto” to the Cloud Locker (ceramic tile) without reproduction just as in C. M. Paula.  No new material object could be said to have been created because, like the ceramic tile, the Cloud Locker already existed as a material object and another material object (i.e., the sound recording) would simply be placed in the Cloud Locker.  One could even consider the transitory nature of the sound recording as it passes through network equipment over the Internet analogous to the transitory state of the print in the resin emulsion. The court would probably insist that its “copyrighted print, or material object” language was being misread.  But in order to do this and still conclude, consistently with the C. M. Paula court, that no new material object was created, it would have to contend that the copyrighted print was still fixed in the paper when it was stripped from the paper.  That contention runs counter to the stripping process in C. M. Paula that was described as “involv[ing] the use of acrylic resin . . . as a transfer medium to strip the printed indicia from the original surface on which it is printed. . . .”[53]  Thus, C. M. Paula actually comports quite nicely with a favorable result for ReDigi. Despite the aforementioned analysis, the ReDigi court used C. M. Paula against ReDigi.  If the court felt persuaded to find against ReDigi for policy reasons external to the law, the best option for the court may have been just to declare that C. M. Paula was not precedent in the Southern District of New York and to distinguish its decision as an exercise of independent judgment in light of different facts and different time periods.  Indeed, the court would have been perfectly free to do this, especially since it could have noted that the court in C. M. Paula (decided in 1973) was completely unaware of how technology has made copyright infringement so easy and pervasive. For this reason, the court’s decision could also be understood as a response to the ease and increase in copyright infringement resulting from technological advances.

B. File Sharing Zeitgeist

A palpable undercurrent of paranoia regarding illegal file sharing runs throughout the ReDigi decision, despite no explicit policy argument alluding to the practice.  For example, the court explicitly relies on previous cases concerning peer-to-peer file sharing systems to provide analytical guidance.  Specifically, the court uses London-Sire Records, Inc. v. Doe 1 for the proposition that an electronic download of a music file is a reproduction of the sound recording when magnetically encoded on the downloader’s hard drive as a phonorecord.[54]  But London-Sire involved anonymous users of peer-to-peer file sharing software that were copying files from other users’ computers.  In each instance, a copy of the file simultaneously existed on the downloader’s computer, while the original was retained by the supplier.  That court stated, “[plaintiffs] note, correctly, that an electronic download does not divest the sending computer of its file . . . .”[55]  It continued, “because the data at point A[, the source,] is not necessarily destroyed by the process of reading it, the person at point A might retain ownership over the original . . . .”[56]  Thus, the facts on which the London-Sire court based its understanding of the reproduction and distribution rights differ substantially from the facts in ReDigi.  Whereas the alleged infringers in London-Sire retained a copy of the music file that was “not necessarily destroyed,” in ReDigi, the original file is necessarily moved from source to destination without retention, as designed and implemented by ReDigi’s Media Manager software.[57] However, the court ignored this fairly significant difference.  Instead, it extrapolated from London-Sire the belief that the “distinction is immaterial under the plain language of the Copyright Act.  Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right.”[58]  The only additional form of support for its opinion is a reference to the dictionary definition of “reproduction,” which means, inter alia, “to produce again” and not, as the court says, “to produce again while the original exists.”[59]  While the court makes a well-founded point, it is generally difficult to know whether an object has been reproduced unless the original (i.e., source) still exists.[60] Fortunately, we have more evidence to resolve the specific facts in this case.  The Media Manager software holds the key to whether the original was reproduced or simply moved.  Unfortunately, all of the technical code is protected as a trade secret.[61]  Nevertheless, the technical aspects of file storage and transfer will be analyzed in Section IV, which will shed light on how files are fixed on hard drives and alleviate concerns of rampant file sharing abuse. Before analyzing the technical details of file storage and transfer, it is important to recognize that the court was in a difficult situation.  ReDigi presented a novel question that had never been litigated before,[62] and there was limited legal doctrine to apply to the facts of this case.  So it is perhaps natural that the morally opprobrious shadow illegal file sharing casts would also influence the court.  It may have been tough for the court to conceptualize ReDigi’s process when, traditionally, technology has made it easier to copy files for redundancy, archival, and distribution purposes, sometimes illegally.  Not that the situation cannot be conceptualized; without the potential to resell files, ReDigi subscribers are simply migrating their files to the trashcan for deletion.  Obviously, this is absurd. In a way, the court may be thinking that it is being hoodwinked; that ReDigi, with a wink and a nod, is telling the world that it is moving the file when in reality it is copying.  With these reservations, it is difficult to intuit that ReDigi is more like eBay than it is like the original Napster.[63]  By exploring the technical side of file storage and transfer, the distinction becomes more palatable.

III. Storing Digital Files on a Hard Drive Is Fixation Capable of Being Moved Without Being Reproduced

Throughout its briefing of the case, ReDigi stressed the importance of understanding its technology to understanding its defense that it was not reproducing digital music files.  Even while dealing with the sort of generalities inherent in analyses of proprietary processes, an argument can still be made that ReDigi is not infringing the copyright owner’s reproduction right without knowing the details of the software.

A. Fixation of Sounds in Physical Structures

Before the advent of the Internet, and certainly before anyone had heard of an “MP3” file or compact disc, music was (and still is) recorded on vinyl records.  Records are made by physically pressing grooves into a vinyl disc.  As seen in Figure 1a, a record player’s needle follows grooves in a disc as the disc spins. The needle moves within the grooves in accordance with their vertical and lateral undulations.  That mechanical movement is then converted into electronic signals by electronic circuitry.  These signals are ultimately amplified and then converted back into mechanical movements by the speaker, which produces sound waves that travel to the human ear.[64] Although sound quality improved drastically with compact disc (CD) technology, the process of storing information on CDs remained very similar to that used with vinyl discs.  On CDs, audio waveforms from vocals and musical instruments are converted into binary digits through a process of sampling (or digitizing) the waveform at intervals known as the sampling period.[65]  Each sample of the audio waveform creates a series of binary digits based on the waveforms’ amplitudes.[66]  Instead of stamping grooves into vinyl, CDs are stamped with pits to differentiate between a “1” bit and a “0” bit of the digitized sequence.[67]  Figure 1b shows those pits as viewed from the topside of the stamped layer.[68]  A polycarbonate plastic encasing surrounds the CDs stamped layer for protection.[69]  As the disc spins, a laser (rather than a needle) changes its radial distance from the center of the disc to read the particular physical changes in the CD.[70]  When the laser hits a flat part of the CD, it reflects directly into a detector.[71]  When the laser hits a pit, it scatters, reducing the intensity of the beam at the detector. [72]  The difference in the detected intensity stemming from the physical changes of the CD creates the bit pattern read by the CD drive.[73]  Because there is no conversion from mechanical movement to electronic signals, the noise levels are reduced and the sound quality remains clear. Apparent from this description of vinyl records and CDs is the fact that the sound recordings are physically sculpted into such phonorecords.  Understood in this manner, the fixation that occurs in vinyl records and CDs epitomizes the prototypical fixation of phonorecords contemplated by the House of Representatives when they passed the Copyright Act.[74] This conception of fixation also helps to explain the court’s adherence to the proposition that “it is the creation of a new material object and not an additional material object that defines the reproduction right.”[75]  Because grooves and pits are physically sculpted as material objects into the recording layer of the disc, any new material object fixed with the same sound recording will necessarily be an additional material object.  That is, the material fixation of the embedded sculpture is intimately tied to the recording layer.  In this scenario, it is impossible to imagine moving the material object (i.e., the grooves or pits as a collection) without moving the recording layer of the vinyl disc or the CD as well.  However, the notion of fixation changes when vinyl discs and CDs are replaced by hard drives composed of electric and magnetic fields.
Huguenin Figure 1(a) Vinyl Record
Figure 1a : Magnified images of a vinyl record[76]
Huguenin Figure 1(b) Compact Disk
Figure 1b : Magnified images of a CD[77]

B. Fixation of Sounds in Transferable Material Objects

When a ReDigi subscriber uploads his iTunes music from his personal computer to ReDigi’s cloud service, he moves that music from a magnetic hard drive or solid-state drive to another magnetic hard drive or solid-state drive, both of which could be used as the actual storage mechanism of the server.  But magnetic hard drives and solid-state drives are fundamentally different than vinyl records and CDs in how information is stored.  Whereas it makes sense to describe information as fixed grooves and pits in a vinyl record or CD, that description is inapposite when describing information storage in magnetic hard drives and solid-state drives.  This is because information is stored as electrical and magnetic signals (i.e., fields), which can actually be moved from one drive to another via electromagnetic waves and electrical lines that compose the current infrastructure of the Internet.[78]  So although an electromagnetic representation of grooves and pits can be transferred over the Internet, the actual grooves and pits cannot be transferred over the Internet.[79] Figure 2a shows a schematic drawing of a magnetic hard drive, specifically a single hard drive platter that stores digital information.  Magnetic hard drives typically contain multiple, stacked platters, which are rigid, circular discs made from aluminum or glass.[80]  Platters are divided into circular tracks, which can be further subdivided into sectors.  Each sector contains a fixed number of storage layer domains, which are the physical implementations of data bits (0s or 1s).[81]  When writing data, the write head element passes over the domains and impresses magnetic fields into the domains.  During impression, the write head element creates a strong magnetic field at its tip (represented by the red arrows) to align the magnetic material in that domain in the same direction.  The magnetic field is stored in one of two directions (represented by the black arrows).[82] In order to read the data, the read head element passes over the domains.  Instead of impressing the magnetic field like the write head element, it detects the direction of the magnetic field in each domain.  If the magnetic field is constant from one domain to the next, no electrical signal is induced in the read head element, which interprets the data as a 0 bit.  If the magnetic field changes from one domain to the next, an electrical signal is induced in the read head element, which interprets the data as a 1 bit.[83] ReDigi’s servers likely contain magnetic hard drives to store the iTunes music files because of their massive storage capabilities.  Many of ReDigi’s subscribers likely have magnetic hard drives in their personal computers as well.  However, due to their rapidly decreasing prices, non-moving parts, and superior read and write speeds,[84] some ReDigi servers and ReDigi subscribers may have solid-state drives.  Despite the differences between magnetic and solid-state drives, data in each is typically stored in a binary fashion. Figure 2b shows a schematic drawing of a simplified solid-state hard drive.  The drawing shows a memory unit capable of storing 32 bits of information.  One bit of information is stored in each of the transistors, which are arranged into eight rows and four columns.  Each bit is chosen for storing information by applying appropriate voltages to its corresponding word line and bit line.[85]  The right side of Figure 2b shows an enlarged diagram of the transistor corresponding to word line six and bit line three.  The transistor is composed of a silicon base and two other silicon layers (the gates) separated by two insulating layers (blue layers).  Each transistor operates in two states: an “on” state (1 bit), and an “off” state (0 bit).  The “off” state is programmed by applying a positive voltage to the control gate to attract a negative electrical charge (in the form of numerous electrons) into the floating gate.  The transistor is erased to the “on” state when the electrical charge is removed from the floating gate by applying a negative potential to the control gate.[86]
Huguenin Figure 2(a) Magnetic Hard Drive
Figure 2a : Diagram of Digital Media Stored on a Magnetic Hard Drive
Huguenin Figure 2(b) Solid State Drive
Figure 2b : Digital Media Stored on a Solid State Drive
  The electrical charge stored in the floating gate directly effects whether current will flow through the silicon base layer.  In order to read the data stored in the transistor, the current is measured.  If current flow is detected, a 1 bit is read.  If current flow is not detected, a 0 bit is read.[87] Although it is tempting to define these electrical charges and magnetic fields as fixed (in the legal copyright sense) in the drive, they are perhaps better described as contained or stored at a waypoint.  This is because they are not intimately tied to the recording layer like grooves and pits, but instead are merely stored in an electronic transistor or a magnetic domain until they are transferred to a new storage unit.[88]  Furthermore, because grooves and pits are physically fixed in the recording layer, they cannot be extracted and transferred in media that carry only electrical and magnetic signals. The key point of this analysis is that when digital files are transferred from magnetic hard drives and, certainly, solid-state drives, no new material object is created because the electrical charge and magnetic fields that constitute the data are actually transferred from waypoint to waypoint.  A more insightful way to conceptualize such data storage is to view the electrical charge and magnetic fields as material objects themselves, rather than assigning that role to the magnetic storage layer or transistor.  In this schemata, every time data is transferred, the material object is transferred, which further implies that no new material object is created.  This conceptualization posits that, upon transfer, the electrical charge or magnetic field is released from the waypoint; otherwise, the data would necessarily be copied into a new material object.  And, just as the foregoing analysis indicated that electrical charge is easily stored and removed from the floating gate, magnetic fields can be stored and removed from their domains.  While it may be unlikely that the exact material object in the legal sense (electron/magnetic field) is transferred from one waypoint to another, one cannot definitively say they are not transferred because they all appear identical to human observers.[89]  This shows how digital files can be differentiated from physical grooves and pits, since it is never possible for a physical, sculpture-like material object to be transferred along a medium conducive to electromagnetic signals. Perhaps an analogy would help solidify the concept.  Consider a series of five buckets at point A, of which the first three contain water and the last two do not.  The five buckets at point A can be imagined to represent five bits in a “11100” sequence.  One way to transfer that information is to carry the five buckets, with their contents, to point B.  However, if the only way to transfer the bit sequence from point A to point B is copper tubing, carrying the buckets is no longer feasible.  Nonetheless, the information can still be transferred to point B using the copper tubing, a prearranged timing protocol to know when to expect the water (if there is any) from each bucket, and five receiving buckets available at point B.  Only the water, not the buckets, is essential to the communication because the water, not the bucket, is indicative of the bit sequence.[90]  The water (electric charges and fields) is the material object in which the information (sound recording) is fixed, while the bucket (magnetic hard drive or solid state drive) is simply a storage container. When discussing vinyl records and CDs, however, there is no water.  The shape of the bucket is the data-carrying object in this alternate universe.  Although the user at point A could send color-coded water through the copper tubing to signify whether the bucket shape is, for example, cylindrical or rectangular, if the person at point B uses that information to create cylindrical and rectangular buckets of their own, we know they must be new material objects because the buckets cannot physically pass through the copper tubing. It is this conceptual difference the court was unwilling to recognize in its ReDigi opinion.  Instead of discussing the physics of storing digital information in magnetic and solid-state drives, the court chose to make a conclusory declaration that “[i]t is simply impossible that the same ‘material object’ can be transferred over the Internet.”[91]  Axiomatically, the court stated, “[t]his understanding is, of course, confirmed by the laws of physics.”[92]  However, if courts are going to premise infringement of reproduction rights on the creation of a new material object, it is critical that they recognize what fits that category.  With today’s modern technology, the line differentiating material objects from containers storing such objects has become clearer.  Though the two are essentially indistinguishable with vinyl records and CDs, they can be conceptually separated in modern mass storage devices.

IV. Distribution Right Pertaining to Previously Owned Digital Media

Even if ReDigi did not infringe the copyright owner’s reproduction right, the company openly admitted to distributing the iTunes music files from its website.[93]  Without a proper defense, this constitutes direct infringement of the copyright owner’s distribution right under 17 U.S.C. § 106(3).  Accordingly, ReDigi asserted the first sale defense, which entitles “the owner of a particular copy or phonorecord lawfully made under this title, . . . without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”[94]  However, the court rebuffed ReDigi’s attempt to use the first sale defense because “as an unlawful reproduction, a digital music file sold on ReDigi is not ‘lawfully made under this title.’”[95]  Obviously, this conclusion is dependent upon the court’s finding that the phonorecord uploaded to the ReDigi server is a new reproduction of a phonorecord.  And because the court believes it is “impossible for the user to sell her ‘particular’ phonorecord on ReDigi, the first sale statute cannot provide a defense.”[96] But, as the previous section on reproduction rights attests, the court likely cannot—and does not even attempt to—substantiate its statement that it is impossible for a subscriber’s particular digital phonorecord to be transferred to the ReDigi server.  This is because the media used to send electromagnetic signals across the Internet do not transfer the sculpted grooves of vinyl records or pits of CDs, but rather transfer the electrical charge and magnetic fields that are the stored material of today’s digital files.  Thus, the court’s conclusion that “[t]he first sale defense does not cover [transferring digital files] any more than it covered the sale of cassette recordings of vinyl records in a bygone era” is inappropriate in this context.[97] As techniques and technology improve to more simply and efficiently transfer data, analogies to anachronistic practices become obsolete as well.  A cassette recording of a vinyl record necessarily entails two phonorecords. Regardless of whether the cassette tape or vinyl record was made first, the fact that another phonorecord was produced implies that a new phonorecord was produced.  Because the new phonorecord (i.e., the cassette recording in the court’s analogy) is unlawfully reproduced, the first sale defense is inapplicable.  In contrast, material objects that store digital phonorecords (e.g., electrons) are completely transferrable and thus no new material object need be created.[98]  Once one recognizes that a new phonorecord is not necessarily being created, the conclusion that the first sale defense is inapplicable to ReDigi is called into question.[99]

V. Policy Considerations

Despite ReDigi’s lack of success in the Southern District of New York, one piece of good news for consumers is that, in the same opinion, the court declared moving digital files around one’s computer for personal reasons, like defragmentation or transferring digital files from an old computer to a new computer, did not constitute an illegal reproduction of those files.[100]  Unlike ReDigi’s service, which “creates a new material object,” the court claims that “relocating files between directories and defragmenting” (which also creates a new material object under the court’s interpretation of a reproduction) are “almost certainly protected under other doctrines or defenses.”[101]  However, it does not state upon which legal doctrine this declaration is premised.  In fact, upon further review, it is not clear whether these personal file reorganization actions would qualify as either fair use or de minimis, the two most germane defenses.

A. Less Law, More Feel?

Fair use depends on
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.[102]
For these illustrative file reorganization actions, the second and third factors certainly weigh against granting the actions a fair use defense because digital media is commercial in nature and the entire work is reproduced.  Factor one is less definitive.  While the actions are not for profit, they are not educational either.  Nor do they qualify under any of the specifically mentioned fair use purposes of “criticism, comment, news reporting, teaching . . . scholarship, or research . . . .”[103]  The otherwise helpful transformative use inquiry[104] fails to provide guidance here, since file equivalency is desired. Factor four is also less definitive, but the fact that a copyright holder’s revenue would increase if consumers were required to repurchase music that moved from one directory to another, or from one computer to another, suggests that the statutory text would weigh against these actions.[105]  So, even though the first and fourth factors (which tend to predict the outcome of the fair use defense more than the second and third factors)[106] don’t definitively weight against fair use, it is no stretch of the imagination to believe that such actions may not “almost certainly [be] protected under [fair use].”[107] Even more fickle in outcome is the de minimis defense.  While the court could rightfully declare that moving files between directories or while defragmenting are de minimis reproductions, it is not clear why moving files to the Cloud would not then also be de minimis.  In any case, the de minimis defense is usually limited to minimal and insignificant copying or displaying[108], neither of which applies under these actions.  The court in ReDigi may be relying more on Capitol’s concession[109] than on any legal defense asserted by ReDigi, given its perfunctory dismissal of the irrational outcomes that its holding could produce for the average computer user reorganizing files. So what is really happening here?  The answer probably has more to do with a policy of common sense than it does with the law.  We all, including judges and copyright holders themselves, organize digital media on our computers or transfer digital media to our new computers.[110]  In both actions, one file remains accessible to the user while the original instance is forgotten.  Few people would welcome the thought of an infringement lawsuit under these circumstances. The crux must be then the commercial nature of ReDigi’s transactions.  The court has to be worried that the copyright holder loses potential revenue that it could have earned if the different user had purchased the right to reproduce a new copy.  But, since moving digital media from one location to another on one’s personal computer or transferring files from an old computer to a new computer is also a reproduction, it would only seem consistent to be worried that the copyright holder is also losing potential revenue that it could have earned if the same user was required to purchase the right to reproduce a new copy when performing these personal file reorganization actions as well. Coherently differentiating ReDigi’s plight from the situations that raise no ire from the court is not an easy task.  Perhaps the policy rationale that the court manifested is that, in very close calls, err on the side of the copyright holder.

B. Global Policy Divergence

If the United States is leaning one way on the digital resale issue, the European Union appears to be leaning the other way.  In a factual scenario much like that in ReDigi, the European Union’s Court of Justice (ECJ) held that a resold user license to computer software permitted the secondary market purchaser to download (read: “reproduce”) computer software onto the purchaser’s computer.[111]  UsedSoft resold “used,” unlimited period licenses to Oracle software that UsedSoft purchased from original users.  The ECJ stated that the first sale of the computer software enabled the copyright holder to obtain appropriate remuneration for exhaustion of the distribution right to the computer software.[112]  It acknowledged that the reproduction right was not exhausted by the first sale but noted that any reproduction necessary for the use of the computer program by a lawful user is authorized.[113]  Such necessary reproduction would entail the secondary market producer to download another copy of the computer software.  Moreover, the reproduction “may not be prohibited by contract.”[114]  However, the ECJ sensibly stated that the original user must make his or her own copy unusable at the time of resale or the original user would infringe the copyright holder’s right of reproduction.[115] Although the UsedSoft decision was limited to computer software, it is not difficult to imagine its extension to digital media.  If this occurs, there will be a divergence in how the Unites States and the European Union handle reselling digital content in the secondary market.  While this could lead to different price points in the two jurisdictions, a more likely result is the proliferation of restrictive “terms of use” agreements.  Since the unlimited period of the license was critical to the ECJ’s judgment in UsedSoft, it is only a matter of time before all digital media purchases end on resell.  If purchases are defined as licenses[116] rather than outright sales, they can be terminated due to certain unfavorable actions.

