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IP/Entertainment Case Law Updates

Flo & Eddie, Inc. v. Pandora Media, Inc.

District court denies Pandora’s anti-SLAPP motion in lawsuit brought under California law by owners of pre-1972 sound recordings created by The Turtles, holding Pandora’s failure to pay for use of recordings was not conduct in furtherance of its speech rights and Music Modernization Act does not apply retroactively to preempt plaintiff’s state-law claims.

Plaintiff Flo & Eddie Inc., the owner of pre-1972 sound recordings made by the 1960s rock band The Turtles, sued the internet music streaming service Pandora Media Inc., alleging that it had illegally copied and broadcast those sound recordings in violation of California’s copyright law. Pandora filed a special motion to strike, or an anti- strategic lawsuit against public participation (SLAPP) motion, which the district court denied. Pandora appealed the decision to the Ninth Circuit, which certified two questions to the California Supreme Court regarding California statutory and common-law copyright protections for pre-1972 sound recordings. While those questions were pending before the California Supreme Court, Congress passed the Music Modernization Act (MMA), which brought pre-1972 sound recordings within the ambit of federal copyright law by creating new federal protection for those recordings and a new statutory licensing scheme that mirrors the scheme for post-1972 recordings. Among other things, the MMA created an affirmative defense for “non-interactive digital services” such as Pandora, which preempts all common-law and state-law claims based on transmissions of pre-1972 recordings over the internet as long as the service complies with certain statutory licensing requirements. In light of the MMA’s passage, the California Supreme Court declined to consider the certified questions, and the Ninth Circuit remanded the case to the district court. 

Pandora then renewed its anti-SLAPP motion, arguing that its broadcasting of Flo & Eddie’s sound recordings was an expressive activity in furtherance of its speech rights, undertaken in connection with an issue of public interest, and thus protected by the anti-SLAPP statute. It further argued that Flo & Eddie could not demonstrate a probability of prevailing on the merits because its claims are preempted by the MMA. The court denied the motion and declined to dismiss the claims.  

The court first looked to whether Pandora’s complained-of activities were in furtherance of its free speech rights. Pandora argued that the activity at issue was its broadcasting of the pre-1972 recordings, while Flo & Eddie argued that the activity at issue was instead Pandora’s failure to pay for the copying and broadcasting of its recordings. The court agreed with Flo & Eddie, relying principally on the Ninth Circuit’s 2017 decision in Jordan-Benel v. Universal City Studios, Inc. In Jordan-Benel, plaintiff brought an implied-in-fact contract claim against several film industry defendants for allegedly using his screenplay without providing compensation. In that case, the Ninth Circuit held that the plaintiff’s claim arose from the defendants’ failure to pay for his idea, rather than the creation of a film based on the screenplay, and therefore the conduct at issue was not in furtherance of the defendants’ free speech rights. Analogizing to Jordan-Benel, the court emphasized that Flo & Eddie “takes no issue with Pandora broadcasting its songs,” which is arguably expressive activity, but rather “takes issue with Pandora’s ‘failure to pay for its exploitation of intellectual property,’” which is not expressive activity. 

Even assuming that Pandora’s conduct was in furtherance of its free speech rights, the court held, Pandora also failed to show that its broadcasting was in connection with an issue of public interest, as required by the anti-SLAPP statute. The court here employed a two-part test that seeks to identify (1) the public issue that the speech implicates and (2) the functional relationship between the speech and the public conversation on the issue. The court agreed with Flo & Eddie that the relevant issue of public interest is “the underlying music itself” and that Pandora’s copying and transmission of the music are not related to the public conversation about it because Pandora “had no hand in creating” the music. That Pandora’s “speech” was commercial, the court held, further weighed against a finding that the copying and transmission of the recordings were protected. 

Finally, the court held that even if Pandora’s activities were protected under the anti-SLAPP statute, it would still deny the motion because Flo & Eddie had established a likelihood of prevailing on the merits for three reasons. First, the court held, the MMA does not preempt Flo & Eddie’s state-law claims because they were already pending at the time of the MMA’s passage. According to the court, although 17 U.S.C. Sec. 1401(e) preempts “any” claim arising from digital transmissions of pre-1972 recordings before the MMA’s enactment, this statutory language does not demonstrate a “clear congressional intent” or provide an “unambiguous directive” that it should be applied retroactively. For example, the court noted, Congress could have expressly stated that Sec. 1401(e) preemption applies to pending claims, but it opted not to do so. 

Second, the court held that even if the MMA applied retroactively, Flo & Eddie had raised genuine issues of fact as to whether Pandora qualifies for Sec. 1401(e) preemption. Sec. 1401(e), the court noted, requires that Pandora establish (1) pre-MMA compliance with various statutory licensing requirements, including limitations on the number and types of phonorecord copies it may create; and either (2) notice of use and payment, within 270 days of the MMA’s passage, for all transmissions and reproductions of pre-1972 recordings during the three years before enactment of the MMA; or (3) a settlement agreement waiving liability. According to the court, Flo & Eddie raised genuine issues of fact as to whether Pandora made phonorecord reproductions in excess of those allowable by the statutory licensing regime—specifically, whether Pandora made copies of Flo & Eddie tracks for purposes not permitted by 17 U.S.C. Sec. 112(e) or whether those copies were kept for longer than six months in violation of Sec. 112(e). Flo & Eddie, the court held, also raised a genuine issue of fact as to whether Pandora failed to notice use of or pay for all transmissions and reproductions of Flo & Eddie recordings during the three-year period preceding the enactment of the MMA. 

Third, the court rejected Pandora’s argument that California law does not protect the right that Flo & Eddie’s claims assert—the right of public performance in pre-1972 sound recordings. Having previously addressed this issue in earlier orders and having found that Pandora’s reliance on other courts’ interpretation of other states’ copyright laws was unconvincing, the court reaffirmed that California law protects the public performance right in pre-1972 sound recordings.

Prepared by Frank D’Angelo and Kyle Petersen