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MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN (SBN 49087) rjf@msk.com MARC E. MAYER (SBN 190969) mem@msk.com EMILY F. EVITT (SBN 261491) efe@msk.com 11377 West Olympic Boulevard Los Angeles, CA 90064-1683 Telephone: (310) 312-2000 Facsimile: (310) 312-3100 Attorneys for Plaintiffs

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SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES

CAPITOL RECORDS, LLC, a Delaware limited liability corporation; SONY MUSIC ENTERTAINMENT, a Delaware partnership; UMG RECORDINGS, INC., a Delaware corporation; WARNER MUSIC GROUP CORP., a Delaware corporation; and ABKCO MUSIC & RECORDS, INC., a New York corporation, Plaintiffs, V. SIRIUS XM RADIO INC., a Delaware corporation; and DOES 1 through 10, inclusive, Defendants.

CASE NO. BC 520981 Judge: Honorable John Shepard Wiley

NOTICE OF MOTION AND MOTION OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15,1972; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT [Request for Judicial Notice and Appendix of Non-California Authorities Filed Concurrently Herewith] Hearing Information: Location: Dept. 311 Date: May 14,2014 Time: 10:00 a.m. File Date: September 11, 2013 Trial Date: none set

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MOTION FOR JURY INSTRUCTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

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TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:

PLEASE TAKE NOTICE that, on May 14, 2014 at 10:00 a.m., or as soon thereafter as

4 the matter may be heard by the Honorable John Shepard Wiley in Department 311 of the above5 captioned Court, located at Central Civil West Courthouse, 600 South Commonwealth Ave., Los 6 Angeles, CA 90005, Plaintiffs Capitol Records, LLC, Sony Music Entertainment, UMG 7 Recordings, Inc., Warner Music Group Corp., and ABKCO Music & Records, Inc. will and 8 hereby do move the Court to adopt the following instruction to be given to a jury at the trial of this 9 action: 10 11 12 13 14 15 16 As set forth in the attached Memorandum of Points and Authorities, the foregoing jury The owner of a sound recording "fixed" (i.e., recorded) prior to February 15, 1972, possesses a property interest and exclusive ownership rights in that sound recording. This property interest and the ownership rights under California law include the exclusive right to publicly perfolin, or authorize others to publicly perform, the sound recording by means of digital transmission whether by satellite transmission, over the Internet, through mobile smartphone applications, or otherwise.

17 instruction is warranted by California Civil Code Section 980 and California common law, 18 including (but not limited to) Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. 19 Cal. 2010); ii&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977); and Capitol Records, Inc. 20 21 22 This motion is made pursuant to the Stipulated Briefing Schedule filed by the parties on v. Erickson, 2 Cal. App. 3d 526 (1969).

23 January 16, 2014, and the Court's Order thereon, entered January 27, 2014. 24 25 This motion is based on this Notice of Motion, the attached Memorandum of Points and

26 Authorities, any reply that may be filed in support of this motion, the concurrently filed Appendix 27 of Non-California Authorities, the complete files and records in this action, any facts of which the
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Court may take judicial notice under California Evidence Code 451 and 452 (including the 2 materials contained in the concurrently filed Request for Judicial Notice), and any other further 3 argument or evidence that Plaintiffs may present at or before the hearing on the motion. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
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DATED: February 3,2014

MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN MARC E. MAYER EMILY F. EVITT

By:

F4---utA4/1e/v\-7/110/

Russell J. Frac an Attorneys for laintiffs

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TABLE OF CONTENTS Page


Introduction I. II. III. PROPOSED JURY INSTRUCTION PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAW CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72 RECORDINGS THAT INCLUDES THE EXCLUSIVE RIGHT OF DIGITAL PUBLIC PERFORMANCE A. B. C. The Case Law Establishes The Existence Of A Common Law Intangible Property Interest In Pre-72 Recordings. The Policies And Principles Of California Law Confirm The Existence Of A Digital Performance Right In Pre-72 Recordings. The Plain Language And Structure Of Civil Code Section 980 Confirm The Existence Of An Exclusive Digital Public Performance Right In Pre-72 Recordings Congress Has Recognized That A Digital Public Performance Right Is Necessary To Protect Owners Of Sound Recordings 1 3 4

5 5 9

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Conclusion

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MOTION FOR JURY INSTRUCTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