C. Economic Policy

The digital world seems to be moving to a license-based purgatory in order to maintain more control over copyrighted works.  Licensed users are restricted from using the first sale doctrine as a defense to distributing the digital media and therefore every user is forced into licensing from the copyright owner.  In theory, this seems like the optimal way to generate the most revenue.  But a pre-owned digital media marketplace may actually provide a better way to free untapped revenue.  First, if consumers are able to resell their digital music and obtain some resale value, they may be willing to pay more upfront.  Second, consumers that in the past avoided purchasing digital music due to its inalienability may be willing to purchase instead of stream if it can be resold.  Lastly, digital music cannot be resold until it is originally sold and consumed.  Only when a critical mass of copies has infiltrated the market and original owners have no further use of their original copies will original sales decline because of resales.  Since sales are heavily concentrated in the first few weeks[117], if not days, of release, one wouldn’t be unreasonable in projecting that resales won’t have as large an impact on overall sales as one might initially assume. For example, Figure 3 shows Beyoncé’s self-titled album sales tracked over approximately 16 weeks from its release date.[118]  The numbers indicate that the majority of sales took place within the first three days (basically over the weekend).  Assuming that most of those original purchasers didn’t get their fix of Beyoncé over the weekend, the stragglers will continue to have to purchase original versions.  Determining what effect a secondary market would have on overall original purchasers would vary to a large degree on the connectedness and magnetism of the music.  However, regardless of its magnetism, it instantaneously becomes more seductive to would-be stragglers who are worried about buyer’s remorse because of the resale fallback opportunity.  Theoretically, then, there could be more “weekend” purchasers than under the current, no resale model.
Huguenin Figure 3 Self-Titled Album
Figure 3: US Sales of Beyoncé’s Self–Titled Album
  There are certainly attendant economic risks associated with a secondary resale market. But as they aren’t clearly irrational risks, it would be surprising if Capitol Records engaged in this sort of cost-benefit analysis before commencing litigation against ReDigi in an attempt to shut down the resale market. After all, the secondary market isn’t a file sharing market (as used in its pejorative sense).  And, as the ECJ prudently noted, reselling on the secondary market is authorized only on the condition that the original user render the original version unusable, assuring the copyright holder has seen revenue at some point from every copy in the market.[119]  Much of the paper has focused on this same notion — that the original version (as a material object) is in fact made unusable because that original version (the material object itself) is transferred to the new consumer.

VI. Future Outlook of Previously Owned Digital Media

If patent activity is any indication of the future of used digital media, this will not be the last case courts confront on the issue of reproduction and distribution of digital media.  Amazon[120] and Microsoft[121] have already received patents on technology enabling secondary markets for digital media.  Apple has applied for a patent[122] on its own method, and ReDigi has not given up on the business idea, filing a new patent application[123] on a system that completely avoids the unlawful reproduction issues addressed in its case against Capitol Records.

A. Possible Solutions

For those entities still looking to create a business around reselling used digital media, there are a few possible options available to continue that pursuit.
1. Legal Battle Option
The first option is to pursue the argument made above — that, contrary to the opinion of the Southern District of New York, ReDigi did not reproduce the digital media files on its servers.  The advantage of resolving the complex issue this way is that it puts digital media files stored on magnetic and solid-state drives on a level playing field with digital media files stored on more physically mobile forms of storage, such as CDs, vinyl, and USB flash drives.  Physical displacement of physically mobile storage devices from transferor to transferee is a well accepted means of transferring ownership without reproduction, and transferring digital media stored as electric charge and magnetic fields via electrical lines and electromagnetic waves should be a no less accepted means of transferring ownership without reproduction in the modern age of digital communication. The disadvantage of proffering this argument is simple but paramount in practice — it is unlikely to win judicial support.  While it embraces the intersection of science and law in an attempt to create a well-reasoned rule, the court, at least in the ReDigi case, seems ready to dismiss anything more than a cursory examination[124] of the scientific principles that guide how copyright law might be interpreted when applied to innovative, new technology.[125] Furthermore, the argument laid out above that ReDigi effected only an object transfer, not creation, has several vulnerabilities.  While it is true that electrons can move from point A to point B in a conductive wire, it is highly unlikely that all the electrons used to store the bits of the digital file on the ReDigi server were those used to store bits of the digital file on the subscriber’s personal computer.  This is because free electrons “hop” from ion to ion when traveling down a conductive wire.[126]  Copper atoms, for example, that compose wires impede the movement of electrons as temperatures rise due to thermal vibrations, making it more challenging for a particular electron to reach point B as its distance from point A increases.[127]  Similarly, although electromagnetic waves represent the fundamental underpinnings of wireless communication, electromagnetic waves are impeded by physical barriers and magnetic fields stray along wired communication lines and thus don’t correlate exactly with the magnetic fields used to store the bits of the digital file.[128]  These weaknesses only increase the resistance with which a court would meet any proposed scientific argument.  Nonetheless, data stored at a subatomic scale is different from data stored on a macroscopic scale, like on paper or in a CD, precisely because subatomic particles and magnetic fields can be physically transferred, indeed are the transferring agents, along internet communication channels whereas macroscopic material objects cannot.[129]  And even though an observer cannot definitively say that the same subatomic material objects originally fixing the copyrighted work were transferred to the recipient, a critic would actually fare worse because the critic would have to show how two identical particles (the original material object and accused, different, transferred material object) are actually different.[130]  The boundary between material objects and the communication channels used to transport them is blurred to the point that the court can no longer rely on archaic analogies to times past when interpreting anachronistic laws. However, even if a court were to accept the above argument, the copyright holder could still wield his distribution right to show infringement.  This is because consumers who are considered licensees, as opposed to owners, with restricted transfer and use rights are unable to invoke the first sale doctrine to distribute digital media files without repercussions.[131]  If the copyright holder or its authorized vendor (e.g., iTunes) licensed the use of digital media files via carefully constructed license agreements[132] (instead of selling them), a reselling licensee would still be a sitting duck for an infringement claim on the copyright holder’s distribution right.  Thus, any legal victory for a defendant under the reproduction right would likely be a mere consolation prize once infringement of the distribution right was adjudged.[133]
2. Technological Workaround Option
The second option is to pursue a solution outside of the legal system.  Because the legal system can be slow to reverse course, using technology to work around the obstacles set up by the legal system can actually lead to faster and less costly solutions.[134]  And, in fact, this is precisely what ReDigi did.[135]  As discussed in ReDigi’s patent application, the essence of the workaround takes the form of redirection software installed on the subscriber’s computer.  That software redirects downloaded packets (i.e., pieces) of the digital media file from the subscriber’s personal computer to the subscriber’s personal space on ReDigi’s cloud storage servers.[136]  Therefore, the subscriber’s personal computer acts as another node of the Internet in which the packets simply pass through on their way to the ReDigi cloud storage server.[137]  The downloaded digital file is stored for the first time on the ReDigi cloud storage server, not the subscriber’s personal computer.[138]  Because the file stored on the ReDigi cloud storage server is the original file downloaded from the online retailer (e.g., iTunes), there is no reproduction (and, of course, no unauthorized reproduction).  Once the subscriber decides to sell the used digital content, ReDigi can simply update the owner of the allocated space occupied by the digital file on the server.[139]  In other words, ReDigi can change the ownership permissions from transferor to transferee without actually moving the digital file around on its cloud storage server, thereby avoiding any further complications over unauthorized reproductions.  The subscriber can still access the file by streaming its contents in a manner akin to services like Amazon Cloud Player, Google Play, and iTunes Match, whose services at this point have a favorable legal track record.  This is due, in part, to similar remote television streaming services being held compliant with copyright law in the Second Circuit[140] and, in larger part, to the contractual agreements they have covering much of the music they stream. While the technological workaround avoids any further liability to ReDigi from the ReDigi case itself, the legal ramifications of the opinion will continue to haunt future defendants in similar situations.  If the court’s holding remains unchallenged, it will continue to carry precedential value, potentially expanding copyright protection beyond a reasonable interpretation of the Copyright Act.  ReDigi should not be expected to solely carry the burden of safeguarding the public’s interest against copyright expansion, but it may be necessary to compete with bigger companies that can easily bargain their way to immunity.  Nonetheless, since ReDigi does not have the bargaining power of giants like Amazon, Google, and Apple, it is also possible Capitol Records would still pursue legal action against ReDigi for infringing public performance rights until ReDigi paid for a licensing agreement.
3. Contractual Option
The first two options are really rivers that ultimately lead to the vast ocean of contractual agreements.  By agreeing to a contract, both parties remove legal action from the realm of copyright infringement into the realm of contract law.[141]  This eliminates a large degree of uncertainty and allows the parties to set their own terms for ownership of intellectual property without wondering how a court will interpret congressional action. The trend of relying on contracts instead of judges will only increase as these major players experiment with the secondary market for digital media.[142]


