ABS Entm't, Inc. v. CBS Corp.

• Decision Date: 20 August 2018
• Docket Number: No. 16-55917,16-55917
• Citation: 900 F.3d 1113
• Parties: ABS ENTERTAINMENT, INC., an Arkansas corporation; Barnaby Records, Inc., a New York corporation; Brunswick Record Corporation, a New York corporation; Malaco Inc., a Mississippi corporation, each individually and on behalf of all others similarly situated., Plaintiffs-Appellants, v. CBS CORPORATION, a Delaware corporation; CBS Radio, Inc., a Delaware corporation; Does, 1 through 10, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

900 F.3d 1113

ABS ENTERTAINMENT, INC., an Arkansas corporation; Barnaby Records, Inc., a New York corporation; Brunswick Record Corporation, a New York corporation; Malaco Inc., a Mississippi corporation, each individually and on behalf of all others similarly situated., Plaintiffs-Appellants,

v.CBS CORPORATION, a Delaware corporation; CBS Radio, Inc., a Delaware corporation; Does, 1 through 10, Defendants-Appellees.

No. 16-55917

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 9, 2017—Pasadena, California

Filed August 20, 2018

Robert Edward Allen (argued), Alan P. Block, Roderick G. Dorman, and Lawrence M. Hadley, McKool Smith Hennigan P.C., Los Angeles, California; Kathleen E. Boychuck, Andrew Szot, and Marvin A. Miller, Miller Law LLC, Chicago, Illinois; for Plaintiffs-Appellants.

Robert M. Schwartz (argued), Amit Q. Gressel, Andrew J. Strabone, and Victor Jih, Irell & Manella LLP, Los Angeles, California, for Defendants-Appellees.

Richard S. Mandel, Cown Liebowitz & Latman P.C., New York, New York; George M. Borowsky, Recording Industry Association of America Inc., Washington, D.C.; for Amicus Curiae Recording Industry Association of America Inc.

Morgan E. Pietz, Gerard Fox Law P.C., Los Angeles, California; Katrina Novak, Lowe & Associates P.C., Los Angeles, California; for Amicus Curiae California Society of Entertainment Lawyers.

Steven G. Sklaver, Kalpana Srinivasan, and Stephen E. Morrissey, Susman Godfrey LLP, Los Angeles, California; Daniel B. Lifschitz, Maryann R. Marzano, and Henry Gradstein, Gradstein & Marzano P.C., Los Angeles, California; for Amicus Curiae Flo & Eddie Inc.

Andrew M. Gass and Elizabeth H. Yandell, Latham & Watkins LLP, San Francisco, California; Roman Martinez, Latham & Watkins, Washington, D.C.; for Amicus Curiae iHeartMedia Inc.

Stephen B. Kinnard, Paul Hastings LLP, Washington, D.C.; Emmy Parsons, Garrett Levin, and Rick Kaplan, National Association of Broadcasters, Washington, D.C.; for Amicus Curiae National Association of Broadcasters.

Before: Richard Linn,^* Marsha S. Berzon, and Paul J. Watford, Circuit Judges.

LINN, Circuit Judge:

Appellants ABS Entertainment, Inc., Barnaby Records, Inc., Brunswick Record Corp. and Malaco, Inc. (collectively, "ABS") appeal from the grant of summary judgment by the Central District of California in favor of CBS Corporation and CBS Radio, Inc. (collectively, "CBS"), holding that CBS did not violate any state law copyrights possessed by ABS in sound recordings originally fixed before 1972. ABS also appeals from the district court's striking of its class action certification, and certain evidentiary rulings.

We conclude that the district court erred in finding a lack of a genuine issue of material fact about the copyright eligibility of remastered sound recordings distributed by CBS and improperly concluded that ABS's state copyright interest in pre-1972 sound recordings embodied in the remastered sound recordings was preempted. We also conclude that the district court abused its discretion by excluding the testimony of ABS's expert Paul Geluso, excluding the Triton Reports as evidence of CBS's performance of ABS's sound recordings in California, and granting partial summary judgment of no infringement with respect to the samples contained in those reports. Finally, we conclude that the district court's strict application of its local rules with respect to the timeliness of ABS's motion for class action certification was inconsistent with the Federal Rules of Civil Procedure and was thus an abuse of discretion.

For the reasons set forth below, we reverse the grant of summary judgment and the striking of class certification, and remand for further proceedings consistent with this opinion.

