Sheridan v. Iheartmedia, Inc.

• Decision Date: 05 June 2017
• Docket Number: No. 15-CV-09229.,15-CV-09229.
• Citation: 255 F.Supp.3d 767
• Parties: Arthur SHERIDAN & Barbara Sheridan, Plaintiffs, v. IHEARTMEDIA, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

255 F.Supp.3d 767

Arthur SHERIDAN & Barbara Sheridan, Plaintiffs,

v.IHEARTMEDIA, INC., Defendant.

No. 15-CV-09229.

United States District Court, N.D. Illinois, Eastern Division.

Signed June 5, 2017

Elizabeth A. Fegan, Hagens Berman Sobol Shapiro LLP, Chicago, IL, John M. Destefano, III, Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ, Anthony Lewis Abner, Abner and Fullerton, Dana Point, CA, for Plaintiffs.

James K. Lynch, Andrew M. Gass, Brittany N. Lovejoy, Latham & Watkins LLP, San Francisco, CA, Matthew W. Walch, Latham & Watkins LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

John J. Tharp, Jr., United States District Judge

Plaintiffs Arthur and Barbara Sheridan own the master recordings of many hit songs from the 1950s and 1960s. Defendant iHeartMedia plays these recordings on its internet and traditional broadcast radio stations without paying any sort of royalty or licensing fees to the Sheridans. The Sheridans sued on behalf of themselves and others like them, claiming iHeartMedia's actions constitute common law copyright infringement, unfair competition, conversion, and unjust enrichment. iHeartMedia has moved to dismiss the complaint for failure to state a claim. For the reasons stated below, the motion is granted.

BACKGROUND¹

In the 1950s and 1960s, plaintiff Arthur Sheridan owned and operated "several recording companies specializing in recording and selling doo-wop, jazz, and rhythm and blues music." Compl. ¶ 15. He and Barbara Sheridan own the "master sound recordings" of many "fixtures" of these genres, by artists like the Flamingos, J.B. Lenoir, and the Moonglows. Id. at ¶ 16–17. They assert they also own any "intellectual property and contract rights associated with the recordings" and continue to market these recordings, receiving "revenue from licenses granted to third parties to publicly perform the recordings." Id. at ¶ 18–19.

Defendant iHeartMedia, operating under the name iHeartRadio, "offers internet radio services in the form of customizable music ‘stations' that stream music to users on the internet" as well as owning "hundreds" of traditional AM and FM radio stations, whose broadcasts also can be streamed online. Id. at ¶ 24. Users who listen to customized stations hear advertisements at "periodic intervals between tracks" and can skip only a limited number of tracks per day. Id. at ¶ 26. iHeartMedia has over 70 million registered users as well as millions of other conventional radio listeners. Compl. ¶ 31. According to the complaint, iHeartMedia "regularly broadcasts to Illinois listeners" the recordings owned by the Sheridans. Id. at ¶ 33. When these recordings are transmitted, the recordings are reproduced for the purposes of buffering, streaming, and other uses.Id. at ¶ 28. iHeartMedia has not obtained any licenses from the Sheridans. Id. at ¶ 34.

This case concerns only recordings made before February 15, 1972 ("pre–1972 recordings") because, as explained further below, sound recordings made on or after that date are subject to federal copyright law; to the extent that pre–1972 recordings have legal protection, it is provided by state law (statutory and common law) rather than federal law. The Sheridans filed this putative class action on behalf of themselves and other "owners of reproduction and public performance rights in Pre–1972 Recordings that have been publicly performed... by iHeartRadio ...." Id. at ¶ 37. They assert four state law claims: that iHeartMedia infringed their common law state copyright (Count I), that iHeartMedia misappropriated their property under the Illinois Uniform Deceptive Trade Practices Act ("IUDTPA") ( 815 ILCS 510/1 et seq. ) (Count II), that iHeartMedia converted their property rights (Count III), and that iHeartMedia has been unjustly enriched (Count IV). iHeartRadio has moved to dismiss all of the claims (see Mot., ECF No. 22), which are discussed in more detail below.

DISCUSSION

A. Jurisdiction

The Sheridans assert this court has jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d), because at least one class member is a citizen of a different state than the defendant, there are more than 100 class members, and the aggregate amount in controversy exceeds $5,000,000. Compl. ¶ 8. iHeartMedia has not contested the sufficiency of the class allegations to confer subject matter jurisdiction, and given the large number of recordings that could potentially be covered by a ruling on pre–1972 recordings, the Court finds the class allegations as to diversity and the amount in controversy to be reasonable. See Back Doctors Ltd. v. Metro. Prop. & Cas. Ins. Co. , 637 F.3d 827, 830 (7th Cir. 2011) ("the estimate of the dispute's stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible"). As claims under the Class Action Fairness Act are still governed by state law like any other claim brought under diversity jurisdiction, the Court applies Illinois law (and neither party has suggested that the Court should do otherwise). See Springman v. AIG Mktg. , 523 F.3d 685, 686 (7th Cir. 2008).