Capitol Records has two obvious concerns associated with ReDigi’s business model.  First, despite ReDigi’s most thorough efforts, users can store files externally to their local computer in order to retain a copy for themselves prior to becoming a subscriber.  Second, if users are purchasing previously owned music from other users, then they are not purchasing “new” music from providers that share profits with Capitol Records.  While the first is a legitimate legal concern, it is a separate issue from whether ReDigi is committing or inducing copyright infringement, especially since ReDigi actively eliminates copies stored on the user’s computer when the user sells the music.  The second is a legitimate business concern but, again, separate from the issue of copyright infringement. Technology will always be one step ahead of the glacially-moving legal system.  Rather than attempt to rein in technology through legal maneuvering, copyright holders should try to incorporate it into their business models.  With the uncertainty surrounding digital music transferring and copyright holders pressing the issue with almost nothing to lose, licensing agreements will continue to be sought after by both parties looking to mitigate potential loses. Because court decisions loom large when determining which party has more leverage in contractual agreements, every court decision should be analyzed and scrutinized for flawed reasoning.  These instances of flawed reasoning will be few and far between when legal reasoning is involved because judges have a vast amount of experience, and interpretation of the law is often subjective.  However, most judges outside of the Federal Circuit have little experience with scientific reasoning, which can lead to incongruent holdings and confused parties.  This is what happened in the ReDigi case. While ReDigi’s technological acumen has allowed it to sidestep this problem for now, future entrants in the digital resale market may be less fortunate.
* James received his J.D. from New York University School of Law in 2014. He received a Ph.D. in Electrical Engineering from the University of Nebraska in 2010. He also received a B.S. in Electrical Engineering and a B.S. in Computer Engineering from the University of Nebraska in 2005. He would like to thank Professor Barton Beebe and the JIPEL members who helped edit and publish this article.
[1] For those readers of the future where digital content is a relic of the past, iTunes was the leading online marketplace to buy digital media.  Users could purchase music, television shows, movies, and books in digital form at prices that were usually less than their tangible counterparts.
[2] There are six exclusive rights granted to the owner of the copyrighted work.  17 U.S.C. § 106 (2006).  The issue of reselling previously owned digital media focuses on three: the reproduction right, the distribution right, and the public performance right.
[3] Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y. 2013).  This case is discussed thoroughly in the next section.
[4] Id.
[5] The files stored in a subscriber’s Cloud Locker are, in reality, stored on a server in Arizona. Id. at 645.
[6] Id. at 650–51.
[7] Id. at 645.
[8] Id.
[9] More information on the first sale doctrine’s applicability to this case is provided infra Part I.D.
[10] See Def.’s Mem. of Law in Opp’n to Pl.’s Mot. for Prelim. Inj. at 19, Jan. 27, 2012, ECF No. 14 (“[U]nlike the terms of service for Amazon’s online music store, the iTunes Terms of Sale (‘iTunes TOS’) formally provide that title to music files downloaded from iTunes passes to the consumer.” (emphasis in original)).
[11] Matt Peckham, How ReDigi Lets You Resell Digital Music (and Why It’s a Big Deal), Time (June 27, 2012),
[12] Id.
[13] ReDigi, 934 F. Supp. 2d at 645–46.
[14] Id. at 646.
[15] Id.
[16] Id.
[17] Def.’s Counter Statement Pursuant to Local Rule 56.1 ¶ 18, Aug. 14, 2012, ECF No. 83.  It should be noted that the closed credit system was adopted, at least in part, at the behest of the record labels who believed it prudent to keep the money “in the music ecosphere.”  Id. ¶ 19.
[18] ReDigi, 934 F. Supp. 2d at 646.
[19] 17 U.S.C. § 102(a)(7) (1990).  Artists also receive a copyright in the underlying musical composition.  U.S. Copyright Office, Circular 56A, Copyright Registration of Musical Compositions and Sound Recordings (2012),  This was not an issue in ReDigi since the artists were not plaintiffs.
[20] 17 U.S.C. § 101.
[21] 17 U.S.C. § 106(1).
[22] ReDigi, 934 F. Supp. 2d at 648.
[23] Id. at 649.
[24] Id. at 650.
[25] 17 U.S.C. § 106(3).
[26] ReDigi, 934 F. Supp. 2d at 651.
[27] 17 U.S.C. § 107 and 17 U.S.C. § 109, respectively.
[28] The factors to be considered in a fair use defense are: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.” 17 U.S.C. § 107.
[29] ReDigi, 934 F. Supp. 2d at 652–54.
[30] 17 U.S.C. § 109(a).
[31] Under a strict reading of section 109, the first sale doctrine would apply to the original phonorecord stored in a subscriber’s computer hard drive only if the subscriber purchased the right to fix the sound recording in a phonorecord from a store that transferred ownership to that particular phonorecord instead of simply granting a license to use that particular phonorecord.  The court never addressed this issue because it resolved the question of the application of first sale defense without regard to the phrasing of the iTunes purchasing agreement.  However, ReDigi asserted that ownership was transferred.  Def.’s Mem. of Law, supra note 10.
[32] U.S. Copyright Office, DMCA Section 104 Report 82–83 (2001), available at
[33] Id. at 82.
[34] When the court decided that the subscriber’s act of uploading was a reproduction, the court reasoned that the “reproduced” file was not under protection of the first sale defense.  Thus, ReDigi also infringed distribution rights by selling the illegally “reproduced” file.  From here, the court found ReDigi liable for direct and secondary infringement since it actively participated in, and benefitted from, its subscribers’ infringing conduct.  ReDigi, 934 F. Supp. 2d at 656–60.
[35] Def.’s Mem. of Law, supra note 10, at 9 (“The only copying which takes place in the ReDigi service occurs when a user uploads music files to the ReDigi Cloud, thereby storing copies thereof in the user’s personal Cloud Locker . . . .”).
[36] Pl.’s Reply Mem. of Law in Further Supp. of Pl.’s Mot. for Partial Summ. J. at 1, Aug. 8, 2012, ECF No. 87 (“The only plausible reading of this statement . . . is that uploading delivers a copy of a music file to the ReDigi cloud.”).
[37] Def.’s Mem. of Law in Opp’n to Pl.’s Mot. for Partial Summ. J. at 6, Aug. 14, 2012, ECF No. 79.
[38] ReDigi, 934 F. Supp. 2d at 650.
[39] Usually, when a move command is initiated by the user, the operating system simply updates the link that points to the file’s location on the hard drive without actually moving where the bits of the file are stored.  So, if the user wanted to move the file from directory A to directory B, the operating system would internally manage the “movement” such that the link to the file appears when the user accesses directory B, but not directory A.  This does not happen when ReDigi moves the file, however, because the file is being moved from one file system, the subscriber’s computer, to a different file system, the subscriber’s Cloud Locker.  However, moving the file is probably a more appropriate description than copying the file in this case since, regardless of the actual implementation of the move command, the subscriber has no volition, intent, or knowledge of any copying.  ReDigi’s Media Manager software is proprietary, so a step-by-step analysis of the code cannot be performed. Assuming, however, that ReDigi was aware of the potential copyright issues, it is at least conceivable that it deliberately wrote the software to avoid creating copies.  See Def.’s Mem. of Law in Further Supp. of ReDigi’s Summ. J. Mot. at 6, Aug. 24, 2012, ECF No. 90 (explaining the upload process as “wholly unlike a copy and delete operation, which happens in two distinct steps”).
[40] C. M. Paula Co. v. Logan, 355 F. Supp. 189, 190 (N. D. Tex. 1973).
[41] Id.
[42] Id. at 191.
[43] Id.
[44] Id.
[45] ReDigi, 934 F. Supp. 2d at 650.
[46] Id. at 650–51.
[47] Id. at 651.
[48] Id. at 649.
[49] Id. at 650–51 (“There, the copyrighted print, or material object, was lifted from the greeting card and transferred in toto to the ceramic tile; no new material object was created.”) (emphasis added).
[50] C. M. Paula, 355 F. Supp. at 190.
[51] See 17 U.S.C. § 101 (defining the word “copy” as the material object “in which a work is fixed . . . and from which the work can be perceived, reproduced, or otherwise communicated” and the word “phonorecord” as the analogous term to “copy” where “sounds” replace “work”).
[52] See 17 U.S.C. § 101 (“‘Copies’ are material objects . . . in which a work is fixed . . . .”).  So copyrighted works are fixed or embodied in material objects, colloquially known as copies.
[53] C. M. Paula, 355 F. Supp. at 190.
[54] “[W]hen a user on a [P2P] network downloads a song from another user, he receives into his computer a digital sequence representing the sound recording. That sequence is magnetically encoded on a segment of his hard disk (or likewise written on other media). With the right hardware and software, the downloader can use the magnetic sequence to reproduce the sound recording. The electronic file (or, perhaps more accurately, the appropriate segment of the hard disk) is therefore a ‘phonorecord’ within the meaning of the statute.” ReDigi, 934 F. Supp. 2d at 649 (quoting London-Sire Records, Inc. v. Doe 1, 542 F. Supp. 2d 153, 171 (D. Mass 2008)).
[55] London-Sire, 542 F. Supp. 2d at 172.
[56] Id.
[57] See ReDigi, 934 F. Supp. 2d at 646 ( “[A]t the end of the process, the digital music file is located in the Cloud Locker and not on the user’s computer.”); see also Def.’s Statement of Undisputed Facts Pursuant to Local Rule 56.1 ¶ 12, July 20, 2012, ECF No. 56 (“Once a user requests to place a legally acquired phonorecord in the Cloud Locker, the file is migrated to the Cloud Locker so that it is no longer on the user’s local device.”).
[58] ReDigi, 934 F. Supp. 2d at 650.
[59] Id.
[60] For example, if your friend gives you a fruitcake as a gift and you find it so fantastic that you exactly replicate it as a return gift for your friend, it is difficult for your friend to know whether you have exactly reproduced the fruitcake or sheepishly re-gifted the one your friend gave you.  If you can produce the original fruitcake (or at least parts of it), you can probably salvage your relationship since your friend will know you didn’t re-gift.  If you can’t produce the original fruitcake, your friend will have to take your word for it but will not know for sure whether it is a reproduction or the original.
[61] This is not surprising given how profitable the software can be if it is ultimately deemed legal.  ReDigi CEO, John Ossenmacher, has already admitted that they are in talks with several interested companies to license their software.  “There aren’t many ways to do this without copying — we know, and they know, they’d be using our technology to do it.”  Peckham, supra note 11.
[62] ReDigi, 934 F. Supp. 2d at 648 (“The novel question presented in this action is whether a digital music file, lawfully made and purchased, may be resold by its owner through ReDigi under the first sale doctrine.”).
[63] It is certainly possible for subscribers to game the ReDigi system.  Dubious subscribers could create an external copy of their music prior to downloading Media Manager, which would not flag those copies since the software is unaware of prior events.  However, this activity would be occurring despite Media Manager, not in concert with it.  Furthermore, those subscribers would also likely realize that there are other easier methods to obtain digital files without using a scrupulous system like ReDigi.
[64] 9 Marshall Cavendish Corporation, How It Works: Science and Technology 1284 (Wendy Horobin et al. eds., 3d ed. 2003).
[65] John Y. Hsu, Computer Architecture: Software Aspects, Coding, and Hardware 3 (2001); see also Scott Mueller, Upgrading and Repairing PCs 525–26 (20th ed. 2011).
[66] Hsu, supra note 65, at 3.
[67] It is actually the detected transition from flat part to pit or pit to flat part that determines whether a “1” bit is read.  When no transition is encountered over a threshold period, a “0” bit is read.  CDs that are burned instead of stamped (e.g., by personal CD burners) differentiate between “1” bits and “0” bits by changes in the reflectivity of the recording material.  The laser in the CD burner literally heats up portions of the writeable CD’s recording layer, which creates the differentiating reflectivities necessary to create bit patterns.  Mueller, supra note 65, at 521, 532.
[68] Since the laser and detector are aimed at the underside of the CD, the plateaus are actually seen as pits from the laser’s perspective.
[69] Id. at 520.
[70] Id. at 521–22.
[71] Id.
[72] Id.
[73] Id. at 521.
[74] H.R. Rep. No. 94-1476, at 56 (1976) (defining phonorecords as “physical objects in which sounds are fixed”).
[75] ReDigi, 934 F. Supp. 2d at 650.
[76] Susumu Nishinaga, Needle Playing a Record (scanning electron microscope image), Science Photo Library,
[77] CD Scanning Electron Microscope Image, LPD Lab Services,
[78] John Rhoton, The Wireless Internet Explained 5–6, 10–11, 22 (2002).
[79] Therefore, any digital creation of a physical fixation that was transferred only with the help of the Internet, like that in vinyl discs and CDs, will necessarily involve a new fixation of the information since the original fixation could not have been transferred.
[80] Mueller, supra note 65, at 445.
[81] Id. at 438–40.
[82] Id. at 422–24.
[83] This simple encoding mechanism, where no magnetic field change equals a “0” bit and a magnetic field change equals a “1” bit, is no longer used in practice because more advanced encoding techniques are available to increase storage capacity.  Id. at 432–37.
[84] Id. at 501.
[85] The bit line selects a certain column in the cell array and the word line selects a certain row in the cell array.  All unselected cells in the series bit line are driven into a conducting mode.  Thus, if the entire bit line conducts, the selected cell is “on” (conducting state), whereas if the bit line does not conduct, the selected cell is “off” (non-conducting state).  Rino Micheloni et al., Inside NAND Flash Memories 20–24 (Rino Micheloni et al. eds., 2010).
[86] Giulio G. Marotta et al., Nonvolatile Memory Technologies with Emphasis on Flash 64 (Joe E. Brewer & Manzur Gill eds., 2008).
[87] Id.
[88] See, e.g., Christoph Friederich, Inside NAND Flash Memories 67, 77 (Rino Micheloni et al. eds., 2010) (explaining how a programming operation injects electrons into the floating gate of a transistor cell and how an erase operation removes electrons from the floating gate of a transistor cell).
[89] David J. Griffiths, Introduction to Quantum Mechanics 179 (1995) (“The fact is, all electrons are utterly identical, in a way that no two classical objects can ever be. It is not merely that we don’t happen to know which electron is which; God doesn’t know which is which, because there is no such thing as ‘this’ electron, or ‘that’ electron; all we can legitimately speak about is ‘an’ electron.”).  In fact, John Wheeler, a well-renowned American physicist, actually postulated that there is only one electron and that all electrons are simply manifestations at a particular slice in time of the world line of that singular electron.  Richard P. Feynman, Nobel Lecture: The Development of the Space-Time View of Quantum Electrodynamics (Dec. 11, 1965), in Nobel Lectures, Physics 1963-1970, at 155, 163 (1972), available at (“I received a telephone call one day at the graduate college at Princeton from Professor Wheeler, in which he said, ‘Feynman, I know why all electrons have the same charge and the same mass’ ‘Why?’ ‘Because, they are all the same electron!’”).  Magnetic fields are invisible forces.  So a similar conclusion can be reached knowing that magnetic fields generated by flowing electrons are indistinguishable from those generated by materials composed of magnetic domains.  Neville G. Warren, Excel Preliminary Physics 74 (2004).
[90] One could just as easily imagine having a protocol where the person at point A pours whatever water is contained in a bucket into the copper tubing every minute.  In that case, the user at point B only needs to stand under the copper tubing and determine which minutes of the five he or she gets wet to receive the communication.
[91] ReDigi, 934 F. Supp. 2d at 649.
[92] Id.
[93] Id. at 651.
[94] 17 U.S.C. § 109.
[95] ReDigi, 934 F. Supp. 2d at 655 (quoting 17 U.S.C § 109(a)) (emphasis added).
[96] Id.
[97] Id.
[98] See infra note 129 and accompanying text.
[99] This conclusion requires that the digital music phonorecord be transferred and, by implication, not retained by the transferor.  Aaron Perzanowski and Jason Schultz advocate for a similar position but under the common law exhaustion principle on a policy basis rather than the first sale statute on physics principles.  They say that if the original owner transfers his or her ownership interest in the file and the owner did not retain any copy of the file after transfer, the file should be sanctioned by the exhaustion principle.  Without this policy change, the current law on copyright practically prevents the owner from alienating his or her digital music at all.  Aaron Perzanowski & Jason Schultz, Digital Exhaustion, 58 UCLA L. Rev. 889, 938 (2011).
[100] ReDigi, 934 F. Supp. 2d at 651 (“As Capitol has conceded, such reproduction is almost certainly protected under other doctrines or defenses, and is not relevant to the instant motion.”).
[101] Id.
[102] 17 U.S.C. § 107.
[103] Id.
[104] Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994).
[105] See Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 931 (2d Cir. 1994) (concluding that the fourth factor favored the copyright holder because photocopying academic articles in a commercial business decreased potential licensing and subscription revenue that the business would have had to pay when it wanted to access the articles if they had not been photocopied).  Contrarily, the Court might determine that the fourth factor favors time-shifting actions by viewing these activities as “caus[ing] . . . nonminimal harm to the potential market for . . . copyrighted works.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 456 (2012). However, this contrary position may be attributed to default bias in that there is a long-standing tradition to look past these actions instead of challenging them.
[106] Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. Pa. L. Rev. 549, 584–85 (2008) (discovering that factor four and one coincided with the outcome of the fair use defense in 83.8% and 81.5%, respectively, of the 297 opinions analyzed while factor two coincided with the outcome in only 50.2% of the opinions).
[107] ReDigi, 934 F. Supp. 2d at 651.
[108] See, e.g., Newton v. Diamond, 388 F.3d 1189, 1196 (9th Cir. 2004) (holding that a three-note sequence from a jazz composition was a “simple, minimal, and insignificant” sampling, constituting de minimis use); Sandoval v. New Line Cinema Corp., 147 F.3d 215, 218 (2d Cir. 1998) (holding that copyrighted photographs shown in the movie Seven for 35.6 seconds was de minimis because the photographs were obscured, severely out of focus, and virtually unidentifiable).  But see Ringgold v. Black Entm’t Television, Inc., 126 F.3d 70, 77 (2d Cir. 1997) (holding that a copyrighted poster shown in a TV show for 26.75 seconds was not de minimis because the poster was clearly visible and recognizable with sufficient observable detail).
[109] The court noted that Capitol conceded defragmentation and file relocation were protected from copyright infringement.  See ReDigi, 934 F. Supp. 2d at 651 (“As Capitol has conceded, such reproduction is almost certainly protected under other doctrines or defenses, and is not relevant to the instant motion.”).
[110] As more files are stored remotely, i.e., stored in the “Cloud,” moving and transferring digital media will become nearly irrelevant for individual consumers but a highly relevant legal issue for remote storage companies.  Unlike individual consumers, these companies will have the bargaining power to secure these reproduction rights for themselves and for their users via contracts, avoiding uncertainties in the default copyright law rules.
[112] Id. ¶¶ 63, 89.
[113] Id. ¶ 85.
[114] Id. ¶ 76.
[115] Id. ¶ 78.
[116] See, e.g., iTunes Store – Terms and Conditions, Apple (Sept. 18, 2013), (“The software products made available through the Mac App Store and App Store . . . are licensed, not sold, to you.”).
[117] See Alan T. Sorensen, Bestseller Lists and Product Variety, 55 J. Indus. Econ. 715, 724–25 (2007) (presenting data of 1,217 books off the New York Times bestseller list that indicated 73.8% hit a sales peak within their first four weeks on sale with a resulting exponential decay afterwards and noting that these sales patterns can be seen in other entertainment areas).
[118] E.g., Silvio Petroluongo, Beyonce Bound for No. 1 as Sales Soar Past 400,000, Billboard (Dec. 14, 2013, 8:28 PM),‌beyonce-bound-for-no-1-as-sales-soar-past-400000; Keith Caulfield, ‘Beyonce’ Sales Grow to 550k-Plus, Set for No. 1, Billboard (Dec. 15, 2013, 10:14 PM),‌articles/news/5839792/beyonce-sales-grow-to-550k-plus-set-for-no-1; BEYONCÉ Shatters iTunes Store Records with 828,773 Albums Sold in Just Three Days, Apple (Dec. 16, 2013),; Keith Caulfield, Beyonce Spends Second Week at No. 1 on Billboard 200 Chart, Billboard (Dec. 26, 2013, 2:13 PM),; Keith Caulfield, Beyonce Leads for Third Week at No. 1 on Billboard 200 Chart, Billboard (Jan. 2, 2014, 12:54 PM),‌articles/‌news/‌5855135/‌beyonce-leads-for-third-week-at-no-1-on-billboard-200-chart; Danielle Harling, Hip Hop Album Sales: Week Ending 3/30/2014, HipHop DX (Apr. 2, 2014, 12:55 PM),; Andres Tardio, Hip Hop Album Sales: Week Ending 04/06/2014, HipHop DX (Apr. 9, 2014, 10:00 AM),  Although less established musicians may require a few weeks or months to create peak sales, those sales will still likely be made by original purchasers because the secondary supply will not meet consumer demand.  In cases like these, the exponential decay will not begin immediately but instead follow the fast rise.
[119] UsedSoft GmbH, ¶ 78.
[120] U.S. Patent No. 8,364,595 (filed May 5, 2009).
[121] U.S. Patent No. 7,818,811 (filed Dec. 6, 2005).
[122] U.S. Patent Appl. No. 13/531,280 (filed June 22, 2012).
[123] U.S. Patent Appl. No. 13/760,823 (filed Feb. 6, 2013).
[124] See ReDigi, 934 F. Supp. 2d at 649 (stating an ostensible maxim “confirmed by the laws of physics” that “[i]t is simply impossible [for] the same ‘material object’ [to be] transferred over the Internet”).
[125] See, e.g., 17 U.S.C. § 101 (defining a “digital transmission”); 17 U.S.C. § 117 (limiting certain exclusive rights for computer programs); Digital Millennium Copyright Act, Pub. L. No. 105–304, 112 Stat. 2860, 2873–74 (1998) (discussing limitations on liability for digital transmissions).
[126] 1 Surinder Pal Bali, Electrical Technology: Electrical Fundamentals 17–18 (2013).
[127] U. A. Bakshi & V. U. Bakshi, Basic Electrical Engineering 1-14 (2d ed. 2009).
[128] Curt White, Data Communications and Computer Networks: A Business User’s Approach 78, 83, 104 (5th ed. 2009).
[129] Bali, supra note 126, at 17–18; White, supra note 128, at 83.
[130] See supra note 89 and accompanying text.
[131] Vernor v. Autodesk, Inc., 621 F.3d 1102, 1107, 1111 (9th Cir. 2010) (noting that “[t]he first sale doctrine does not apply to a person who possesses a copy of the copyrighted work without owning it, such as a licensee” and holding that a software user is a licensee rather than an owner when the copyright owner “(1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions”).
[132] In a case similar to Autodesk, involving promotional CDs rather than computer software, the Ninth Circuit held that a boilerplate “promotional statement” affixed to the promotional CDs did not constitute a license agreement and therefore did not prevent transfer of ownership to the recipients.  UMG Recordings, Inc. v. Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011).  Even though the “promotional statement” stated that the CD remained property of the record company and was only licensed to the recipient for personal use, because the promotional CDs were dispatched without prior arrangement with the recipients, the CDs were not numbered, and no attempt was made to keep track of them, the court held that no license agreement had been created.  Id. at 1180–82.
[133] In the ReDigi case, ownership of the digital file was not contested.  See ReDigi, 934 F. Supp. 2d at 645–46.
[134] Technological workarounds are frequently seen in the patent realm where the infringing party believes it easier and less costly to change software and hardware rather than pay a licensing fee.  E.g., Facetime Workarounds of VirnetX Patents Bring Complaints, Costs, MacNN (Aug. 30, 2013, 7:00 PM),‌ (stating that Apple was working on fixing problems to a workaround for a patent infringing FaceTime component, which had been costing Apple $2.4 million per month in royalty payments).
[135] Because the new technique was launched on June 11, 2012, after Capitol Records filed the complaint, it was not considered in the ReDigi case.  ReDigi, 934 F. Supp. 2d at 646 n.3.
[136] ’823 Patent Appl., supra note 123, ¶¶ 35-46.
[137] Id.
[138] Id.
[139] Id. ¶ 31.
[140] Cartoon Network LP v. CSC Holding, Inc., 536 F.3d 121, 139 (2d Cir. 2008) (“Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ . . . .”); Am. Broad. Cos., Inc. v. Aereo, Inc., 874 F. Supp. 2d 373, 378 (S.D.N.Y. 2012), aff’d sub nom. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013) (finding that a streaming television service did not violate the copyright holder’s public performance right because broadcasts captured by each user’s uniquely assigned antenna were not shared with or accessible to other users).  But see Fox Television Stations, Inc. v. FilmOn X LLC, 966 F. Supp. 2d 30, 47–48 (D.D.C. 2013) (reasoning that a streaming television service operating a unique mini-antenna for each user did infringe the plaintiff’s public performance right because other devices in the transmission, like the tuner, server, router, and video encoder, were aggregated among all users in a public manner); Fox Television Stations, Inc. v. BarryDriller Content Sys., PLC, 915 F. Supp. 2d 1138, 1143–44 (C.D. Cal. 2012) (disagreeing with the Second Circuit’s interpretation of 17 U.S.C. § 106(4), which grants an exclusive right “to perform the copyrighted work publicly,” and coming to the conclusion that the seemingly private streams are in fact public).
[141] London-Sire, 542 F. Supp. 2d at 174.
[142] For instance, Google Music, a free streaming music service for users that have uploaded their collection to Google servers, initially launched in May 2011 without licensing agreements.  Antony Bruno, Why Record Labels and Google Music Couldn’t Agree on the Cloud, The Hollywood Reporter (May 12, 2011, 3:30 AM),; Google Music Is Open for Business, Google Official Blog (Nov. 16, 2011),  By November 2011, Google had come to terms with three major record labels, obviously concerned about possible record label backlash.  Donald Melanson, Google Partners with Universal, EMI, Sony Music, 23 Independent Labels on Google Music, Scores Exclusive Content, Engadget (Nov. 16, 2011, 5:34 PM),  Before that time, Apple had already secured agreements with the major record labels for their paid iTunes Match service, which allows users to stream music in their collection without actually uploading any files to Apple’s servers.  Aaron Gottlieb, iCloud: The Devil Is in the Details, Music Bus J. (Aug. 2011), available at  Amazon has also secured licensing agreements with the major record labels to add similar subscription-based scan and match capabilities to its Cloud Player as well.  Press Release, Updated Amazon Cloud Player Includes New Scan and Match Technology, Free Audio Quality Upgrades, and More, (July 31, 2012),  And, as an attempt to quell music company fears, Microsoft has even touted that its offline reselling can benefit copyright holders of pirated content because of “its ability to ‘register’ such content back into media that generates revenue in the ecosystem.” ’811 Patent, supra note 121, col. 16 ls. 21–22.

The Merger and the Damage Done: How the DOJ Enabled an Empire in the Live Music Industry

The Merger and the Damage Done: How the DOJ Enabled an Empire in the Live Music Industry
By Josh Baker* A pdf version of this article may be downloaded here.  


In February 2009, Ticketmaster Entertainment and Live Nation announced a “merger of equals” that would unite these two titans of live entertainment, sending shockwaves through the industry.[1] On January 25, 2010, the United States Department of Justice approved the merger. When the Antitrust Division of the Department of Justice (“DOJ”) announced its decision, it encountered harsh criticism and backlash from within the industry for allowing these already-dominant firms to join forces. Spurred on by outcries from rock stars and politicians, the public regarded this deal with serious skepticism.[2] Nevertheless, the merger went through and Live Nation Entertainment (“LNE”) was born. A close examination of the merger can shed light on aspects of the music industry that inform the antitrust analysis, the efficacy of the remedies imposed in the consent decree, and the effects of the merger on the live music industry. This analysis will show that the DOJ should not have permitted the merger to proceed. In Part I of this Note I will detail the aspects of the music industry that are relevant to an examination of this merger. In Part II I will reexamine the DOJ’s antitrust analysis of the merger while Part III will explain how the structural and behavioral remedies imposed have failed to engender competition. Finally, I will argue that the DOJ overlooked a vital opportunity to create competition in the budding market of fully integrated live performance services.

I. The Live Music Industry

A. Yesterday: A Brief History of the Music Industry

Since the turn of the century, the music industry has been popularly characterized as a sinking ship, doomed by the prevalence of piracy and file-sharing. However, this depiction ignores half of the story. From 1999 to 2009 as the recording industry flailed, revenue from concert ticket sales in the United States skyrocketed from $1.5 billion to $4.6 billion.[3] It should be noted that such figures are a relatively new phenomenon, as the live music industry was not always so profitable. Prior to the 1950s, live concerts were only seen at nightclubs, dance halls, and restaurants. In the decade following World War II, technological advances helped create a mass market for recorded music. Record companies formed, signing artists to multi-album contracts and helping artists expand their audiences. The record companies encouraged artists to perform large concerts to draw fans and drive record sales. As some artists began to surge in popularity they were able to tour regionally, and the more successful ones, nationally. These artists would use local promoters to market their performances at each venue. The mass market for popular music grew rapidly, and soon enough promoters and other entrepreneurs began to build concert venues to accommodate larger audiences. Artists with a substantial fan base would perform in indoor clubs and artists who could draw a larger audience played in amphitheaters. The most popular artists began performing in arenas and stadiums. These “superstar” artists typically generated the lion’s share of ticket sale revenues. By 2009, gross revenues from the top one hundred tours had reached $2.5 billion.[4] However, superstar artists are few and far between. In 2009 fewer than one hundred artists worldwide were capable of drawing enough fans to fill amphitheaters or larger venues, and not all of these superstars tour each year.[5] The services of superstar artists are thus a scarce and crucial resource, fervently sought after by concert promoters.

B. A Day In The Life: Staging a Concert

A complex string of relationships is required to produce a concert. The key figures and entities in the chain are the artist, manager, booking agent, promoter, venue, venue service providers (including the ticket distributor), secondary ticket market, and consumers. Understanding each role in the process is crucial to analyzing the Live Nation-Ticketmaster merger under antitrust law. The first link is the artist’s personal manager. The manager serves a variety of purposes, one of which is arranging performances via the booking agent. The booking agent contracts with a promoter (such as Live Nation) to produce either an individual show or a multi-performance tour. The artist generally receives a guaranteed payout from each performance, or alternatively, a percentage of revenues. The manager and agent receive percentages of the artist’s income (typically 15% and 5%, respectively). The promoter is responsible for obtaining the performance space and marketing the event. The promoter usually receives a guaranteed payout, subordinate to the artist’s. After the guaranteed payouts are made, the remaining revenue is split between the artist and the promoter. The venue rents out the performance space and contracts for ticket distribution, concessions, merchandise, security and other services, or provides them in-house. The venue receives a percentage of the ticket distributor’s fees as well as a percentage of the concessions and merchandise sold during the performance. Artists receive the largest share of merchandise revenue. The ticket distributor delivers tickets to consumers (“primary ticketing services”). The distributor receives a portion of the ticket service fees, which are added to the face value of the tickets. To clarify a common misunderstanding, the face value of the ticket is split between, and determined by, only the artist and the promoter. It is beyond the purview of ticket distributors. Critics of surging ticket prices must understand that ticket distributors (such as Ticketmaster) should only be held responsible for increases in service fees, not increases in ticket prices. Finally, the consumer pays the face value of the ticket, plus the service fees, in exchange for admission to the concert. Once the tickets are purchased, secondary ticketing services (such as allow for the resale of tickets between consumers. On the secondary market, prices may fluctuate considerably. The secondary ticketing service provider also charges a fee for each sale.