1 2 3 4 A&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977) 5 A&M Records, Inc. v. Napster, 6 239 F.3d 1011 (9th Cir. 2001) 7 8 9
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CASES

passim 1 10 16 1, 16 13 passim 5, 6, 8, 15 5 6 5 13 14 14 4, 14, 17 10 1, 9, 10


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Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327 (1990) Bonneville Int'l Corp. v. Peters, 153 F. Supp. 2d 763 (E.D. Pa. 2001) Bonneville Intl Corp. v. Peters, 347 F.3d 485 (3d Cir. 2003) California School Employees Assn. v. Travis Unified School Dist., 156 Cal. App. 3d 242 (1984) Capitol Records, Inc. v. Erickson, 2 Cal. App. 3d 526 (1969) Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal. 2010) Order Granting Temporary Restraining Order Preliminary Injunction Temporary Restraining Order Cassel v. Superior Court, 51 Cal. 4th 113 (2011) Fnb Mortgage Corp. v. Pac. General Corp., 76 Cal. App. 4th 1116 (1999) Geertz v. Ausonio, 4 Cal. App. 4th 1363 (1992) Goldstein v. California, 412 U.S. 546 (1973) Hollywood Screentest of America, Inc. v. NBC Universal, Inc., 151 Cal. App. 4th 631 (2007) International News Service v. Associated Press, 248 U.S. 215 (1918)
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TABLE OF AUTHORITIES (continued)


Page(s) Lane v. Whitaker, 50 Cal. App. 2d 327 (1942) Law Offices of Mathew Higbee v. Expungement Assistance Services, 214 Cal. App. 4th 544 (2013) Leader v. Cords, 182 Cal. App. 4th 1588 (2010) Lone Ranger Television, Inc. v. Program Radio Corp., 740 F.2d 718 (9th Cir. 1984) Lopez v. Superior Court, 50 Cal. 4th 1055 (2010) Metropolitan Opera Ass 'n v. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (N.Y. Sup. Ct. 1950) Ojala v. Bohlin, 178 Cal. App. 2d 292 (1960) Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524 (2011) Smith v. Paul, 174 Cal. App. 2d 744 (1959) Williams v. Weisser, 273 Cal. App. 2d 726 (1969) WorldMark, The Club v. Wyndham Resort Development Corp., 187 Cal. App. 4th 1017 (2010) STATUTES 13 11 14 7 14 7, 11 11 14 12 12, 13 15

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1 2 3 4 5 6 7 8 654 980 Fla. Stat. 543.02 (enacted 1941)

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

9 10 11 12 6 W. F. Patry, Patry On Copyright, 18:55 (2013 ed.) 13 H.R. Conf. Rep. No. 105-796, at 79 (1998) 14 15 16 17 18 19 20 21 22 23 24 25 26 27
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OTHER AUTHORITIES 13 B. E. Witkin, Summary of California Law, 46, 47 (10th ed. 2005) 12 4 16

H.R. Rep. No. 92-487 (1971) No. 104-274 (1995) S. Rep. No. 104-128 (1995)

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Introduction Defendant Sirius XM Radio Inc. ("Sirius XM") has built a multi-billion dollar business on