B. Common Law Copyright

Federal copyright law extends to sound recordings created on or after February 15, 1972. Copyright protection for sound recordings "fixed" (recorded) prior to February 15, 1972, however, is a matter of state law, rather than federal law. See 17 U.S.C. § 301(c). Both parties offer their own takes on the history of copyright law, but the basic undisputed fact is that for decades, the federal Copyright Act provided no protection for sound recordings (as distinct from protected lyrics and musical notes). Much lobbying was done on the subject, but there was little litigation. See Danielle Ely, Note, We Can Work It Out: Why Full Federalization of Pre–1972 Sound Recordings is Necessary to Clarify Ambiguous and Inconsistent State Copyright Laws , 23 GEO. MASON L. REV. 737, 740–742 (2016). In 1971, Congress enacted the Sound Recordings Act ("SRA"), which provided limited protection for sound recordings fixed after it went into effect in 1972. See Pub. L. No. 92–140, sec. 1(a), § 1(f), 85 Stat. 391, 391 (1971). In 1976, Congress added the language currently found at § 301(c), which clarifies that state copyright law governs pre–1972 recordings.²

Illinois has no state copyright statute governing sound recordings, unlike some other states, such as California. See Cal. Civ. Code § 980(a)(2) ; see also Flo & Eddie Inc. v. Sirius XM Radio Inc. , No. CV 13-5693 PSG RZX, 2014 WL 4725382, at *4 (C.D. Cal. Sept. 22, 2014), reconsideration denied , No. CV 13-5693 PSG (RZX), 2015 WL 9690320 (C.D. Cal. Feb. 19, 2015). The question, then, is whether Illinois provides common law copyright protection to pre–1972 sound recordings that have been sold to the public, but were not licensed by the defendant for public performance.³

Illinois recognizes a common law copyright in unpublished productions of "literature, [ ] drama, music, art, etc." that allows authors to control the initial publication of their work. Frohman v. Ferris , 238 Ill. 430, 87 N.E. 327, 328 (1909) ; Morton v. Raphael , 334 Ill.App. 399, 79 N.E.2d 522, 523 (1948) ("the settled rule of law in this and other jurisdictions" is "publication without copyright divests the owner of an exclusive common law right and the production becomes common property, subject to the free use of the community"). Publication, however, extinguishes the common law copyright. Rees v. Peltzer , 75 Ill. 475, 478 (1874) ("there is no copyright in a published work at common law") (emphasis in original). Under Illinois law, then, the dispositive question as to whether there is copyright protection that includes the right to exclusive public performance of a sound recording is whether the work has been "published." This question in turn depends upon whether it can be said that the copyright holder has dedicated, or donated, the work to the public, Raphael , 79 N.E.2d at 523, or, conversely, has effectively limited its distribution. In Frohman, for example, a playwright successfully sued a competitor who put on a nearly identical production of his play. 87 N.E. at 329. Frohman had never published his manuscript, but he had overseen public productions of the play. Id. The Court held such performances did not constitute publication of the play, citing copyright treatises of the era for the proposition that under the common law "the author does not lose his rights in the production by public representation [i.e. , performance]." Id. at 328, 87 N.E. 327, 328 (bracketed material added). The Illinois Supreme Court did not view performance as indicative of an intent to surrender the author's common law copyright, distinguishing a limited performance of the play from having the composition "printed and published in a book." Id. In Raphael, by contrast, an artist "made the first publication" of a series of murals "when she painted them on the walls of the Great Lakes Room where they could be seen and were undoubtedly observed by many persons." Raphael , 79 N.E.2d at 523. Of course, the same might be said of public performances of the play at issue in Frohman , but such are the challenges of applying the common law.

Whether the Sheridans can be said to have "dedicated to the public" their recordings has therefore been the principal sticking point for the parties, with the Sheridans arguing that "virtually no public domain" exists for sound recordings and that they have not "surrender[ed]" their copyright to the public. Pl.'s Resp. at 2, 7. Both the Illinois Supreme Court and the Seventh Circuit, however, have construed the concept of dedication to the public to include acts by which members of the public could access copies of the work—particularly through sales. See, e.g., Peltzer , 75 Ill. at 479 (publication of maps made "by selling several copies to real estate dealers without any restriction as to their use"); Data Cash Sys. v. JS&A Grp., Inc. ,...