C. Hello, Goodbye: Recent Industry Developments

For a litany of reasons, sales of physical albums have declined precipitously from levels seen at the turn of the century. Per Nielsen SoundScan, total album sales in 1999 reached 755 million—648 million from CDs and 105 million from cassettes.[6] By 2009, total album sales had dropped to 374 million.[7] Digital sales, which accounted for 40% of all music purchases in 2009, are increasing but have not yet replaced the losses incurred from declining physical sales. Conversely over the same time period, revenue from live performances has been steadily increasing. Even with ticket prices on the rise, concert attendance is growing. Artists used to go on tour to promote album sales, but now the relationship has flipped. In 1999, Millenium by the Backstreet Boys was the top selling album, generating $187 million in sales.[8] The Backstreet Boys’ touring revenues however only came to $37.1 million.[9] In contrast, U2’s record-breaking 2011 tour grossed $156 million in ticket sales, while the band pulled in a mere $4.8 million from combined album and digital sales.[10] Another significant trend the music industry has recently experienced is the emergence of “360 deals.” While the proliferation of these deals may seem revolutionary, this is not an altogether unexpected phenomenon. For years, record companies were models of vertical integration, providing artists with distribution, marketing, promotion, production and other services that were crucial to commercial success. Artists dreamed of signing “the big record deal,” seeking a big company to provide them with everything needed to release a successful album, since that used to translate into financial success. There is a well-documented history of artists agreeing to long-term contracts with the biggest labels, pursuing lucrative upfront advances and instant celebrity. The recent change has not been the behavioral pattern of artists, but rather that companies on the live performance side of the industry have begun consolidating their many roles. Artists still demand one-stop shopping, and with touring replacing album sales as the primary source of revenue, the major entities in the concert business are developing their capacity to supply those services.

D. Come Together: Live Nation, Ticketmaster, and the Merger

Live Nation and Ticketmaster were the two premier examples of increasingly vertically integrated firms in the live performance industry. Each had a history of pursuing vertical integration by acquiring companies in complementary markets. The merger of these two firms demonstrated their commitment to this strategy.
1. Live Nation: History and Strategy
Live Nation was principally a promotion company that started in the late 1990s as SFX Entertainment. Around 1997, SFX Entertainment began acquiring competing major promoters around the country to develop a national network. As SFX expanded, it introduced the practice of exclusively promoting significant portions, or even the entirety, of an artist’s national tour. Previously, artists (via their booking agents) would contract with individual local promoters in the regional markets where they wished to perform. In 2000, Clear Channel bought SFX and renamed it Clear Channel Entertainment.[11] Over the next few years, Clear Channel Entertainment significantly increased its share of the concert promotion market and acquired exclusive rights (via sale or contract) to numerous prestigious amphitheaters and other performance venues across the country. In 2005, following antitrust investigations, Clear Channel was forced to spin off Clear Channel Entertainment as a new entity, Live Nation. In 2008, Live Nation boasted that it was “the largest producer of live concerts in the world, annually producing over 16,000 concerts for 1,500 artists in 57 countries.”[12] In the United States alone, Live Nation owned 18 venues, held leases on 70 more, and operated many beyond that. Live Nation also owned or operated approximately 90% of the amphitheater venues in the United States. Additionally, Live Nation’s subsidiaries held booking rights for 159 venues around the world, and their events represented between 35-58% of all concerts, depending on the estimate.[13] In addition to achieving horizontal integration through the acquisition of competitors, Live Nation began to expand its reach vertically as well. In 2006, Live Nation acquired MusicToday, an online retailer for music merchandise. Although Live Nation was a longtime Ticketmaster client, in 2008 Live Nation announced that it would partner with CTS Eventim (Europe’s largest ticket distributor) to create its own ticket distribution platform. This platform was expected to compete directly with Ticketmaster in the market for primary ticketing services.[14] That same year, Live Nation also announced an agreement with SMG, a venue operator and former Ticketmaster client, to provide ticketing services for SMG venues. Live Nation has drawn antitrust scrutiny and allegations of engaging in anticompetitive behavior on multiple occasions. A set of class action lawsuits commencing in 2002 claimed that Clear Channel (prior to divesting Live Nation) restricted airplay on its radio stations for artists that competing promoters had booked.[15] A 2009 claim brought by an independent promoter claimed that Live Nation engaged in anticompetitive tying arrangements by leveraging its venues and promotional services, illegally monopolizing markets for amphitheater venues and promotional services, and denying competitors access to major artists (a “critical input”).[16] After the merger, in 2011, a separate class action by concertgoers claimed that Live Nation imposed mandatory parking fees as a form of illegal tying.[17]
2. Ticketmaster: History and Strategy
Ticketmaster offers integrated, full-service ticket distribution, which includes online sales, retail outlets, call centers and venue box office operations. In its early years, Ticketmaster competed with Ticketron, another primary ticket distribution service provider. With superior online technology and service, Ticketmaster surpassed and eventually acquired Ticketron. Over the past decade, has grown into one of the five largest e-commerce sites in the world, with over 26 million unique visitors each month.[18] Ticketmaster has also demonstrated a predilection for pursuing vertical integration. In 2008, Ticketmaster acquired Front Line Management Group. Front Line is the world’s leading artist management firm, representing over 250 artists.[19] Ticketmaster also acquired Paciolan, a leading supplier of ticketing software, as well as TicketsNow and GetMeIn, which offer secondary ticketing services. Both Ticketmaster and its subsidiary Front Line have distinct histories of acquiring rivals and companies in complementary markets. Ticket buyers and artists have launched a bevy of complaints over the years alleging that Ticketmaster charges excessive fees on primary ticket sales as a result of its monopoly power.[20] Pearl Jam was involved in a very public (if ultimately fruitless) spat with Ticketmaster over excessive service fees in the mid-1990s.[21] In 2003, The String Cheese Incident and its associated booking group claimed Ticketmaster had abused its market power by denying the group a customary percentage of the tickets to a concert through the use of exclusive contracts.[22] In another case which began in 2003, the Superior Court of California granted class certification on allegations that Ticketmaster misrepresents or omits the fact of a profit component in its shipping and processing fees.[23] Immediately preceding the merger with Live Nation, Ticketmaster faced public outcry and claims that it had conspired to divert tickets for popular events directly to TicketsNow, where tickets were sold at substantially higher prices.[24] A series of class action complaints regarding this alleged behavior were filed in Canada in February 2009, and later settled in February 2012.[25]
3. The Merger Investigation and Consent Agreement
On February 10, 2009, Live Nation and Ticketmaster entered into an agreement under which they would merge into a new entity called Live Nation Entertainment. The companies joined in a tax-free, all-stock merger with a combined enterprise value of approximately $2.5 billion.[26] Over the course of the following year, the DOJ conducted an investigation into the effects the merger might have on competition. A number of competitors and interested parties submitted comments opposing the merger.[27] Ultimately, the DOJ found that the merger would substantially decrease competition in primary ticketing services for major concert venues. To allay this concern, on January 25, 2010, the DOJ and the parties entered into a consent agreement that would permit the merger provided that specific measures were taken to address the effect on the primary ticketing market. Although the DOJ’s Competitive Impact Statement said its only concern was the primary ticketing market, their remedies and analysis touched on other potential anticompetitive effects.[28] These secondary concerns will be discussed in Part II, infra. The ten-year consent agreement—still in effect—includes both structural and behavioral remedies. Ticketmaster agreed to license its ticketing software to AEG, the second leading promoter in the United States, and to divest its Paciolan division to Comcast-Spectacor, one of Ticketmaster’s competitors in the primary ticketing services market.[29] The consent agreement also prohibits LNE from misusing proprietary ticketing information.[30] Promoters that were Ticketmaster clients would be at a significant disadvantage if their chief rival, Live Nation, were privy to such sensitive information, so LNE is restricted from sharing this information between their ticketing and promotion operations. The agreement also stipulates that Ticketmaster provide these clients with a copy of this information should the clients decline to renew their contracts with Ticketmaster.[31] Further, the agreement forbids LNE from engaging in retaliatory measures against competitors, which might occur via anticompetitive tying practices involving their venues, ticketing services, promotional services and Front Line-managed artists.[32] To enforce the agreement, the DOJ established a new Compliance Committee to monitor industry developments and encourage consumers and competitors to report violations. The Committee is authorized to interview employees of the firm and demand corporate documents regarding matters relating to the consent decree.[33]

II. The Department of Justice’s Antitrust Analysis

The Clayton Act prohibits combinations and acquisitions where “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”[34] A central tenet of antitrust law is that effective competition drives prices towards marginal costs, spurring innovation, incentivizing efficiency, and benefiting consumers. The antitrust analysis resulting from the DOJ’s investigation into the Live Nation-Ticketmaster merger formed the basis for the consent order and the remedies included therein. This section will scrutinize the DOJ’s antitrust analysis and examine alternative theories the DOJ should have considered.

A. Jigsaw Puzzle: Horizontal Components of the Merger

The focus of the DOJ’s antitrust analysis was the market for primary ticketing services, the sole significant market in which Ticketmaster and Live Nation both already participated and where they had been chief rivals. When Live Nation partnered with CTS Eventim to enter the primary ticketing services market, it became Ticketmaster’s fiercest competitor. The merger threatened to eliminate this significant competitive force.
1. The Market for Primary Ticketing Services
A proper analysis of the horizontal effects of this merger must begin with a definition of the competitive market at stake. A standard test for appropriate market definition, the “SSNIP test,” entails identifying a set of products or services over which a hypothetical monopolist (i.e. the merged firm) could profitably impose a small but significant and non-transitory increase in price. For the merger at hand, the relevant market included major concert venues and primary ticketing service providers.[35] If a monopolist in this market were to impose a SSNIP above the otherwise competitive pricing level, major concert venues would not be able to freely substitute an alternative. Venues must provide a primary ticketing service to consumers, and there are no viable alternatives to providing such a service outside of the identified market. In the market for primary ticketing services, sellers are able to price discriminate among different venues, as contracts between ticketing companies and venues are individually negotiated and typically prohibit the resale of those services.[36] Price discrimination could therefore result in the merger affecting each class of venues differently. Hence, the antitrust analysis focused on venues with few alternate service providers because the merger could disproportionately disadvantage such venues. The analysis found that the venues most affected by this merger were major concert venues.[37] These venues require sophisticated ticketing services that can withstand heavy transaction volume and complex marketing and distribution needs.[38] Only a limited set of firms was capable of providing these specialized services and fewer still had the proven track record that these venues desired. Live Nation and Ticketmaster were both among this select group. Defining the market at issue also requires examining geographical boundaries. For this merger, the relevant geographic market was the United States.[39] Although foreign ticketing services could potentially enter into the domestic market, at the time of the merger they were not significant market participants and have still not exerted much competitive influence within the domestic market. Therefore, the relevant market was defined as major concert venues within the United States. Once the market is defined, market participants must be identified and their respective market shares need to be calculated. Ticketmaster has long been the dominant supplier of primary ticketing services to major venues, with over an 80% market share before 2009.[40] In fact, in 2008 no other firm held more than a 4% share.[41] In the months preceding the merger, Live Nation declined to renew its contract with Ticketmaster and began to compete in primary ticketing services. According to TicketNews, the power scores (a market share approximation using an estimation of actual transactions) of and at the end of August 2009 were 60.32 and 16.02, respectively.[42] Using these power score figures, the Herfindahl-Hirschman Index (HHI)—a metric used by the DOJ as well as the Federal Trade Commission since 1982 to measure market concentration—for this market was nearly 4,000 prior to the merger, even ignoring all other firms.[43] The DOJ-FTC 1992 Horizontal Merger Guidelines regard a market with a HHI greater than 1,800 as “highly concentrated.”[44] The Merger Guidelines declared that a merger is presumed “likely to create or enhance market power” if it increases the HHI of a highly concentrated market by more than one hundred.[45] Based on the power score figures, this merger increased the HHI by almost two thousand. Although this illustration omits important parts of the market, such as companies that enable self-distribution, the merger still presented significant concerns under traditional horizontal merger analysis. However, calculating the HHI of a potential merger produces only a presumption of market power. It does not constitute a full analysis of the effects the transaction could have on competition. Accordingly, the DOJ has stated that the calculation of market shares and concentration ratios “provide only the starting point for analyzing the competitive impact of a merger.”[46] Importantly, the presumption that the merger is likely to increase market power does not necessarily indicate that the merged firm will, or has the ability to, act anticompetitively. One key factor the HHI calculation does not take into account is potential competitors not presently participating in the market. A hypothetical price increase by the merged firm could entice outsider firms to enter the market, making the price increase unsustainable. However, in the primary ticketing market, substantial barriers to entry prevent potential entrants from supplying a competitive check on LNE’s behavior. The DOJ identified a number of these barriers to entry in its investigation of the merger. Providing ticket distribution services to major concert venues requires platforms that are technologically complex and expensive to develop.[47] The high fixed costs necessary for developing and maintaining such platforms are especially problematic for potential entrants because they exacerbate the difficulty of achieving sufficient scale to provide effective market competition.[48] Furthermore, after years of operating at an impressive scale, LNE has unparalleled access to individual consumer data. The firm can leverage this data to provide marketing services that others could not initially offer venues.[49] Other aspects of Ticketmaster’s business model also discourage market entry. Ticketmaster regularly uses medium- to long-term exclusive contracts with venues (averaging six years in duration), with approximately twenty percent of these contracts expiring each year.[50] These contracts limit how quickly another firm could obtain a competitively effective scale. Venues also incur costs to install and teach employees to use new platforms; these costs act as counterincentives to the venue switching its primary ticketing service provider.[51] To evade these prohibitive cost barriers, new entrants might adopt software platforms that offer cheaper, yet effective, online distribution alternatives.[52] The licensing of web-based ticketing platforms involves extremely low marginal costs, which may help attract potential entrants. However, this would still not avoid the scale effects and costs to venues of switching service providers. Even firms already engaged in the business of ticket distribution face barriers to real competition for major concert venues. The major venues have complex ticketing needs, such as a high volume of sales upon initial ticket availability, and accordingly can be extremely reluctant to sign long-term deals with unproven ticketing companies. The slightest hiccup in primary ticketing services can produce disastrous effects for a venue, so a track record of reliability is a prized commodity.[53] Ticketmaster has established a strong reputation for capably providing complex ticketing solutions. Immediately prior to the merger, Live Nation, in an effort to establish a reputation for its own ticketing platform, was attempting to build experience handling ticketing services for its own venues. As the DOJ stated in its Competitive Impact Statement assessing the merger, “[n]o primary ticketing company other than Ticketmaster and Live Nation has amassed or likely could have amassed in the near term sufficient scale to develop a reputation for successfully delivering similarly sophisticated primary ticketing services.”[54] The DOJ recognized that potential entrants would be hard-pressed to convince venues to gamble on unproven ticketing partners that may encounter growing pains. The DOJ identified one firm who could potentially provide direct competition in the primary ticketing services market: CTS Eventim, a German ticketing firm. While the DOJ pointed to Live Nation’s agreement with CTS as evidence that former Ticketmaster clients could emigrate to newer competitors, the merger itself showed that such competition was not yet viable on a significant scale.[55] After Live Nation explored engaging in direct competition with Ticketmaster via licensing CTS software and adapting it to the North American market, it decided to forego this option. According to LNE’s own 10-K filing, the company terminated its agreement with CTS because the German firm “fail[ed] to deliver a North American ticketing system that met the contractual requirements of being a ‘world class ticketing system . . . that fits the needs of the North American market.’”[56] While new competitors may be better equipped to compete with LNE in the primary ticketing market, CTS was the most likely entrant and most viable competitor at a significant scale. Live Nation’s decision to join, rather than compete, was at least partially motivated by a lack of competing services capable of rivaling Ticketmaster’s dominant platform. One consideration the DOJ omitted from its analysis was the potential for substitution, specifically in the form of self-distribution. Rather than contract out to Ticketmaster or Live Nation for primary ticketing services, venues could turn, and have turned, to companies that offer software solutions that enable venues to handle ticket distribution in-house. Even with a dearth of effective competitors in the market for third-party ticketing services, were LNE to significantly raise prices for its ticketing services, venues in that market could substitute this in-house distribution option. In fact, a number of former Ticketmaster clients did just that.[57] Companies that offer these services have already developed the capacity to serve major venues and thus face fewer cost barriers to entry. This in-house option provides at least a plausible restraint on the sustainability of potential price increases from LNE.
2. The Market for Integrated Service Packages
The second horizontal concern the DOJ identified in its analysis of the merger was the effect on the market for vertically integrated service packages.[58] The DOJ noted that prior to the merger, both companies strove to supply a package that included both primary ticketing services and access to concert content.[59] Live Nation was able to offer this bundle (at least implicitly) when it entered the primary ticketing services market, and showed it could serve both the ticketing and promotional needs for venue clients.[60] In response, Ticketmaster acquired a majority stake in Front Line, allowing Ticketmaster to grow its capacity to offer its own ticketing and concert content package.[61] As the DOJ explained, “the merged firm’s ability to bundle primary ticketing services (implicitly or explicitly) with access to artists managed by Front Line and/or promoted by Live Nation would require competitors to offer venues both primary ticketing services and access to content in order to compete effectively.”[62] In 2009, the American Antitrust Institute published an article alleging that “[i]f the merger is consummated, firms seeking to enter the market would, to an even greater extent than at present, need to enter on several levels at once,” which would serve as a significant barrier to entry.[63] The issue was not that the firms engaged in bundling—which the DOJ did not deem anticompetitive behavior—but that save for the merger, the companies would have competed with each other in a newly minted market for integrated service-and-content packages. The DOJ should have expanded on this insight. For a brief few months, Live Nation had spurred Ticketmaster into a new arena of competition—albeit one which included only these two firms—forcing both Ticketmaster and Live Nation to experiment with innovative business models that championed vertically integrated services. Regardless of whether this development is characterized as having birthed a new market or having transformed the existing one, the two firms were nevertheless engaged in productive competition. Based on the companies’ respective histories of pursuing vertical integration, the DOJ anticipated that both would have continued on this path, save for the merger. The DOJ surmised that, “but for the proposed transaction, venues and concertgoers would have continued to enjoy the benefits of competition between two vertically integrated competitors.”[64] Notably, the merger proposal itself evidenced the intentions of both Live Nation and Ticketmaster to pursue vertical integration. The firms were not mirror images, as they were direct competitors only in the individual market for primary ticketing services. Aside from primary ticketing services, each firm had access to markets that the other had yet to penetrate, suggesting that Ticketmaster and Live Nation, respectively, were significant and likely entrants into a number of markets in which the other already participated. Competition likely would have spurred the firms to expand into these complementary markets. For instance, Live Nation could have entered (via acquisition) the markets for artist management and/or secondary ticketing. Conversely, Ticketmaster could have entered the markets for promotions and/or merchandising. Even if they never actually entered those markets, the standing threat of entry would have exerted significant competitive effects on those markets.[65] These complementary markets may have been competitive in their own right, but the merger eliminated significant potential competition in each of them. The DOJ should have recognized that two vertically integrated competitors, each with a history of pursuing vertical integration, were well-positioned to compete or threaten to compete in complementary markets.[66]