3 transmitting sound recordings to the public. Every day, Sirius XM exploits, for commercial gain, 4 many hundreds, if not thousands, of Plaintiffs' sound recordings that were "fixed" (i.e., recorded) 5 before February 15, 1972 ("Pre-72 Recordings"), by transmitting high-quality digital versions of 6 those recordings to more than 25 million paying customers.' In fact, Sirius XM unabashedly seeks 7 to attract users to its service by offering channels dedicated to Pre-72 Recordings (including 8 1940s, 1950s, and 1960s channels) and by using Pre-72 Recordings to promote its channels, such 9 as by using classic Rolling Stones recordings to advertise the "Deep Tracks" channel and, just last 10 week, highlighting the works of the late singer/songwriter Pete Seeger on Sirius XM's "The 11 Village" and "Outlaw Country" channels. Notwithstanding the bounty that Sirius XM is receiving 12 from its unfettered use of some of the most iconic sound recordings of all time including 13 recordings by artists such as the Beatles, the Rolling Stones, Led Zeppelin, The Supremes, Bob 14 Dylan, and hundreds of others it refuses to pay the artists who created those cultural treasures, 15 and those who own the rights to them, any portion of the millions of dollars Sirius XM makes each 16 year from those Pre-72 Recordings. In addition to being fundamentally unfair, Sirius XM's 17 conduct violates California common law and statutes grounded in the century-old maxim that "one 18 may not reap where [it] has not sown." International News Service v. Associated Press, 248 U.S. 19 215, 239-40 (1918) ("INS"). 20 21 ' Sirius XM describes its service as follows: "Thanks to those satellites high in the sky, you can enjoy Sirius XM Satellite Radio almost anywhere within the 48 contiguous United States, the 22 District of Columbia and Puerto Rico (with some limitations), hundreds of miles out into the Atlantic and Pacific Oceans, the Gulf of Mexico, Caribbean Sea and the Great Lakes." 23 https://listenercare.siriusxm.corn/app/answers/detail/a id/3570 (last visited Feb. 3, 2014). Sirius XM has now expanded its services beyond satellite radio. Sirius XM's website describes its 24 digital service, MySXM, as an Internet radio feature "so you can enjoy it on your computer or with a Sirius XM app for your iPhoneC, iPadS, iPod touch or compatible Android device." See 25 http://www.siriusxm.com/mysxm (last visited Feb. 3, 2014). 26 2 Sound recordings can be digitally transmitted by satellite, over the Internet, and over mobile networks. "Real time" Internet transmissions are known as "streaming" transmissions. Bonneville Intl Corp. v. Peters, 347 F.3d 485, 489 (3d Cir. 2003). Alternatively, music files may be 27 distributed via digital download, which is a way "to receive information, typically a file, from 28 another computer to yours." A&M Records, Inc. v. Napster, 239 F.3d 1011, n. 1 (9th Cir. 2001).
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This motion asks the Court to recognize a basic legal principle: the exclusive intellectual property rights that California law grants to the owners of Pre-72 Recordings are broad and adaptable, and include the right to publicly perform Pre-72 Recordings by digital transmission, whether by satellite, over the Internet, through smartphone applications, or otherwise. For over 40 years, California law explicitly has recognized the existence of a common law property right in Pre-72 Recordings. This exclusive property right, which is necessary to protect and encourage the investment of time, money and creative effort involved in providing these unique recordings to the public, was written into Section 980 of the California Civil Code in 1982, which states, in unqualified terms, that the ownership rights of Pre-72 Recordings are "exclusive ... as against all persons." The property right in Pre-72 Recordings has for many years been exploited by the creators and owners of those recordings by reproduction and physical distribution to the public (i.e., on vinyl records, audio tapes, and CDs). The methods by which consumers enjoy music, and by which sound recording owners and artists distribute and are paid for that music, have changed, but the property exploited is the same. The same music now is widely accessed by means of digital audio transmissions such as those that are the foundation of Sirius XM's business. These transmissions enable businesses like Sirius XM to provide paying subscribers located anywhere in the United States (and beyond) high-quality recordings through car radios, desktop and laptop computers, smartphones, tablets, and other connected devices. Sirius XM's own representations that it currently has over 25 million paying subscribers confirm this change in consumer habits in listening to music. In 2012, Sirius XM's hardware was in two out of every three new cars sold, and its business generated more than $3.4 billion.' Put simply, Sirius XM is using Pre-72 Recordings to provide access to the same music that Plaintiffs created, own, and have the right to sell to the public, whether on CDs, digital copies, or digital transmissions. That Sirius XM is publicly performing those recordings via digital transmission, rather than selling a download or a

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See Sirius XM Satellite Radio Proxy Statement and 2012 Annual Report, available at http://investor.siriusxm.com/annuals.cfm (last visited Feb. 3, 2014); Sirius XM Satellite Radio Corporate Overview, available at http://www.siriusxrn.com/corporate (last visited Feb. 3, 2014). 2
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physical copy, does not change the fact that it appropriates for itself the value of Plaintiffs' property. The requested jury instruction does not implicate any proposed affirmative defenses that Sirius XM may later assert in these proceedings. Nor does this motion ask the Court to address the ultimate proof of a claim for violation of a digital public performance right in Pre-72 Recordings. The only issue before the Court is recognizing the existence of a digital performance right under California law.' As set forth below, the existence of a digital perfoimance right in Pre72 Recordings as part of the exclusive rights conferred by California law is confirmed by caselaw extending over 40 years; by the policies that underpin California common law theories of misappropriation, conversion, and unfair competition; by the plain language, structure, and intent of California Civil Code Section 980; and by the very same market considerations that in 1995 drove Congress to amend the Copyright Act (which, unlike California law, previously specifically excluded a performance right in sound recordings) to give sound recording owners a digital performance right in their federally copyrighted post-72 recordings. These authorities, whether taken individually or collectively, establish conclusively that there exists a broad intangible property right in Pre-72 Recordings that includes the valuable right to perform these recordings digitally. Accordingly, the Court should grant this motion and adopt Plaintiffs' proposed jury instruction.