I

In 1971, Congress passed the Sound Recording Act. This Act for the first time created federal copyright protection for certain sound recordings. Under that law, sound recordings fixed after February 15, 1972 were made subject to a compulsory license regime for performance via digital transmission and were excused from infringement for performance via terrestrial radio. 17 U.S.C. §§ 114, 301(c).

Congress reserved governance of sound recordings fixed before 1972 to state statutory law and common law and excluded such sound recordings from federal copyright protection until 2067. 17 U.S.C. § 301(c) ("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.... [N]o sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.").

ABS owns sound recordings embodying musical performances initially fixed in analog format prior to February 15, 1972 ("pre-1972 sound recordings").¹ As digital formats replaced analog ones, ABS hired remastering engineers to remaster the pre-1972 sound recordings onto digital formats ("remastered sound recordings"). In doing so, ABS determined to optimize the recordings for the new digital format using standard, technical processes to create accurate reproductions of its original pre-1972 analog recordings and did not set out to create any new and different sound recordings. ABS contends that this resulted in a change in quality but not a substantial difference in the identity or essential character of the sound recordings themselves. ABS argues that injecting a substantial difference in the digital remasters from their analog originals would have diminished the value of the remastered sound recordings, contrary to ABS's objective in seeking to fully exploit its intellectual property in those sound recordings.

ABS did not enter copies of the contracts between ABS and the remastering engineers into the record, but both parties agree that ABS authorized the creation of the remastered sound recordings at issue here.² There is no dispute that the remastered sound recordings contain only the sounds (i.e. the vocals and instruments) originally performed and fixed in the studio before 1972 and contained in the pre-1972 sound recordings, and that no sounds were removed or rearranged from the original fixed version. ABS agrees that the remastered sound recordings are not identical to the pre-1972 sound recordings, but contends that any differences were trivial and of no copyrightable consequence.

CBS delivers music content through terrestrial radio and digital streaming, including 18 music stations in California that are themselves streamed over the internet in "simulcast." CBS's Radio 2.0 system logs "all sound recordings it digitally transmits over the Internet," and a third party, Triton, tracks CBS's simulcasts. CBS does not use any analog sound recordings; it exclusively relies on digitally mastered or remastered sound recordings for the content it delivers to its customers. For all the broadcast content, CBS paid a royalty to the owner of the underlying musical composition. For the digitally streamed content, CBS paid the compulsory license fee under the Sound Recording Act to Sound Exchange. For content delivered by terrestrial radio, CBS does not pay a license fee pursuant, as permitted, to the Sound Recording Act's safe haven for terrestrial radio performance. See 17 U.S.C. § 114(d).

II

On August 17, 2015, ABS filed a putative class action against CBS in the Central District of California, alleging that CBS's transmission and distribution of the remastered sound recordings violated California state law—specifically, California Civil Code § 980(a)(2) (protecting the property rights of an author of a sound recording fixed prior to February 15, 1972); misappropriation and conversion; and unfair competition, under California Business and Professions Code § 17200.

On November 17, 2015, the district court denied a joint stipulation to extend the 90-day deadline for filing a motion for class action certification to allow for class certification discovery, explaining that there was "no show of cause, let alone good cause." On November 19, 2015, the expiration date of the local rule's 90-day deadline for filing of class certification, the court denied without explanation another joint stipulation to extend the filing date. That same day, ABS timely filed a motion for class certification. On November 25, 2015, the district court struck the motion for class certification because it set a hearing date for the motion beyond the 35-day period after service of process as required by the court's standing orders and it did not include a statement pursuant to Local Rule 7-3 that a "conference of counsel" took place prior to the filing of the motion. The court then struck ABS's class allegations as untimely filed under Local Rule 23-3.

CBS thereafter filed a motion for summary judgment, arguing that there was no genuine issue of material fact that the remastered sound recordings were authorized original derivative works, subject only to federal copyright law. In support of its motion, CBS submitted declarations from music engineers, including from Durand R. Begault, attesting that the remastering process involved originality and aesthetic judgment. In response, ABS submitted expert declarations of its own, including from Paul Geluso, who testified that the pre-1972 and remastered recordings "embodied" the same performance based on waveform, spectral, and critical listening analysis.

The district court decided two important evidentiary issues and granted summary judgment to CBS. The district court excluded Geluso's testimony under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharms., Inc. , 509 U.S. 579, 589–90, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) as "unscientific" and "unnecessary to aid a fact finder capable of listening to the sound recordings on his or her own," and, "[a]lternatively" because Geluso's testimony was "irrelevant." The court reasoned that Geluso limited his forensic analysis to only the first five...