B. All Down The Line: Vertical Components of the Merger

Vertical mergers, and the vertical components of mergers, have historically received lower antitrust scrutiny than their horizontal counterparts. Enforcement agencies rarely view these types of mergers as posing competitive risks since they are most often motivated by efficiency concerns rather than efforts to grow or maintain market power.[67] Nevertheless, certain vertical behaviors still draw antitrust scrutiny. Vertical combinations and agreements can be illegal if they injure the competitive process. The “principal concern with vertical transactions is the possibility that companies will be denied significant access to suppliers and customers.”[68] The Financial Times, considering the Live Nation – Ticketmaster merger in 2009, opined that a vertically integrated firm “running the entire process… would stifle competition. This would work against fans in the longer term, no matter what innovations were on offer initially.”[69] The DOJ neglected to include potential anticompetitive effects arising from the vertical components of the merger in its analysis, but did address some of these concerns by imposing behavioral remedies in its Final Judgment.
1. Anticompetitive Concerns of Vertical Integration
The Ticketmaster-Live Nation merger implicated some of the worrisome behaviors associated with vertical integration. One such behavior relating to the vertical components of this merger was anticompetitive tying or bundling practices. Although most tying is lawful, courts have held parties liable for “anticompetitive forcing,” where a firm coerces buyers of the tying product to also buy the tied product.[70] For example, here the concern was that LNE could require that venues exclusively book Live Nation artists (the “tied” product) as a condition for access to Ticketmaster’s ticketing services (the “tying” product).[71] Mere bundling, however, is often a desirable procompetitive behavior, which does not violate federal antitrust laws.[72] For a tying practice to be considered anticompetitive, the firm must use its market power in the tying market to coerce buyers to purchase the firm’s products or services in the tied market for reasons unrelated to the quality or price of the products offered.[73] Traditional industrial organization economics suggest that this strategy often makes little economic sense, as the firm would prefer to market its monopolized product independently.[74] Yet, there is reason to believe that in the primary ticketing services industry, LNE might have sufficient incentive to pursue this anticompetitive strategy. Competitors have asserted that, prior to the merger, Live Nation unlawfully tied the purchase of its promotional services to the use of its venues and venue services, with the intent to foreclose competing promoters and venues from accessing major artists.[75] Live Nation was (and remains) the only promoter capable of booking an artist’s entire national tour—its competitors tend to be concentrated in local markets—arguably providing Live Nation with substantial market power on its own (an issue distinct from the immediate merger). Live Nation could exert its market power to coerce artists not to partner with a competing regional promoter or venue. Without access to artists, these smaller rivals cannot compete effectively, giving Live Nation sufficient incentive to tie its products as a means of further entrenching its dominance in promotions and choking off competition in the market for venues. The merger could aggravate this concern, affording LNE increased leverage (in its superior market position in ticketing services) to persist in this exclusionary strategy. LNE incurred operating losses of $203.8 million, $70.4 million and $161.9 million in 2010, 2011 and 2012, respectively, possibly indicating an anticompetitive strategy of offering artists and venues unsustainable supercompetitive prices in order to exclude and eliminate competitors.[76] On the other hand, neither Live Nation nor Ticketmaster has yet been found liable for such conduct, as the IMP suit is still pending. In its response to public comments regarding the proposed final order in the DOJ’s investigation, the DOJ expressed doubts that Live Nation wields the significant market power alleged.[77] If the DOJ is correct, concerns over anticompetitive tying are purely speculative. However, the DOJ did specifically account for the increased potential for coercive tying in its behavioral remedies, in the form of anti-retaliation provisions.[78] Retaliation represents the enforcement or punishment side of anticompetitive tying offers.[79] Another antitrust concern relating to the vertical components of this merger was the use of exclusive contracts. Long-term exclusive contracts can be used by firms with strong market power to prevent competitors from entering a market, an anticompetitive practice that may violate sections 1 or 2 of the Sherman Act.[80] Ticketmaster has been accused of using such contracts to foreclose rivals in precisely this manner.[81] Likewise, Live Nation has been accused of abusing exclusive dealings contracts to foreclose competition.[82] However, the use of exclusive agreements is generally seen as efficient, procompetitive conduct.[83] Finally, a number of competing independent promoters related concerns that the merger would give Live Nation access to their proprietary information. As a primary ticketing service provider, Ticketmaster has access to this information as a result of its independent contracts with venues. Seth Hurwitz, a prominent independent promoter, described this issue in his testimony before the Senate subcommittee, explaining, “my biggest competitor will have access to all of my sales records, customer information, on sale dates for tentative shows, my ticket counts, they can control which shows are promoted and much more. This will put ALL independent promoters at an irreparable competitive disadvantage.”[84] The DOJ directly addressed this problem in the Final Judgment through a firewall provision.[85]
2. The Firms’ Asserted Procompetitive Justifications
Vertical mergers are generally presumed procompetitive, but courts and enforcement agencies still inquire into the particular efficiency gains asserted by the merging parties. In this case, the DOJ refused to credit a number of LNE’s asserted efficiencies. The DOJ’s Merger Guidelines require that the claimed efficiencies be merger-specific and non-speculative; the burden of substantiating the claims is imposed on the merging firms.[86] Ultimately, “if cognizable efficiencies are of a character and magnitude such that the merger is not likely to be anticompetitive in any relevant market,” the DOJ will not challenge the merger.[87] The press release announcing the merger of Ticketmaster and Live Nation claimed that the firms anticipated “approximately $40 million of operating synergies through the combination of their ticketing, marketing, data centers and back-office functions.”[88] A few weeks later, the CEOs of the two companies—Michael Rapino (Live Nation) and Irving Azoff (Ticketmaster)—outlined the benefits of the merger during a congressional hearing.[89] According to Azoff, “[i]t is designed to address the obvious inefficiencies in the supply chain — the large volume of unsold tickets to events, higher costs, surcharges and the explosion of the resale market.”[90] The DOJ largely rejected the procompetitive efficiencies claimed, explaining that the parties “could realize many of the asserted efficiencies without consummating the proposed transaction,” pointing to the fact that each company had already started to pursue strategies of vertical integration before the merger agreement.[91] The DOJ debunked claims of increased innovation by describing how a vertically integrated monopolist is actually less likely to innovate and yield efficiency gains than two competing firms would be. The DOJ also noted that a pair of competing firms had a greater likelihood of passing these advantages on to consumers.[92]

C. Under My Thumb: The DOJ’s Final Judgment

After weighing the anticompetitive effects and the firms’ procompetitive justifications, the DOJ determined that the merger could not proceed as proposed. In its Final Judgment, the DOJ allowed the merger, provided that certain steps were taken to alleviate the anticompetitive effects on the primary ticketing services market.[93] The remedies stipulated therein indicate the DOJ’s concern with horizontal effects in the market for vertically integrated services. However, the Final Judgment neglected to address how the merger extinguished the competitive effects of having potential entrants to complementary markets (promotions, artist management, etc.). With its proscription against retaliation, the DOJ subtly attempted to remedy the increased potential for LNE to engage in anticompetitive exclusive dealings and coercive tying.[94] In sum, although the DOJ spoke warily of the anticompetitive effects of the merger and discredited the parties’ explicit procompetitive efficiency claims, it nevertheless allowed the merger to proceed. While the Final Judgment was an effort to quell the DOJ’s antitrust concerns and produce effective competitive markets, as the next section will explain, that effort fell short.

III. Remedies

The DOJ’s Final Judgment employed a hybrid solution to address the anticompetitive concerns raised by the merger, including both structural and behavioral remedies. This section will argue that the structural remedies implemented were insufficient to cure the anticompetitive ills. Furthermore, in employing a then-novel enforcement strategy of imposing behavioral restrictions along with structural fixes, the DOJ imprudently neglected to address a number of concerns inherent with behavioral remedies in general. In the case of the behavioral restrictions on the Live Nation-Ticketmaster merger, those concerns are particularly apparent.

A. I Want To Break Free: Structural Remedies

The primary distinction between structural and behavioral remedies is that structural remedies create or preserve independent firms to maintain market competition, while behavioral remedies permit integration, subject to operating rules that aim to prevent the newly formed firm from undermining competition post-merger.[95] Historically, structural remedies have been preferred in addressing antitrust concerns over proposed mergers. The DOJ’s 2004 Antitrust Division Policy Guide to Merger Remedies (“2004 Guide”) stated that structural remedies, compared to behavioral remedies, “are relatively clean and certain, and generally avoid costly government entanglement in the market.”[96] The DOJ followed this preference in many merger investigations, both before and after publication of the 2004 Guide.[97] A number of studies, including reports by the FTC as well as European and Canadian agencies, have examined the strengths and limitations of structural remedies, concluding that they have been “largely effective —and superior to alternatives—in accomplishing their stated goal.”[98] The DOJ viewed decreased competition in the market for primary ticketing services as the primary evil presented by the Live Nation-Ticketmaster merger, and imposed two structural remedies to combat it. First, the DOJ sought to establish AEG as a viable, vertically integrated competitor in the primary ticketing services market because it was LNE’s most likely competitor. The DOJ required LNE to grant AEG a perpetual license of its Host ticketing platform, believing this would fill the market’s competitive void.[99] Second, the DOJ wanted to “establish another independent and economically viable competitor” in the primary ticketing services market and thus directed the divestiture of Ticketmaster’s Paciolan division to Comcast-Spectacor.[100] In February 2011, one year after the DOJ closed its merger investigation, AEG announced that rather than implementing Ticketmaster’s Host platform, it would be partnering with Outbox Enterprises.[101] Prior to the merger, AEG had been a Ticketmaster client. As the prime competitor affected by the merger, it follows that AEG sought to replace Ticketmaster as the provider of its in-house ticketing services and compete with LNE in that market generally. The fact that AEG chose Outbox over the DOJ-prescribed Host platform shows that this structural remedy had no appreciable effect on competition in this market. The intended effect of this remedy was to provide a competing platform seller. By rejecting the option to license the Host platform, AEG nullified any possible remedial effect on the competitive imbalance that concerned the DOJ. Conversely, the AEG-Outbox partnership demonstrated that competing promoters and venues may have more options available to fulfill their ticketing needs than the DOJ anticipated. Outbox, which operates on a venue’s website as opposed to a ticket company’s site, allows venues more power and control over customer service, and the venue retains consumer data and profiles without any third party involvement.[102] Other ticketing service purveyors have lauded this approach as embracing innovation and opening the door for viable competition.[103] In the wake of the merger, other competing venues have followed suit, so as not to provide business to LNE.[104] However, as promising as these developments may be with regard to increased innovation and competition in the primary ticketing services market, it remains unclear whether these cases are examples of a trend or temporary aberrations. If the newcomers prove sustainable, they may obviate the need for the DOJ’s structural remedies altogether. Prior to the merger, Ticketmaster’s usual renewal rate with venue clients was higher than 85%.[105] In 2010, the rate increased to 95%.[106] According to LNE’s Supplemental Operational and Financial Information, Ticketmaster “again achieved a net renewal rate of over 100% for 2012.”[107] In the company’s 2012 year-end financial report, it showed growth of 3.6% and 5.6% for the adjusted operating incomes of its concerts and ticketing divisions, respectively, over the previous year. Since 2010, the firm’s revenue has increased from $5.1 billion in 2010, to $5.4 billion in 2011, to $5.8 billion in 2012.[108] LNE has also continued to pursue its strategy of acquiring competitors.[109] Furthermore, Outbox and other upstart challengers have only just reached a scale where they can compete, so it remains to be seen whether their new technologies will prove viable substitutes. To truly exert a competitive influence on the market, the firms will need to attract more than just sympathetic (or vindictive) venue clients. These upstarts will need to prove that they can provide reliable service for venues with various capacities and ticketing needs. Until they do, current Ticketmaster clients will be reluctant to risk a change by implementing unproven software, no matter how innovative.

B. Don’t Stop Me Now: Behavioral Remedies

Behavioral or “conduct” remedies allow merging parties to consummate the deal, subject to conditions on their operational behavior. The aim is to create room for the procompetitive efficiencies gained from the merger while regulating anticompetitive behavior that the newly-merged firm might pursue.[110] Naturally, this creates a tension with the firm’s profit-maximizing incentives. A number of significant concerns derive from this tension and therefore behavioral remedies must be supplemented with continuous oversight of the firm’s conduct.[111] Such oversight is analogous to the work of a regulatory body; hence conduct remedies face shortcomings similar to those associated with industry regulation.[112] These shortcomings include informational asymmetries, vagueness, inconsistent incentives, implementation costs, and enforcement problems. The 2004 Guide warned that behavioral remedies are typically “more difficult to craft, more cumbersome and costly to administer, and easier than a structural remedy to circumvent.”[113] Firewalls, fair-dealing, and transparency provisions were all characterized as posing “substantial policy and practical concerns,” requiring considerable resources to oversee and carrying potential for “harm as well as good.”[114] Nevertheless, the DOJ’s Final Judgment imposed a set of behavioral remedies including anti-retaliation and firewall provisions as well as establishing a Compliance Committee. These remedies implicate a number of the general concerns with behavioral remedies and regulation. The anti-retaliation provisions of the consent agreement demonstrate the asymmetry of information between the firm and its regulating agency. In the Final Judgment the DOJ defined retaliation as
[R]efusing to Provide Live Entertainment Events to a Venue Owner, or Providing Live Entertainment Events to a Venue Owner on less favorable terms, for the purpose of punishing or disciplining a Venue Owner because the Venue Owner has contracted or is contemplating contracting with a company other than Defendants for Primary Ticketing Services. The term “Retaliate” does not mean pursuing a more advantageous deal with a competing Venue Owner.[115]
It is readily apparent that this definition may be subject to multiple interpretations, with the inquiry into a retaliatory action resting on a determination of the firm’s motives. The firm is considerably better positioned than the agency to know or obtain knowledge as to the motivation driving a particular business decision. This inherent informational disadvantage leaves the agency in the uncomfortable and ineffective position of deferring to the firm’s proffered explanation for engaging in the behavior in question.[116] Even a marginally clever company can understand this flaw and manipulate evidence to support a permissible motive. When the proscribed behavior is vague and motive-dependent, this type of remedy does mere lip service to actual behavioral modification. The firewall provisions of the consent order present another significant flaw with behavioral remedies: countervailing incentives. Although the DOJ prohibited LNE’s ticketing service from sharing sensitive promotional and consumer data with LNE’s promotional arm, the company’s profit-maximizing incentives run counter to this firewall. Hence, LNE will consistently be confronted with opportunities to misuse the firewalled information.[117] The firm is thereby incentivized to subvert the restrictions and avoid detection; such behavior is illegal, socially inefficient and, more importantly, undermines the effectiveness of the firewall provision.[118] Inconsistent incentives have a similar effect on the aforementioned anti-retaliation provisions, which require LNE to forego the full exertion of its vertical integration leverage. In effect, LNE is directed to “leave money on the table,” which will only encourage the company to exploit the vague boundaries of the consent order and find ways to circumvent the restrictions.[119] Behavioral remedies also carry significant costs to implement. Conduct restrictions must be monitored, interpreted, and enforced at the expense of the DOJ. This expense may be substantial and will draw resources from the agency’s total budget. In 2010, the Federal Energy Regulatory Commission (“FERC”) and Federal Communications Commission (“FCC”) each spent close to 15% on oversight and enforcement expenses.[120] The DOJ also has to develop an expertise in regulatory oversight and the appropriate accompanying structure, requiring institutional changes and associated personnel costs.[121] When behavioral remedies are compared with traditional regulation, additional enforcement challenges come to light. Where traditional regulators such as the FERC or the FCC have broader powers to restrict a firm’s conduct, the procedural and control rights of the DOJ are limited to ensuring compliance with consent orders.[122] The DOJ is also limited to ex post intervention for a limited term, rather than being afforded ex ante authority.[123] Finally, behavioral remedies enhance the risk of agency capture, through increased interactions between the large firm and the government enforcers.[124] LNE will have strong incentives to lobby agencies and legislative bodies for certain types of behavioral restraints that allow the firm to pursue its natural profit-maximizing tendencies.[125] The ineffective consent order constraining LNE in this case may be a good example of this sort of lobbying at work. LNE had considerably more lobbying resources than any of its competitors and the Final Judgment employed a then-novel enforcement strategy that, as I have explained, was largely ineffective in restraining LNE’s conduct. The DOJ has its own interests in effective enforcement, but in the end the agency is a political entity.


The Department of Justice recognized anticompetitive harm stemming from the horizontal components of the Ticketmaster-Live Nation merger, specifically within the primary ticketing services market. However, it did not adequately identify the serious potential harms involved in the combination of two vertically integrated competitors in the live music industry. The DOJ also ignored the loss of significant potential entrants to the various markets complementing ticket distribution. Although the DOJ refused to credit many of the merging parties’ procompetitive efficiency claims, it failed to recognize the perils associated with the vertical components of the merger. Ultimately, the DOJ settled on structural remedies to address the horizontal concerns in the primary ticketing services market and instituted behavioral remedies to placate distressed competitors. The remedies imposed by the DOJ as conditions to the merger’s approval were insufficient to maintain or stimulate competition. The Paciolan divestiture transferred a small slice of the market share for primary ticketing services to a legitimate, vertically integrated competitor, Comcast-Spectacor. However, Comcast does not participate in the other complimentary markets involved in the live music industry, save for a few sports arenas. Furthermore, granting a favorable license of the Host software to AEG was rendered completely ineffective by AEG’s decision to partner with Outbox Technologies instead. Only after years of successful, reliable, large-scale service by innovative competitors, will a substantial number of major concert venues decide to risk a partnership with market newcomers such as Outbox or Ticketfly. Until such time, or until a competitor attains a significant market share in a bundle of complementary fields, LNE will stand alone as the dominant firm in the market for vertically integrated live music services. Most importantly, the DOJ missed a glaring opportunity to restructure a nascent industry. It should have recognized the burgeoning trend toward vertical integration in the live music industry, with two market leaders forging the way. Artists are growing increasingly reliant on touring income to support their careers and historically have been inclined to utilize one-stop shopping.[126] Vertically integrated firms like Ticketmaster and Live Nation stood ready to replace record companies in providing these services, capable of signing artists to lucrative 360 deals. Thus it seemed inevitable that Ticketmaster and Live Nation would become each other’s chief competitor, lowering prices for consumers, spurring innovation and generating efficiencies. Now, as a single firm, such benefits remain unrealized and LNE stands alone in its capabilities. The merger of Ticketmaster and Live Nation had an undeniable impact on the live music industry. Artists and competing service providers would all likely be better off had the DOJ prevented the merger and forced the firms to compete. Now it is up to the market to recognize the trends set by LNE and take advantage of a reconfigured landscape. Competitors in primary ticketing should take advantage of new technology to establish a reputation for reliability with new clients and eventually erode LNE’s dominance in the market. Other entities in the music industry, such as record labels, should follow LNE’s lead in creating full-service packages that center on live performances. The concert industry provides fertile ground for profitable competition in this new market and enterprising challengers would be wise to seize this opportunity.
* J.D., 2013, New York University School of Law; B.A., 2009, University of Maryland. This Article was originally written for Prof. Daniel Rubinfeld’s seminar on Antitrust Law and Economics. I would like to thank Prof. Rubinfeld and the members of the JIPEL staff for their assistance with this Article.
[1] Live Nation, Ticketmaster Announce Merger, Pollstar (Feb. 2, 2009),
[2] See, e.g., Daniel Kreps, Bruce Springsteen “Furious” At Ticketmaster, Rails Against Live Nation Merger, Rolling Stone (Feb. 4, 2009),; Cecilia Kang, Senator Urges Scrutiny of Ticketmaster Deal, Wash. Post (July 28, 2009) (referring to Sen. Herb Kohl),; Alfred Branch Jr., Ticketmaster/Live Nation merger: Pascrell letter to Justice Department yields impressive numbers, Ticket News (July 29, 2009) (referring to Rep. Bill Pascrell),
[3] Timothy B. Lee, Why We Shouldn’t Worry About The (Alleged) Decline Of The Music Industry, Forbes (Jan. 30, 2012),
[4] Steve Jones, 2010 wasn’t exactly rocking for the music concert industry, USA Today (Jan. 12, 2011),
[5] Complaint at ¶¶ 53-54, It’s My Party, Inc. v. Live Nation, Inc., No. 109CV00547, 2009 WL 1473260 (D. Md. Mar. 5, 2009) [hereinafter “IMP Complaint”].
[6] Nielsen SoundScan is the official method of tracking sales of music throughout the United States. SoundScan 1999 Year-End Music Industry Report, (Jan. 6, 2000),
[7] The Nielsen Company 2009 Year-End Music Industry Report, Bus. Wire (Jan. 6, 2010), The top selling album of 2009 (Taylor Swift’s Fearless) would not have ranked in the top ten in 1999.
[8] musicNEWS: The Top 10 Biggest Sellers of ’99, (last visited Oct. 26, 2013).
[9] Id. 1999’s top grossing tour (the Rolling Stones) earned $64.7 million. Mick Jagger, Rolling Stones Top Grossing At $64.7 Million, Chi. Tribune (Dec. 30, 1999),
[10] Randy Lewis, U2 is tops again in concert and music-sales revenue, L.A. Times (Jan. 8, 2012),
[11] In recent years Clear Channel has owned or operated a stable of over 1,200 radio stations across the country (a figure estimated to be closer to 850 presently), an extremely dominant position in a market that was once crucial to promotional efforts. The increasing influence of social media and shifting consumer listening habits have eroded the position of radio as the only medium for reaching potential fans.
[12] Alan J. Meese & Barak D. Richman, A Careful Examination of the Proposed Live Nation-Ticketmaster Merger 16 (William & Mary Law School Research Paper No. 09-41, 2009).
[13] Id.
[14] An errant prediction, discussed in greater detail in Part II.
[15] See In re Live Concert Antitrust Litigation, 863 F.Supp.2d 966 (C.D. Cal. 2012) (consolidating claims brought by Malinda Heerwagen and Nobody in Particular Presents).
[16] IMP complaint, supra note 5, ¶¶ 177-85.
[17] See Batson v. Live Nation Entertainment, Inc., No. 11 C 1226, 2013 WL 992641 (N.D. Ill. Mar. 13, 2013); Concert Fan Scream At Live Nation’s Fees For Phantom Parking Spaces, Antitrust Today (Mar. 18, 2011),
[18] Who We Are, Ticketmaster, (last visited Oct. 26, 2013).
[19] Id.
[20] Campos v. Ticketmaster Corp., 140 F.3d 1166 (8th Cir. 1998); Another TM Suit In Canada, (Feb. 17, 2009),
[21] Chuck Philips, U.S. Drop Ticketmaster Antitrust Probe, L.A. Times (July 6, 1995),
[22] Ben Sisario, A Band Battles Ticketmaster on Sales Fees, N.Y. Times (May 15, 2012),
[23] The parties settled the litigation in December 2010. Live Nation Entertainment, Inc., Annual Report (Form 10-K) at 38-39 (Feb. 26, 2013), available at [hereafter Live Nation Entertainment 10-K].
[24] Matt O’Donnell, Ticketmaster, TicketsNow Fee Class Action Settlement, (Oct. 24, 2011),
[25] Live Nation Entertainment 10-K, supra note 23, at 39.
[26] Live Nation, Ticketmaster Announce Merger, supra note 1.
[27] See The Ticketmaster/Live Nation Merger: What Does it Mean for Consumers and the Future of the Concert Business: Hearing Before the Subcomm. on Antitrust, Competition Policy and Consumer Rights of the S. Comm. on the Judiciary, 111th Cong. (2009) (written testimony of Jerry Mickelson, Chairman and Executive Vice President, JAM Productions) [hereinafter Mickelson testimony]; David A. Balto, Senior Fellow, Center for American Progress Action Fund [hereinafter Balto testimony]; Seth Hurwitz, Co-Owener, I.M.P. Productions and 9:30 Club [hereinafter Hurwitz testimony]), available at
[28] Competitive Impact Statement, United States v. Ticketmaster Entm’t Inc., et al., No.1:10-cv- 00139, 13 (D.D.C. Jan. 25, 2010).
[29] Final Judgment, United States v. Ticketmaster Entm’t Inc., et al., No.1:10-cv- 00139, 2010 WL 5699134, at *4-7 (D.D.C. July 30, 2010).
[30] Id.
[31] Id.
[32] Id. at *9-10.
[33] Aaron Silvenis, Live Aid? Assessing the Ability of the Ticketmaster-Live Nation Consent Decree to Restore Competition Levels in the Primary Ticketing Market 18 (The Am. Antitrust Inst., Working Paper No. 11-02, 2011).
[34] 15 U.S.C. § 18.
[35] Primary ticketing services can be obtained through a third party, such as Ticketmaster, or provided in-house with the assistance of firms that facilitate self-distribution. Meese, supra note 12, at 41 n. 116. Notably, consumers are not relevant participants in this market. Although effects on consumer welfare are important to consider, and consumers will surely feel the effects passed on through end prices, they have no bearing on the immediate inquiry. See Campos, 140 F.3d at 1174.
[36] Competitive Impact Statement, supra note 28, at 6.
[37] The DOJ defined “major concert venues” as the top 500 venues by annual revenue, as reported to Pollstar. Id. at 4 n. 2. Alternative proposed definitions restrict the number of distinctly affected venues to those with a capacity of over 8,000. See Plaintiff United States’ Response To Public Comments, United States v. Ticketmaster Entm’t Inc., et al., No.1:10-cv-00139-RMC at 20 (D.D.C. June 21, 2010) [hereinafter Response To Public Comments]. Others have argued that venue size is an altogether arbitrary and improper distinction for identifying relevant market participants. Meese, supra note 12, at 32.
[38] Meese, supra note 12, at 31 n.70 (citing Evren Ergin, Barclays Capital, Ticketmaster-Live Nation Antitrust Analysis, Apr. 30, 2009, at 5).
[39] Competitive Impact Statement, supra note 28, at 8.
[40] Id.
[41] Id.
[42] Top Primary Ticket Sellers, TicketNews, (week ending Aug. 29, 2009). The next closest competitor,, had a score of 5.03.
[43] HHI is the sum of the squares of the market shares of each participant, so including other firms would only increase the HHI.
[44] U.S. DEPARTMENT OF JUSTICE AND FEDERAL TRADE COMMISSION, 1992 Horizontal Merger Guidelines, available at [hereinafter 1992 Guidelines]. The Guidelines were updated on August 19, 2010, available at [hereinafter 2010 Guidelines]. The threshold for “highly concentrated” markets in the 2010 Guidelines is 2,500.
[45] 1992 Guidelines, supra note 44. The 2010 Guidelines threshold for mergers “likely to enhance market power” is an increase of 200 points.
[46] Id. at 18.
[47] Competitive Impact Statement, supra note 28, at 9.
[48] Id.
[49] Id. at 9-10.
[50] Meese, supra note 12, at 62.
[51] Competitive Impact Statement, supra note 28, at 9.
[52] Meese, supra note 12, at 33.
[53] See James D. Hurwitz, Commentary: Ticketmaster – Live Nation 34 (The Am. Antitrust Institute, 2009).
[54] Competitive Impact Statement, supra note 28, at 7.
[55] See id. at 10.
[56] Live Nation Entertainment 10-K, supra note 23, at 37.
[57] Examples include the Houston-Toyota Center, Kroenke Sports Enterprises, Lollapalooza, International Speedway Corporation and the New York Metropolitan Opera. Meese, supra note 12, at 36-39.
[58] Although the DOJ framed this issue as an increased barrier to entry rather than a separate horizontal component of the merger, it undoubtedly recognized this as a competitive concern.
[59] Competitive Impact Statement, supra note 28, at 11.
[60] Id.
[61] Id.
[62] Id. at 11-12. It should be noted that the bundling practice itself was not deemed anticompetitive. The bundling by each company resulted in a new market comprised of competing bundles of integrated services.
[63] Hurwitz, supra note 53, at 49. The essay continued, conjecturing that “[t]he available evidence provides no indication that a substantial competitor can or will be created within any reasonable time horizon.” Id. at 53.
[64] Competitive Impact Statement, supra note 28, at 12.
[65] Just as current competitors exert downward price pressure on each other, a monopolistic price increase could also invite firms outside the market to enter at a lower price point.
[66] The DOJ likely neglected to include this theory because of its admittedly speculative nature.
[67] Meese, supra note 12, at 80.
[68] Hurwitz, supra note 54, at 50 (quoting ABA Section of Antitrust Law, Antitrust Law Developments 380 (6th ed. 2007)).
[70] Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 14–16 (1984).
[71] See Balto Testimony, supra note 27; Mickelson Testimony, supra note 27.
[72] See Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 276 (2d Cir. 1979).
[73] Meese, supra note 12, at 108–09.
[74] Id. at 109–10.
[75] See IMP complaint, supra note 5, ¶¶ 139–45.
[76] Live Nation Entertainment 10-K, supra note 23, at 22.
[77] See Response to Public Comments, supra note 37, at 18–21.
[78] Id. at 16–17.
[79] The efficacy of the DOJ’s solution is addressed infra Part III.B.
[80] See, e.g., United States v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005); see also 15 U.S.C. § 1 (2006) (“Every contract . . . in restraint of trade or commerce . . . is declared to be illegal.”); 15 U.S.C. § 2 (2006) (prohibiting “Every person who shall monopolize, or attempt to monopolize…any part of the trade or commerce . . . . ”).
[81] In 1992, a California consumer group filed a class action antitrust suit against Ticketmaster, alleging the company’s contracts with venues and promoters constituted exclusive dealings agreements in restraint of trade and were therefore prohibited by antitrust law. See Kevin E. Stern, The High Cost of Convenience: Antitrust Law Violations in the Computerized Ticketing Services Industry, 16 Hastings Comm. & Ent. L.J. 349, 358 (1994). Pearl Jam spearheaded a well-publicized antitrust investigation against Ticketmaster in 1994, alleging that Ticketmaster’s exclusive contracts foreclosed access to “a significant percentage of the suppliers of services necessary to hold entertainment events.” Wanda Jane Rogers, Beyond Economic Theory: A Model for Analyzing the Antitrust Implications of Exclusive Dealing Arrangements, 45 Duke L.J. 1009, 1016 n.28 (1996); Pearl Jam Musicians Testify On Ticketmaster’s Prices, N.Y. Times (July 1, 1994), The investigation closed in 1995 with no finding of anticompetitive conduct. Press Release, Dep’t of Justice, Antitrust Division Statement Regarding Ticketmaster Inquiry (July 5, 1995), available at
[82] In a pre-merger suit that is still pending, a prominent independent promoter claimed that Live Nation used exclusive contracts with artists to prevent other promoters and venues from competing for their business. IMP complaint, supra note 5, ¶¶ 83-91. When Live Nation was a subsidiary of Clear Channel Communications, another independent promoter made similar claims regarding the company’s practice of securing exclusive contracts to promote artists’ entire national tours, precluding competing promoters from bidding on local engagements. See Amended Complaint at ¶ 52, NIPP v. Clear Channel Communications, Inc., 311 F. Supp. 2d 1048 (D. Colo. 2004) (No. 01-N-152). The case was eventually settled out of court.
[83] When brought suit against Ticketmaster for similar claims (among other antitrust allegations), the court ruled that the long term exclusive contracts were used by Ticketmaster to “accommodate their customers’ desires, to their mutual benefit.” The court held that these exclusive contracts represented “a mutually desired reasonable business practice from which no antitrust inferences may be drawn.” Ticketmaster Corp. v., Inc., No. CV99-7654-HLH(VBKX), 2003 WL 21397701, at *5 (C.D. Cal. March 7, 2003).
[84] Hurwitz Testimony, supra note 27.
[85] See Competitive Impact Statement, supra note 28, at 17. How effective this behavioral remedy might be is discussed infra Part III.B.
[86] 1992 Guidelines, supra note 45, at 30-32.
[87] Id.
[88] Live Nation, Ticketmaster Announce Merger, supra note 1.
[89] Live Nation and Ticketmaster CEOs Outline Benefits of Merger, Bloomberg (Feb. 24, 2009),
[90] Id.
[91] Competitive Impact Statement, supra note 28, at 12.
[92] Id.
[93] See id. at 13–18.
[94] The DOJ did not explicitly identify this concern in its Competitive Impact Statement, but the inclusion of this remedy speaks to the DOJ’s apprehension regarding the issue. See id. at 16–17.
[95] John E. Kwoka & Diana L. Moss, The American Antitrust Institute, Behavioral Merger Remedies: Evaluation and Implications for Antitrust Enforcement 3–4 (2011).
[96] U.S. Dep’t of Justice, Antitrust Div. Pol’y Guide to Merger Remedies § III(A) (Oct. 2004) [hereinafter 2004 Guide], available at The DOJ updated the Guide in 2011, incorporating significant policy shifts.The 2011 Guide omits an explicit preference for structural remedies and no longer restricts when it is appropriate to institute behavioral relief (previously limited to ancillary restrictions on vertical mergers). See U.S. Dep’t of Justice, Antitrust Div. Pol’y Guide to Merger Remedies (June 2011) [hereinafter 2011 Guide], available at Notably, the updated Guide deletes without explanation all mention of the four substantial costs associated with conduct remedies, costs that were central to the approach taken in the 2004 Guide. Kwoka, supra note 95, at 6 n.8.
[97] Kwoka, supra note 95, at 11.
[98] Id. at 12. Some drawbacks of structural remedies include information asymmetries between the agency, merging parties and third-party buyers; incentives to dispose assets that may insufficiently restore competition; an altered market post-remedy; and the conduciveness of the market to collusion following a divestiture. However, the failures and limitations of structural remedy policies have generally been addressed and improved over time. Id. at 10.
[99] AEG was the second leading promoter in the country, owned or operated more than thirty major concert venues, and held a 50% share of a reputable talent management agency. Competitive Impact Statement, supra note 28, at 13.
[100] Id. at 15. Paciolan occupied 3% of the market for direct ticketing services at major concert venues, and an additional 4% of the market through sublicenses (half of which already included Comcast’s New Era division). Id. Comcast was, and still is, seen as a potential competitor in ticketing services, but the company’s central focus remains with sports teams and arena venues. See Ray Waddell, Brave New World, Billboard (Mar. 27, 2010), Though somewhat vertically integrated, Comcast has yet to venture substantially into the other elements of the live music industry.
[101] Ethan Smith, Promoter Crowds Ticketmaster, Wall St. J. (Feb. 3, 2011),
[102] Alfred Branch Jr., AEG teams with Outbox Technology to compete with Ticketmaster on ticketing, TicketNews (Feb. 3, 2011),
[103] See id.
[104] See Alfred Branch Jr., Merriweather Post Pavilion switches from Ticketmaster to TicketFly, TicketNews (Feb. 19, 2010), In May of 2010, even before AEG made the switch, Merriweather Post Pavilion became the country’s first major venue to leave Ticketmaster for another competing ticketing service provider, Ticketfly. Scott Bernstein, Considering The Ticketfly Alternative, Glide Mag. (May 13, 2010), Ticketfly offers an integrated content management system, lower service fees and social networking platforms to facilitate distribution and marketing services. Silvenis, supra note 33, at 24; see also About, Ticketfly, visited Oct. 12, 2013).
[105] Silvenis, supra note 33, at 6.
[106] Id.
[107] Live Nation Entertainment, Fourth Quarter and Full Year 2012Supplemental Operational and Financial Information 1 (Feb. 26, 2013), available at
[108] Live Nation Entertainment 10-K, supra note 23, at 41.
[109] Its acquisitions include Coppel (a concert promoter based in Australia and New Zealand), Cream (a festival promoter based in the United Kingdom) and HARD (a festival promoter based in Los Angeles) in 2012 alone. Id. at 7.
[110] Kwoka, supra note note 95, at 4.
[111] Id. at 5.
[112] Mounting empirical evidence establishes that traditional industry regulation is not consistently effective at modifying firm behavior and often incurs distorting economic effects on the industry or market being regulated. Id. at 22 (citing Paul Joskow & Nancy Rose, The Effects of Economic Regulation, in 2 Handbook of Indus. Org., 1449 (Richard Schmalensee & Robert D. Willig eds., 1989); Kip Viscusi, Joseph Harrington & John Vernon, Economics of Regulation and Antitrust (2005)).
[113] 2004 Guide, supra note 96, at § III(A).
[114] Id. at §§ III(E)(2) & III(E)(2)(b).
[115] Final Judgment, supra note 29, at *3.
[116] Kwoka, supra note 95, at 23.
[117] Id. at 25-26.
[118] It does not strain the imagination to envision a company surreptitiously transferring valuable information from Employee A to Employee B, staying one step ahead of the regulators.
[119] Kwoka, supra note 95, at 26.
[120] Id. at 27 (citing FERC, Fiscal Year 2012 Congressional Performance Budget Request, at 2 & 4, available at and FCC, Fiscal Year 2012 Budget Estimates Submitted to Congress, at 39 & 69 (Feb. 2011), available at
[121] See id. at 27.
[122] Id. at 30-31.
[123] Id.
[124] Id. at 34.
[125] Id. at 35.
[126] See supra Part I

What Are the Constitutional Limits on Awards of Statutory Damages?

By Andrew Berger* A pdf version of this article may be downloaded here. Tenenbaum Finds That a Jury’s Award Within the Statutory Range Violates Due Process In July 2010 Judge Nancy Gertner in Sony BMG Music Entertainment et al. v. Tenenbaum, did what no court has ever done before. The court held the jury’s statutory damages award of $675,000 violated the Due Process Clause even though the award was within the statutory range set by Congress.[FN1] The court stated that the “award is far greater than necessary to serve the government’s legitimate interests in compensating copyright owners and deterring infringement.”[FN2] Judge Gertner slashed the award by 90% to $2,250 per work infringed for a total of $67,500. Tenenbaum thus becomes the first file sharing case to reach an appellate court following trial. Why this Constitutional Attack on Statutory Damages? Will Judge Gertner’s decision withstand appeal? Why are statutory damages, so long a staple of copyright litigation, now under increased constitutional scrutiny? For answers we need to go back a bit into history. For many years tort defendants complained that awards of punitive damages were unpredictable and imposed crippling financial burdens. Mindful of these concerns, the Court in the late 1980’s started to question whether these “skyrocketing” awards might adversely impact “research and development of new products.”[FN3] Gore Finally in 1996 the Court in BMW of North America, Inc. v. Gore held unconstitutional a jury’s award of punitive damages.[FN4] There an Alabama jury awarded plaintiff $4,000 in compensatory damages and $4 million in punitive damages based on BMW’s failure to disclose that plaintiff’s supposedly “new” car had been repainted before he bought it.[FN5] The Alabama Supreme Court reduced the punitive damages award to $2 million, representing a ratio of punitive to compensatory damages of 500:1.[FN6] Despite this reduction, the Supreme Court held the award violated due process. The Court acknowledged that “[p]unitive damages may further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition” and that “only an award that is ‘grossly excessive’ in relation to these interests” would violate due process.[FN7] Gore then set forth three criteria, often referred to as “the Gore guideposts,” to assist court in determining if a punitive damage award comports with due process: (1) The degree of reprehensibility of defendant’s misconduct; (2) The disparity or ratio between the actual or potential harm suffered by plaintiff and the punitive damages award; and (3) The difference between the punitive damages awarded by the jury and civil penalties authorized or imposed in comparable cases.[FN8] Campbell Thereafter in State Farm Mutual Automobile Insurance Co. v. Campbell the Court, applying these three guideposts, concluded that a punitive damages award of $145 million, compared with actual damages of $1 million, “was an irrational and arbitrary deprivation of the property of the defendant.”[FN9] Although Campbell expressly declined to create a bright-line constitutional limit to the punitive-to-compensatory damages ratio, the Court expressed a general preference for single-digit ratios.[FN10] Do the Gore Guideposts Apply to Test the Constitutionality of a Statutory Damages Award in Copyright Cases? Following Gore and State Farm, courts uniformly opted not to apply the Gore framework to test the constitutionality of statutory damages awards in copyright cases.[FN11] Instead, post-Gore cases preferred to assess constitutionality by applying the standards set forth years earlier by the Court in St. Louis, I.M. & S. Ry. Co. v. Williams.[FN12] In Williams, the Court considered whether a jury’s award within a statutorily prescribed range violated the due process clause. In that case, a railroad charged two sisters 66 cents each more than the statutorily prescribed fare. A state statute sought to deter over-charges by providing for statutory damages between $50 and $350 for each violation. The sisters sued and received statutory damage awards of $75 apiece — 114 times more than the 66 cents in damages each had incurred. Williams held that award constitutional. The Court stated that the validity of the awards should not be tested by comparing the small amount of the overcharges with the magnitude of the judgments.[FN13] Instead, the Court, in assessing the awards’ constitutionality examined whether the statutory scheme appropriately responded to “the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to established passenger rates.”[FN14] Williams stated that an award would only violate due process if it were “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”[FN15] The Court expressly rejected defendant’s attempt to test the constitutionality of the “large” penalty by comparing it with the actual damage, stating that statutory remedies for “public wrongs” are not required to “be confined or proportioned to [plaintiff’s] loss or damages.”[FN16] Williams added that when comparing the size of an award against the gravity of the offense, a court must bear in mind that legislatures “still possess a wide latitude of discretion” when setting statutory damages.[FN17] Zomba Zomba v. Panorama, supra, is representative of the post-Gore cases applying Williams to test the constitutionality of a statutory damages award. In Zomba the 6th Circuit found that a statutory damages verdict of $806,000 (44 times actual damages) was constitutionally permissible.[FN18] Zomba acknowledged Campbell’s preference for a lower punitive-to-compensatory ratio.[FN19] But Zomba noted that Campbell did not deal with statutory damages and therefore Zomba said it would follow Williams until the Court held otherwise.[FN20] Tenenbaum But Tenenbaum did not wait for the Court. Instead, Judge Gertner applying the Gore framework, held unconstitutional the jury’s verdict of $675,000.Tenenbaum added that even under Williams the award was “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”[FN21] Do the Gore Guidelines Apply Here? The Gore guidelines are an ill-fit to test the constitutionality of a statutory damages award for a number of reasons. Before focusing on each guideline, I began with some overall considerations. Courts such as Gore review punitive damages to establish whether a defendant had fair notice of the size of a potential award and to create an outer limit on the jury’s unrestrained discretion to impose punitive damages. But in the statutory damages context concerns about fair notice and unbounded liability are inapplicable. The Copyright Act already gives notice of the potential award and sets a statutory range within which it must fall.[FN22] Further, punitive damages serve a singular purpose: to punish in amounts that are not constrained. But statutory damages in copyright litigation serve other purposes besides punishment: to compensate, impose appropriate damages on wrongdoers, deter future infringements and promote the creation of intellectual property.[FN23] In addition, statutory damages are expressly authorized by Congress, which makes their review a question of the scope of Congress’ legislative authority. Punitive damages, by contrast, are typically awarded by juries without explicit statutory authorization or limitations and thus present no basis upon which courts could easily defer to legislative judgments. Moreover, the Gore guideposts compensate for the absence of legislative guidance. Courts apply them to facilitate judgments the legislature never made. But the present statutory damages scheme is the result of a long history of Congressional action. That scheme already gives guidance regarding the appropriate range of statutory damages. Therefore, a within-statutory-range-verdict is entitled to substantial deference. The Three Guideposts Turning to the specific guideposts: The first guidepost, the degree of defendant’s reprehensibility, has no role to place in a constitutional review of statutory damages because reprehensibility is already embraced and calibrated in the Copyright Act. An innocent infringer risks damages of no less than $200. A non-willful infringer faces damages of no more than $30,000; and a willful infringer risks a maximum of $150,000 per infringed work. Because Congress has already crafted these limits, a court’s role should be limited to reviewing the rationality of Congress’ statutory scheme. That is why Williams instructs courts to examine the reasonableness of Congress’s determination, giving deference to its assessment of the “interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence” to the law.[FN24] The second Gore guidepost weighs the relationship between the punitive award and the actual harm. But this guidepost has no application to statutory damages in copyright litigation for a number of reasons. First, statutory damages may be awarded, as Tenenbaum acknowledged, without any showing of harm.[FN25]Second, § 504(c) of the Copyright Act does not condition the availability of statutory damages on proof of actual damages. Instead, the statute permits a copyright owner to recover statutory damages “instead of actual damages and profits.” And as Judge Gertner acknowledged “every authority [before Tenenbaum] confirms what the language of section 504 indicates — statutory damages may be elected even if the plaintiff cannot, or chooses not to, prove” actual damages.[FN26] Third, Williams forecloses any attempt to compare an award’s ratio to actual damages stating that statutory damages must not “be confined or proportioned to [plaintiff’s] loss or damages.”[FN27]Instead, Williams holds that “the Legislature may adjust [the award’s amount] to the public wrong rather than the private injury.”[FN28] Lastly, requiring proof of actual damages subverts a purpose of statutory damages which relieves the copyright holder of the sometimes impossible burden of proving actual damages.[FN29] The third Gore guidepost judges the propriety of the statutory damages award by focusing on its relationship with the applicable civil penalty. But this guidepost is irrelevant in this constitutional analysis because the award is, by definition, the applicable civil or statutory penalty. The Court Created a Safe Harbor for College-Age File Sharers Judge Gertner admitted that this third guidepost was “the most troublesome for Tenenbaum.”[FN30] Nevertheless, Tenenbaum sidestepped this troublesome fact by reaching an extraordinary conclusion. The court stated that there was “substantial evidence indicating that Congress did not contemplate that the Copyright Act’s broad statutory damages provision would be applied to college students like Tenenbaum who file-shared without any pecuniary gain.”[FN31] The court repeated its bizarre conclusion, “[i]n fact, a careful review of section 504(c)’s legislative history suggests that Congress likely did not foresee that statutory damages awards would be imposed on noncommercial infringers sharing and downloading music through peer-to-peer networks.”[FN32] No doubt collegiate music file sharers are loudly toasting this result. But the “substantial evidence” and the “legislative history” the court relied on consisted of off-hand, post-hoc comments made by Senators Hatch and Leahy at hearings held after Congress passed that statue.[FN33] In fact, the legislative history of the aptly-named the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999[FN34] (the “Digital Act”) demonstrates the opposite—that it addressed the growing online theft of intellectual property by all infringers, commercial or not. Congress expressed the need for this legislation in words that echo Tenenbaum’s conduct:
By the turn of the century … the development of new technology will create additional incentives for copyright thieves to steal protected works. Many computer users … simply believe that they will not be caught or prosecuted for their internet conduct. Also many infringers do not consider the current copyright infringement penalties a real threat and continue infringing even after a copyright owner puts them on notice.[FN35]
The text of the Digital Act (which amended the Copyright Act) does not distinguish between classes of infringers, much less immunize file sharers from statutory damages. Nor does § 504 (a)(2) of the Copyright Act. Instead, that section exposes any “infringer of copyright” to liability “for … statutory damages, as provided.” Further, courts resort to legislative history to divine the meaning of an otherwise ambiguous statutory provision, not to create ambiguity where none exists.[FN36] Because the statutory language was plain, Tenenbaum should not have examined congressional intent, much less relied on informal comments from two Senators made after the Digital Act was enacted.[FN37] Further, if the court were correct that the Copyright Act was not intended to apply to collegiate file sharers, the logical result would have been to find that the verdict violated that Act.[FN38] But the court expressly recognized that the Act unambiguously authorized the jury’s award. Nonetheless, after acknowledging that it “must give effect to this clear statutory language,”[FN39] the court flip flopped stating that § 504(c) “does not embody” any judgment to which the court could defer.[FN40] Tenenbaum’s Damage Calculation Was Equally Problematic Tenenbaum took another unusual turn by setting the damages at $2,250 per work. The court first determined that the actual damage Tenenbaum caused the labels was $1 per song.[FN41] This figure ignores the wide distribution Tenenbaum made of the downloaded songs to an untold number of others, File sharing essentially places the songs in the public domain. Then Tenenbaum purported to rely on the doctrine of treble damages under which a court may increase the award by three times the amount of actual damages.[FN42] But instead of trebling this $1 figure, Tenenbaum trebled $750, which is the minimum amount of statutory damages permitted under the Copyright Act for any infringement other than one done innocently. In other words, the court did not treble the amount of actual damages of $1 per infringed song it determined the labels had suffered. The court instead multiplied its determination of actual damages by 2,250 to reach the damage amount of $2,250 per work, an amount that under the circumstances appears arbitrary. The Verdict Passes Muster Under Williams The jury’s verdict in Tenenbaum, although substantial, fits comfortably within the Williams framework. That case requires deference to the legislature’s “wide latitude of discretion” in responding to public wrongs.[FN43] Under Williams, a court must defer to Congress’ judgment in assessing “the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to establish [law].”[FN44] So long as the statutory damages scheme adequately addresses these concerns, that scheme satisfies due process. Here the jury’s award of $22,500 per song award is toward the low end of the willful infringement range (which extends upward to $150,000 per work) and was 15% of the maximum of $4.5 million the jury could have been assessed. It therefore seems not “obviously unreasonable” or “oppressive” considering there is nothing unconstitutional about an award greater than the quantifiable harm and further considering that the jury’s award was an appropriate response to Tenenbaum’s near decade of willful conduct. As the district court noted, Tenenbaum started file sharing in 1999 and continued through 2007, “downloading thousands of songs for free and without authorization.” Tenenbaum “was aware his conduct was illegal” and even continued it after receiving a cease and desist letter. When sued he tried to shift responsibility for his downloading to others and lied during his “sworn responses to discovery requests” and “made several misleading or untruthful statements in his deposition testimony.”[FN45] The record labels should not be faulted for being unable to quantify the extent of injury Tenenbaum caused. The nature of peer-to-peer file sharing technology Tenenbaum used made that showing nearly impossible. Peer-to-peer networks operate without any centralized control or oversight. They allow computer users to transfer music files directly to their peers without the knowledge of third parties. As the jury may have determined, Tenenbaum should not avoid the consequences of his misconduct simply because he made it difficult for the labels to quantify injury.[FN46] Music piracy is a major problem in this country robbing the economy of billions each year.[FN47] If piracy is to ever end, large verdicts of the kind meted out in Tenenbaum may be necessary. What Are the Consequences If Tenenbaum Is Affirmed on Appeal? Affirming the result in Tenenbaum will negatively impact copyright enforcement for years to come for a number of reasons. First, affirmance will cause many meritorious copyright claims never to be litigated. That is because Tenenbaum, contrary to the Copyright Act, requires copyright owners to prove actual damage as a pre-condition to recovering statutory damages. But many copyright holders will be unable to show actual damages. The value of a copyright, especially at inception, is often impossible to estimate. How much is an unpublished novel by a first-time author worth? Second, removing the teeth from the statutory damage scheme, which is what Judge Gertner essentially did, relegates litigants to actual damages. But they are often inadequate for a number of reasons. First, actual damages may be less than the cost of detecting, investigation and, for sure, litigating. So why bother? Second, actual damages, often requiring extensive accounting analysis, may be prohibitively expensive to prove. Third, although actual damages in copyright litigation include the infringer’s profits attributable to the infringement, there may be none to collect either because an infringer earned none, conveniently lost its sales records or never kept any. What Will Be the Eventual Outcome? Predictions about how the Court might rule should this case reach the high court are not for the faint of heart. But, as Justice Ginsburg noted in Eldred v. Ashcroft,[FN48] albeit in a different context, the Court has been “deferential to the judgment of Congress in the realm of copyright.” I suggest that that deference will continue should the Court ever weigh the constitutionality of the jury’s award in Tenenbaum.[FN49] But at the same time the Court may wish to update its constitutional analysis of statutory damages in the copyright context. Williams is nearly a century old. The internet, new technologies and the ease and frequency of downloading have now reshaped the copyright landscape. Further, copyright holders are in many cases no longer interested in protecting their exclusive rights. Instead, they now place their works on social media sites with every expectation and hope that they will be copied, adapted, modified, published, transmitted and displayed to an untold number of others by any means of distribution now know or later created. These copyright holders who freely share their works often advocate and expect that others will do the same. This advocacy is not likely to lead to changes in the Copyright Act. But it may continue to influence the judicial response to infringement as it did in the district court’s opinion in Tenenbaum.  
* Mr. Berger is counsel to the New York firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP where he specializes in copyright and trademark infringement litigation. He also publishes an intellectual property blog called IP In Brief at [FN1] 721 F. Supp. 2d 85 (D. Mass. 2010). [FN2] Id. at 89. [FN3] Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 282 (1989) (O’Connor, J., concurring in part & dissenting in part);Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 23 (1991) (Punitive damage award that was more than 4 times the amount of compensatory damages came “close to the line.”). [FN4] 517 U.S. 559 (1996). [FN5] 646 So. 2d 619 (Ala. 1994). [FN6] Id. at 629. [FN7] 517 U.S. at 568. [FN8] Id. at 574-84. [FN9] 538 U.S. 408, 429 (2003). [FN10] Id. at 425. [FN11] See, e.g., Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455, 460 (D. Md. 2004); Zomba Enters, Inc. v. Panorama Records, Inc., 491 F.3d 574, 587 (6th Cir. 2007) (Noting that Gore and State Farm’s application to statutory damages for copyright infringement was questionable); Arista Records LLC v., Inc., 2010 WL 3629587 at *4-*5 (S.D.N.Y. Sept. 16, 2010) ($6,585,000 award did not violate due process); Propet USA, Inc. v. Shugart, 2007 WL 4376201 at *2-*3 (W.D. Wash. Dec. 13, 2007) ($500,000 statutory damages award for copyright infringement—“some forty times … actual damages”—not unconstitutionally excessive). [FN12] 251 U.S. 63 (1919). [FN13] Id. at 67. [FN14] Id. [FN15] Id. [FN16] Id. [FN17] Id. at 66. [FN18] 491 F.3d at 587-88. [FN19] Id. at 587. [FN20] Id. [FN21] 721 F. Supp. 2d at 116. [FN22] Plaintiffs-Appellants Opening Brief to the First Circuit in Tenenbaum at 38-9 (“Plaintiffs’ Brief”). [FN23] See, e.g., F.W. Woolworth Co. v. Contemporary Arts Inc., 344 U.S. 228, 233 (1952) (“The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful conduct.”); Feltner v. Columbia Pictures Television Inc.,523 U.S. 340, 352, (1998) (“[A]n award of statutory damages may serve purposes traditionally associated with legal relief, such as compensation and punishment.”); Fitzgerald Publishing Co. v. Baylor Publishing Co., 807 F. 2d 1110, 1117 (2d Cir.1986) (“[T]he expenses saved and the profits reaped by the infringers are considered” as are “the revenues lost by the plaintiff . . . the value of the copyright, . . .and the deterrent effect on others besides the defendant.”); Stevens v. Aeonian Press, 64 USPQ2d 1920, 1921 (S.D.N.Y.2002) (“In making such an award [of statutory damages], the Court is required to consider various factors, including . . . the revenues lost by the Plaintiffs, the value of the copyright, the deterrent effect of the award on other potential infringers, and factors relating to individual culpability.”). [FN24] 251 U.S. at 67; Plaintiffs’ Brief at 41-2. [FN25] 721 F. Supp. 2d at 87; see also, F.W. Woolworth Co. v. Contemporary, supra, 344 U.S. at 233 (“Even for uninjurious and unprofitable invasions of copyright the court may, if it deems just, impose a liability within statutory limits to sanction and vindicate the statutory policy.”); Superior Form Builders, Inc. v. Dan Chase Taxidermy Supply Co., Inc., 74 F.3d 488, 496 (4th Cir.), cert. den., 519 U.S. 809 (1996) (Affirming then-maximum statutory damages award of $100,000 per infringement despite plaintiff’s inability to identify damages or lost profits and even though defendant’s revenues from the infringing sales only totaled $10,000); [FN26] Tenenbaum, supra, 721 F. Supp. 2d at 92. [FN27] Williams, 251 U.S. at 66. [FN28] Id. [FN29] Congress enacted statutory damages because “actual damages are often conjectural, and may be impossible or prohibitively expensive to prove.” Staff of H. Comm. on the Judiciary, 87th Cong., Copyright Law Revision: Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law at 102. [FN30] 721 F. Supp. 2d at 103. [FN31] Id. at 89. [FN32] Id. at 104. [FN33] Id. at 106-07. [FN34] Pub. L. No. 106-160, 113 Stat. 1774. [FN35] H.R. Rep. 106-216 at 3. [FN36] See Ratzlaf v. United States, 510 U.S. 135, 147-48 (1994). [FN37] See, e.g., Connecticut Nat’l Bank v. Germain, 503 U.S.249, 253-54 (1992) (“We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, this first canon is also the last: judicial inquiry is complete.” (internal quotations and citations omitted)). [FN38] See Plaintiffs’ Brief at 33. [FN39] 721 F. Supp. 2d at 107 [FN40] Id. [FN41] Id. at 112. [FN42] Id. at 117. [FN43] 251 U.S. at 66. [FN44] Id. at 67. [FN45] 721 F. Supp. 2d at 90-91. [FN46] See Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264 (1946). [FN47] The Record Industry Association of America quotes with approval a source stating that U.S. internet users annually consume between $7 and $20 billion worth of digitally pirated recorded music., last visited February 17, 2011. [FN48] 537 U.S. 186, 198 (2003). [FN49] Pamela Samuelson & Ben Sheffner, Debate, Unconstitutionally Excessive Statutory Damage Awards in Copyright Cases, 158 U. PA. L. REV. PENNUMBRA 53, 62 (2009),

Girl Talk, Fair Use, and Three Hundred Twenty-Two Reasons for Copyright Reform

by Brian Pearl* A pdf version of this article may be downloaded here. I. INTRODUCTION Girl Talk is the self-imposed moniker of Pittsburgh, Pennsylvania-based artist Gregg Gillis. Since his first album, “Secret Diary,” [FN1] Gillis’s work has evolved from glitch-heavy electronic music interspersed with pre-existing samples to a collage of the most recognizable (and dance-able) moments from hit songs spanning decades as well as musical genres. [FN2] “Night Ripper,” the third Girl Talk album, pushed Girl Talk out of the underground and onto the pages of magazines including Rolling Stone, Blender, and SPIN. [FN3]Influential taste-maker Pitchfork Media fawned over “Night Ripper,” calling the album a “voracious music fan’s dream: a hulking hyper-mix designed to make you dance.” [FN4] “Night Ripper” also enabled Gillis to accomplish every musician’s goal – quitting his day job. [FN5] Gillis spent much of 2007 on tour, playing major festivals as well as a string of sold out headlining shows in larger and larger venues. [FN6] The constantly evolving Girl Talk live show became the basis for the fourth Girl Talk album, “Feed the Animals.”  “Feed the Animals,” Gillis’s most ambitious work to date, was released online by Illegal Art on June 19, 2008, utilizing the “pay-what-you-want” model first implemented by Radiohead for their 2007 album “In Rainbows.” [FN7] Fans who chose to pay ten dollars or more received a compact disc along with an official list of all three hundred twenty-two samples used on “Feed The Animals.” [FN8] Like “Night Ripper,” “Feed the Animals” received an enthusiastic response from critics, earning a spot on many best-albums-of-2008 lists, including year-end lists from Blender Magazine and The Boston Globe. [FN9] Meanwhile, Girl Talk’s live audience has continued to grow, as evidenced by a three-night stint of sold-out shows at New York’s 3000-capacity venue, Terminal 5 in November, 2008. [FN10] In interviews, Gillis explains his method as simply another step down the path that was forged by the musicians, rappers, and producers whose music Girl Talk samples. [FN11] Just as a young guitarist hones his or her craft by “basically collaging together ideas…whether it’s from playing Nirvana songs or blues guitar,” Gillis collages samples together on his laptop computer in what he calls “a very physical extension of that art form.” [FN12] Gillis also sees his work as a sign of the post-Internet times. According to Gillis, consumers growing up in the age of iTunes and YouTube are accustomed to having “a dialogue with the media [they] consume,” often through editing downloaded pictures, making videos, or creating remixes of popular songs.[FN13] II. FAIR USE, OR A LAWSUIT WAITING TO HAPPEN? Along with the critical acclaim, festival appearances, and sold-out shows, Gillis’s success has raised a simple question: is Girl Talk legal? The New York Times referred to “Feed the Animals” as “a lawsuit waiting to happen.” [FN14]Pitchfork Media’s review of “Night Ripper” noted that Girl Talk is “practically begging for court drama.” [FN15] Additionally, both online retailers and physical distributors have expressed their doubts as to Girl Talk’s legal status. Indeed, iTunes and at least one CD distribution company decided to stop carrying “Night Ripper” as a result of growing fears of a Girl Talk-related lawsuit. [FN16] Gillis and his record label, Illegal Art, have chosen to tackle the legal issue head-on, proactively employing a fair use argument in order to defend Gillis’s work from potential litigation. The official bio for “Feed the Animals” distinguishes Girl Talk from “mashups” or DJ mixes, tracks that simply layer one track over another track. [FN17] Gillis claims that the meticulous sampling, pitch-shifting and editing that he employs give Girl Talk tracks “their own character” such that they “surpass the original elements” of the sampled tracks.[FN18] According to the bio, “such transformative work” entitles Gillis to protection under the fair use principle embodied in the U.S. Copyright Act.[FN19] Fair use is a limitation on the exclusive nature of copyright that enables “fair use” of a copyrighted work “for purposes such as criticism, comment, news reporting, teaching…scholarship, or research.” [FN20] Courts evaluate fair use arguments on a case-by-case basis, incorporating four factors into their analysis: (1) “purpose and character of the use,” (2) “the nature of the copyrighted work,” (3) the “amount and substantiality of the portion used,” and (4) the “effect of the use upon the potential market for or value of the copyrighted work.” [FN21] No one factor is dispositive in fair use analysis. As such, courts have broad discretion when evaluating a fair use argument. In Campbell v. Acuff-Rose Music, Inc., the seminal music industry fair use case, rapper Luther Campbell successfully invoked a fair use defense in a case involving 2 Live Crew’s parody of  “Oh, Pretty Woman” by Roy Orbison.[FN22] The Supreme Court, reversing the Sixth Circuit Court of Appeals, determined that analysis of the “purpose and character” factor of fair use should be based on whether the new work “merely supersedes the objects” of the original work “or instead adds something new, with a further purpose or different character . . .in other words, whether and to what extent the new work is ‘transformative.’” [FN23] According to Acuff-Rose, “the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works.” [FN24]Though not specifically enumerated in the Copyright Act, the court held that parody was such a transformative use. [FN25] However, while the Court held that Campbell’s lyrical parody of “Oh, Pretty Woman” was transformative, the Court remanded the question of whether or not the repeated use of a signature bass riff in the Orbison song was also protected under fair use. [FN26] Recently, the District Court for the Southern District of New York relied on Acuff-Rose’s “transformative use” doctrine in a case involving the unauthorized use of a fifteen-second clip of John Lennon’s “Imagine” in the documentary, “EXPELLED: No Intelligence Allowed.” [FN27] The Court denied the Lennons’ request for a preliminary injunction, holding that the filmmakers’ use of “Imagine” was transformative because the film responded directly, through images and voiceover, to the lyrical content of the chosen excerpt.[FN28] The Lennons eventually dropped their lawsuit. [FN29] Though none of the hundreds of artists sampled on Girl Talk’s albums has gone so far as to bring suit against Gillis, journalists and music bloggers have energetically debated the merits of Gillis’s fair use argument. Idolator music blogger Mike Barthel concluded (based on both “purpose and character” and “amount and substantiality”) that Girl Talk does not pass the fair use test.[FN30] Journalist Evan Davies took the opposite position, comparing Gillis to a young Beethoven, plying his trade “after studying Mozart,” in effect commenting on the work of his predecessors without committing wholesale piracy. [FN31] Additionally, there is no consensus among the attorneys who have chosen to weigh in publicly. Intellectual property attorney Barry Slotnick doesn’t give Gillis’s fair use argument much credence. [FN32] According to Slotnick, while “fair use is a means to allow people to comment on a pre-existing work,” fair use does not allow one to “substitute someone else’s creativity for [his/her] own.” [FN33] While Case Western Reserve University of Law professor Peter Friedman agrees in principle, he claims that Gillis’s re-combination of samples is sufficiently transformative as to qualify as an original work, thus discouraging litigation. [FN34] Because there is no fair use case directly on point with the legal questions raised by Girl Talk, it is necessary to look at how courts have historically handled copyright cases involving sampling in order to evaluate Gillis’s fair use argument. III. SAMPLING AND SPARSE CASE LAW Sampling, the use of a pre-existing clip of recorded music in a new musical work, has been common practice, particularly in hip-hop music, since the late 1980s. Gillis’s style of high-volume sampling hearkens back to some of hip-hop’s earliest innovators such as the Bomb Squad and Prince Paul. The Bomb Squad used dozens of unlicensed samples to create a densely layered sound on seminal hip-hop albums including Public Enemy’s “It Takes a Nation of Millions to Hold Us Back.” [FN35] Prince Paul pulled samples, without permission, from disparate sources including Johnny Cash, Steely Dan and the Turtles in the course of producing De La Soul’s masterpiece, “Three Feet High and Rising.” [FN36] Grand Upright Music Ltd. v. Warner Brothers Records, Inc., the so-called “Biz Markie case,” dealt a crippling blow to this sample-heavy style of production. [FN37] In Grand Upright, the court granted a preliminary injunction halting sales of Biz Markie’s album because of unauthorized use of a sample of a Gilbert O’Sullivan song. [FN38] Grand Upright owned both the composition and sound recording copyrights for the O’Sullivan tune. [FN39] The Biz Markie case had a dramatic impact on the emerging sound of hip hop, effectively ending an era where rappers and producers were able to take full advantage of new digital sampling techniques without fear of legal action. [FN40] As Public Enemy frontman Chuck D noted, his group completely changed its production style, reproducing sounds in the studio and dramatically limiting the number of pre-existing samples in order to avoid a wave of litigation. [FN41]Groups who chose to continue sampling pre-existing recordings did so sparingly, often choosing one “primary” sample per song in order to simplify the process of getting permission, “clearing” samples in order to avoid lawsuits. [FN42] Though courts have heard a number of cases involving sampling and copyright infringement, none of these cases have involved a fair use defense for a non-parodic use of a sound recording. Two recent cases, however, illuminate the continued problems courts have had in formulating a consistent approach to sampling and copyright.  In Newton v. Diamond, jazz musician James Newton sued the Beastie Boys for infringing his copyrighted composition through use of a looped three-note sample. The Ninth Circuit applied the “substantial similarity” test for infringement, ultimately holding that the composer’s copyright was not infringed through use of the sample. [FN43] The relatively sensible “substantial similarity” test was immediately rejected by the Sixth Circuit in Bridgeport Music v. Dimension Films[FN44] The Sixth Circuit’s much-criticized opinion set forth a bright line rule, establishing that sampling from a sound recording “necessarily infringes upon the rights of the owners of both the sound recording itself and the underlying composition.”[FN45] Though the Court’s holding did not explicitly preclude a successful fair use argument, as in Newton v. Diamond, no such argument was made by the defendant. IV. GILLIS’S FAIR USE ARGUMENT IN LIGHT OF INCONSISTENT JUDGMENTS REGARDING SAMPLING How would Gillis’s fair use argument fare in court? The general attitudes towards sampling expressed in Grand Upright [FN46] and in Bridgeport [FN47]suggest that at least some courts would be unreceptive to a fair use argument.  Additionally, though Gillis relies on “transformative use” doctrine in making his fair use argument, there simply is no precedent case on point to suggest whether this argument would be successful. Given the sparse case law, Gillis’s argument would depend almost entirely on the opinion of a court as to how “transformative” ought to be defined in this context. Proponents of Gillis’s fair use argument point to Girl Talk’s originality, but much of “Feed the Animals” consists of the juxtaposition of one extremely recognizable sample over another. [FN48] Indeed, it is the many moments of recognition of familiar choruses, hooks, riffs, voices and words that give Girl Talk its appeal. For the most part, Gillis’s transformation takes the form of pitch-shifting, editing, and re-contextualizing his source material.  Defining transformation so broadly in the context of fair use is potentially problematic as similar techniques have been common in hip-hop production for years. [FN49] If simply juxtaposing a Jay-Z verse over a pitch-shifted Radiohead sample is transformative, why should hip-hop producers pay for the rights to samples that will ultimately be “transformed” by a rapper’s verse? [FN50] Does Gillis really “comment” on his source material by displacing a chorus, a chord progression, or a beat without adding a significant amount of new material? Additionally, though “Feed the Animals” is made up largely of rapid-fire edits and extremely brief samples, there are numerous instances of samples of significant length, including a 63-second sample of BLACKstreet’s “No Diggity,” a 54-second sample of Missy Elliot’s “Work It,” and a 30-second sample of the Jackson 5’s “ABC.” [FN51] The use of samples incorporating an entire verse and chorus of a song would surely weigh against Gillis under the “amount and substantiality of the portion used” factor of fair use analysis.  Again, as Barthel points out [FN52], Gillis’s claim that he only uses short samples in a transformative manner is at the very least doubtful, if not highly dubious. [FN53] However, as a practical matter it is hard to blame Gillis for making a fair use argument. Under current copyright law he is left with three unsatisfying choices: continue to produce Girl Talk albums while clinging to a fair use argument; admit that Girl Talk probably does infringe copyright but continue anyway; or admit that Girl Talk infringes copyright and discontinue the project since complying with current law would be a cost-prohibitive logistical nightmare. V. COMPULSORY LICENSING AND “HIGH-VOLUME” SAMPLING Assuming that Gillis’s fair use argument is likely to fail, the only way he could legally produce Girl Talk albums would be under an amended Copyright Act. One oft-proposed solution that would solve the logistical problems posed by Girl Talk is the so-called compulsory sample license, an idea that has been the subject of law review articles for over a decade. [FN54]Creation of a compulsory sample license would involve amending the Copyright Act in order to create a scheme “roughly analogous to the one currently used for licensing cover versions of copyrighted songs” under Section 115 of the Copyright Act.[FN55] Early compulsory sample license proposals were often criticized for creating an “administratively cumbersome” [FN56] system with regulations no less arbitrary than those already in place. [FN57] Indeed, some proposals included bizarrely arbitrary restrictions. [FN58] Proposals for a compulsory sample license have resurfaced in recent years as sampling, and sampling-related legal issues, have evolved. [FN59] Proposed compulsory sample license schemes have included provisions regarding everything from royalty payments and categorization of sample-based works, to potential limits on sample length and liability issues involving sound recording and compositional copyrights. [FN60] No one, however, has proposed a workable solution for an artist such as Gillis who engages in “high-volume” sampling. Even a “relatively small sum collected per album pressed” (or sold digitally online) would render an album featuring three hundred twenty-two samples financially infeasible. [FN61] One possible solution is to structure royalty rates based on a percentage of revenue generated, as opposed to a flat rate per sample used.  Such a scheme would utilize a multi-tiered structure. The overall percentage of royalties paid per track would be determined by a sliding scale based on the number of samples used. [FN62] The division of that royalty revenue would be based on the length of the samples used in order to compensate copyright holders proportionally with the amount of the copyrighted work sampled. This structure would protect the interests of the copyright holder while enabling artists to create sample-based works without having to worry about prohibitive costs. Additionally, this structure is consistent with the constitutionally mandated policy goal of the Copyright Act: promoting “the progress of science and the useful arts.” [FN63] As noted above, Grand Upright abruptly halted the progress of one of the most fertile, creative movements in recent American music history. Amending the Copyright Act in order to allow for high-volume sampling would promote the creation of sample-based works while fairly compensating copyright holders. With the affordability of high-powered laptops and sampling software and the easy access to source material afforded by the Internet, such an amendment could help usher in a new Renaissance of sample-based music by giving sampling artists incentives to create and release new works without the fear of potential litigation or prohibitive preliminary licensing fees. Another, more practical argument is based in the harsh reality of the music industry in 2009. With the entire industry facing an uncertain future in the wake of steadily declining album sales, the music industry should be focused on alternative revenue streams and new monetization schemes. [FN64] Illegal Art released “Feed the Animals” under the Creative Commons Attribution Non-Commercial license, preventing anyone using Girl Talk tracks for derivative works from generating any revenue from that work. [FN65] Besides seeming blatantly hypocritical, this scenario limits the revenue that one of the most talked-about albums of 2008 will generate. Given the current climate of the music industry, such a lost opportunity is unfortunate to say the least. VI. CONCLUSION Though many logistical details would have to be worked out, a compulsory sample license coupled with a royalty scheme based on a percentage of the revenue generated by the sampling work is a workable solution to the problems raised by “Feed the Animals.” Sampling has continued to grow, cross-pollinating genres since its widespread integration into the American musical landscape over twenty years ago. As future generations of musicians grow up with powerful computers and constantly evolving music software, it is likely that many will follow Gillis’s lead. This logical development in music and technology should be accompanied by an analogous development in the laws that protect the rights of copyright holders while encouraging creative works. *** *Staff, UCLA Law Review, Volume 57.  J.D. Candidate, UCLA School of Law, 2011; B.A., Manhattan School of Music, 1999. [FN1] Girl Talk, Feed the Animals (Illegal Art 2002). [FN2] Girl Talk, Night Ripper (Illegal Art, June 19, 2008); Girl Talk Bio, (last visited Oct. 10, 2009). [FN3] Id. [FN4] Sean Fennessey, Review of “Night Ripper”, Pitchfork Media, Jul. 17, 2006, [FN5] Rob Walker, Mash-Up Model, N.Y. Times, July 20, 2008, §MM (Magazine), at 15. [FN6] Girl Talk Bio, supra note 2. [FN7] Nicole Martin, Fans Choose to Pay for Radiohead’s ‘Free’ Album, Daily Telegraph (London), Oct. 11, 2007, at 3. [FN8] Andy Baio, Girl Talk’s Feed the Animals: The Official Sample List, Nov. 10, 2008, [FN9] Metacritic: Best Albums of 2008, (last visited Oct. 10, 2009). [FN10] Jon Pareles, Making Girls Dance: All in a Night’s Work, N.Y. Times, Nov. 20, 2008, at C1. [FN11] Evan Davies, Hail to the Thief, NOW Magazine (Toronto), Nov. 5, 2008 at 1. [FN12] Id. [FN13] Id. [FN14] Walker, supra note 5, at 15. [FN15] Fennessey, supra note 4. [FN16] Id. [FN17] Girl Talk Bio, supra note 2. [FN18] Id. [FN19] 17 U.S.C. §107. [FN20] Id. [FN21] Id. [FN22] 510 U.S. 569 (1994). [FN23] Id. at 579. [FN24] Id. [FN25] Id. [FN26] Id. at 589. [FN27] Lennon v. Premise Media Corp., L.P., 08 Civ. 3813, Opinion & Order at 1 (S.D.N.Y. June 2, 2008), [FN28] Id. at 12. [FN29] Dave Itzkoff, Ono, EMI Drop ‘Imagine’ Lawsuit, N.Y. Times, Oct. 9, 2008, at C2. [FN30] Mike Barthel, Copyfight: Girl Talk is Not Fair Use,, Nov. 10, 2008, [FN31] Davies, supra note 11, at 1. [FN32] Robert Levine, Steal This Hook, N.Y. Times, Aug. 7, 2008 at E1. [FN33] Id. [FN34] Peter Friedman, Appropriation Can Be Original, What Is Fair Use?, Aug. 14, 2008, [FN35] Stephen Thomas Erlewine, Review of “It Takes a Nation of Millions to Hold Us Back”, AllMusic, (last visited Oct. 10, 2009). [FN36] John Bush, Review of “3 Feet High and Rising”, AllMusic, (last visited Oct. 10, 2009). [FN37] 780 F.Supp. 182 (S.D.N.Y. 1991). [FN38] Id. [FN39] Id. at 183. [FN40] Peter Friedman, What, indeed, is fair use?, Ruling Imagination: Law and Creativity, Nov. 13, 2008, [FN41] Kembrew McLeod, How Copyright Law Changed Hip Hop: An Interview with Public Enemy’s Chuck D and Hank Shocklee, Stay Free Magazine (Issue #20, Fall 2002), available at [FN42] Id. [FN43] 349 F.3d 591 (9th Cir. 2003). [FN44] 410 F.3d 792 (6th Cir. 2005). [FN45] Kenneth M. Achenbach, Grey Area: How Recent Developments in Digital Music Production Have Necessitated the Reexamination of Compulsory Licensing for Sample-Based Works, 6 N.C. J.L. & Tech. 187, 199 (2004). [FN46] Grand Upright, 780 F. Supp. at 183  (“Thou Shalt Not Steal”). [FN47] Bridgeport Music, Inc., 410 F.3d at 801 (“Get a license or do not sample.  We do not see this as stifling creativity in any way.”). [FN48] Track 1 of “Feed the Animals,” “Play Your Part (Pt.1),” begins with a sample of UGK’s “International Player’s Anthem” over The Spencer Davis Group’s “Gimme Some Lovin.’”  Track 3, “Still Here,” features BLACKstreet’s “No Diggity” over Kanye West’s “Flasing Lights.” [FN49] Ken Micallef, Kanye West, Remix, Feb. 1, 2004 at 2 (Producer/rapper Kanye West discussing his techniques for manipulating the speed and/or pitch of his samples). [FN50] Track 5 of “Feed the Animals,” “Set It Off,” contains a 40-second clip of Jay-Z’s “Roc Boys” juxtaposed over Radiohead’s “Paranoid Android.” [FN51] Baio, supra note 8. [FN52] Barthel, supra note 30. [FN53] Levine, supra note 32. [FN54] See, e.g., Michael L. Baroni, A Pirate’s Palette: The Dilemma of Digital Sound Sampling and a Proposed Compulsory License Solution, 11 U. Miami Ent. & Sports L. Rev. 65, 93 (1993). [FN55] Robert M. Szymanski, Audio Pastiche: Digital Sampling, Intermediate Copying, Fair Use, 3 UCLA Ent. L. Rev. 271, 294 (1996). [FN56] Id. at 294-295. [FN57] Lucille M. Ponte, The Emperor Has No Clothes: How Digital Sampling Infringement Cases Are Exposing Weaknesses in Traditional Copyright Law and the Need for Statutory Reform, 43 Am. Bus. L.J. 515, 549 (2006). [FN58] See, e.g., Baroni, supra note 54, at 95 (Proposing an arbitrary rule stating that the  “maximum allowable taking would be one sample per artist or group sampled from for each sampling artist’s album.”). [FN59] Achenbach, supra note 45, at 212-221. [FN60] Id. [FN61] Id. at 220. [FN62] For example, a track using 1-5 samples would pay a 10% royalty, a track using 6-10 samples would pay a 15% royalty, and so on.  This example is purely for illustrative purposes. [FN63] U.S. Const . art. I,, § 8, cl. 8. [FN64] Dawn C. Chmielewski, Digital Music Downloads Set a Record; More than 1 Billion Songs were Purchased Online in 2008. But CD Sales Fell 20%, L.A. Times, Dec. 31, 2008, at C3. [FN65], Why Doesn’t Girl Talk Allow Commercial Use?, (last visited Oct. 10, 2009).

A New Model for Music Finance

by Josh Kaplan* A pdf version of this article may be downloaded here. In recent years, the music industry has morphed at an alarming pace. The music label system has failed to evolve with equal speed, and the result is the demise of the music label and its surrounding infrastructure. The music label system has traditionally sold physical records at inflated prices while sharing a very small percentage of such sales with the musician. With the advent of digital music, the utilities that the labels possess have become available to any musician with a good internet connection. A band no longer needs a label to manufacture, promote and distribute its new LP. Today’s indie bands are resourceful, and tap into every free and inexpensive resource readily available. Bands utilize websites, social networking tools, street teams, e-stores and digital distribution companies to “break” into the business. Even still, the band needs one thing to take it to a national or international level: money. In the past, artists would access such capital by signing with a label in exchange for a loan, creatively coined an “advance.” The band, excited by the prospect of national exposure, would give the label the rights to its music and its name, with a contractual obligation to provide the label with six to ten more albums. The label would then control the manufacture, release and promotion of the band’s music. Any royalties that the band received from the sale of its music would be credited toward the “advance” that the band initially received from the label. The label would also reimburse itself for expenses incurred in producing and exploiting the record. Consequently, the band would remain in debt for the length of its contract with the label, and sometimes for years after. Physical record sales have been steadily declining for the past decade. Digital sales will soon eclipse physical sales. [FN1] In order to re-capture the bloated advances and investments that labels made in artists’ physical records, labels’ legal departments have constructed the “360 record deal.” In a 360 deal, the label lures a band to sign with the promise of an advance and label support. A percentage of all revenue generated by the band – from record and merchandise sales, touring, licensing, video and book sales, music rights, etc. – goes to the label. Regardless of the amount of money the label spends on the band or the band’s development in activities outside of music, the band (and usually the individual band members) will owe a percentage of its earnings for a set amount of time to the label. The advance that the label initially paid to entice the band to sign still functions as a loan that the band must repay to the label. The new generation of do-it-yourself musicians has an understandably tough time stomaching the terms of a 360 deal. How can a band “take the next step” without signing such a deal? In a recent trend that has emerged from the rubble of the label system, an independent investor looks to capitalize on the work that an independent musician has already accomplished. Recognizing buzz bands as valuable and legitimate start-ups, savvy individuals and companies increasingly try their hands in the music business. They bring with them corporate experience and non-industry lawyers, and have developed new models for signing, developing and exploiting independent bands. The investment model that has been used for decades by most other industries in the United States is thus finally making its way into the stubborn music industry. The best corporate vehicle to establish a partnership between an investor and a musician is the limited liability company (“LLC”). A band will have normally incorporated an LLC prior to soliciting an investment. In this scenario, we will refer to the band’s LLC as “Band LLC,” and assume it is owned jointly by the band members. The investor will also have established a corporate entity through which it will make its investment. We will refer to the investor’s company as “Investor LLC.” A third entity – typically another LLC – will be formed for purposes of the investment. We will call this third entity “Partners LLC.” Band LLC will be the initial owner (i.e. Member) of Partners LLC, and will assign and transfer all of its assets, copyrights, trade names and other intellectual property to the new entity. Band LLC, together with its legal and managerial team, will then determine the amount of ownership it is willing to cede in exchange for Investor LLC’s investment of money into Partners LLC. Let us assume that Band LLC decides to give Investor LLC 25% ownership in Partners LLC in exchange for an investment of $100,000. It is important to note that ownership percentages do not necessarily determine the way that a company’s profits are split. In a risky business investment such as ours, Investor LLC will expect to recoup its capital contribution ($100,000) in Partners LLC plus a preferred return (for example, ten percent of the initial $100,000) before Band LLC receives any distribution of profit. After recoupment, the profits may continue to slant in favor of Investor LLC, but should gradually move toward division based on ownership percentages of Partners LLC. During the time that Investor LLC is receiving all of Partners LLC’s profits, the musicians themselves make ends meet via salary. The members of Band LLC work for Partners LLC by performing, recording, making appearances, and developing new merchandise, and will thus draw a reasonable salary from Partners LLC until Band LLC starts to earn income from Partners LLC’s profit distributions. Depending on the needs of Band LLC, a sizeable percentage of Investor LLC’s capital contribution will cover the living expenses of the band members. Partners LLC will derive its income from the band’s activities. From royalties to touring to licensing to merchandise sales, all income will go into the Partners LLC pot. If Partners LLC is successful, the distribution of profits will enable Investor LLC to fully recoup its capital contribution plus make handsome profit. Investor LLC’s investment will allow Band LLC to purchase equipment, tour, work with a producer, secure a distribution arrangement, and get to the “next level” without falling into the deep debt that would result from a 360 deal. If we take this plan long term, there may be situations where Band LLC requires an additional investment (for example, to record and release a new album). Rather than giving up more and more ownership of Partners LLC, Band LLC can reinstate the same “waterfall” distribution scenario with a preferred return. This will allow an investor to feel more secure in its investment and allow Band LLC to keep the ownership percentage of Partner LLC at the status quo. If the relationship does not go well and Investor LLC does not recoup its investment in Partners LLC, the capital contribution will not function as a loan and Band LLC will not be responsible or liable for repayment. If Band LLC is concerned with partnering with Investor LLC for a long period of time, other distribution terms may be established. For example, once Investor LLC has received a 150% return on its investment, it may be removed as a Member of Partners LLC. Band LLC could also cap the profits of Investor LLC or limit the participation of Investor LLC through this structure. For today’s DIY bands that continue to work tirelessly on developing their music into a viable business, this type of structure may be ideal. It is a true partnership that allows for a lot of flexibility between the investor and the band. It provides a band with capital that is needed to hire a good public relationship firm, purchase advertisements, hire the right producers and properly exploit its music and merchandise, all without the constraints and the bureaucracy of the label system. If handled properly, such an investment structure may be the model for the “new” music industry. *** *Josh Kaplan often acts as a left-brain guide to right brain thinkers. Josh is a business lawyer at Stahl Cowen who focuses on music, entertainment and intellectual property law. Josh regularly works with musicians, producers, djs, artists, filmmakers, writers and designers to protect their work product through entity formation, contract negotiations, license agreements, and copyright and trademark registration. Josh has negotiated on behalf of his clients to place their music in movies, television shows, video games, commercials, webcasts and compilations with other artists. In addition, Josh has extensive experience assisting filmmakers and musicians in their quest for private funding for their film and music projects. Josh regularly negotiates and drafts private placement offerings and all corresponding documents including operating agreements and subscription agreements. is Josh’s outlet for his views on the music and film industry. [FN1] Casey Johnston, US Digital Music Sales to Eclipse CDs by 2010,