I.

PROPOSED JURY INSTRUCTION Plaintiffs respectfully request that the Court adopt the following jury instruction: The owner of a sound recording "fixed" (i.e., recorded) prior to February 15, 1972, possesses a property interest and exclusive ownership rights in that sound recording. This property interest and the ownership rights under California law include the exclusive right to publicly perform, or authorize others to publicly perform, the sound recording by means of digital transmission whether by

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Plaintiffs also claim that Sirius XM is liable for copying thousands of Plaintiffs' Pre-72 Recordings to its servers or satellites without authorization. There is no dispute that California law recognizes the exclusive right to reproduce copies of Pre-72 Recordings. See A&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). Sirius XM's violations of Plaintiffs' reproduction right are not part of this motion and will be addressed at a later time. 3
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satellite transmission, over the Internet, through mobile smartphone applications, or otherwise. II. PRE-72 SOUND RECORDINGS ARE PROTECTED BY STATE LAW In 1971, Congress passed the Sound Recording Amendment to the 1909 Copyright Act. This amendment granted certain federal protections to sound recordings "fixed" on or after February 15, 1972 ("Post-72 Recordings"). 5 Congress' extension of federal copyright protection to such sound recordings, however, did not disturb the pre-existing state law regimen. Instead, the Sound Recording Amendment expressly preserved state law protection for Pre-72 Recordings. See 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.") (emphasis added). Section 301(c) of the Copyright Act does not limit the extent or nature of the protection that states can grant to Pre-72 Recordings. To the contrary, Congress expressly left existing state law intact, and further allowed the states to retain, adopt, and continue to develop common law and statutory protection for Pre-72 Recordings as they saw fit. Thus, Congress empowered the states to provide full protection for any unauthorized and uncompensated exploitation of Pre-72 Recordings. See Goldstein v. California, 412 U.S. 546 (1973) (California had broad power to protect Pre-72 Recordings that are not covered by the federal Copyright Act); see generally 6 W. F. Patry, Patry On Copyright, 18:55 at 18-198 (2013 ed.) ("Section 301(c) is directed toward material (pre-1972 sound recordings) which Congress has expressly told the states they may protect.... States are thus free to extend pre-1972 sound recordings the full panoply of rights granted original works of authorship by the Federal Copyright and beyond (for example, a performance right...)"). As explained below, California provides a valuable, intangible property right in the performances embodied in Pre-72 Recordings that includes the exclusive right to use (and authorize others to use) Pre-72 Recordings by digitally transmitting them.

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The protection for sound recordings "fixed" after February 15, 1972, later was codified in the 1976 Copyright Act, which lists "sound recordings" as a "work of authorship" protected by federal copyright law. See 17 U .S.C. 102(a)(7). 4
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III. CALIFORNIA LAW RECOGNIZES A PROPERTY INTEREST IN PRE-72 RECORDINGS THAT INCLUDES THE EXCLUSIVE RIGHT OF DIGITAL PUBLIC PERFORMANCE A.

The Case Law Establishes The Existence Of A Common Law Intangible Property Interest In Pre-72 Recordings.

California case law supports the existence of a digital performance right in Pre-72 Recordings under theories of unfair competition, misappropriation, and conversion. Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal. 2010), is the only reported decision applying California law to the digital performance of Pre-72 Recordings. The defendants were the owners of websites (bluebeat.com and basebeat.com ) that transmitted and distributed sound recordings, including a large number of Pre-72 Recordings (most notably recordings by the Beatles), to members of the public, both by digital download and by digital streaming, without authorization from the owners of the recordings. The plaintiffs, six affiliated record labels, sued, alleging that the defendants had engaged in federal copyright infringement with respect to the plaintiffs' Post-72 Recordings and had violated state law with respect to the plaintiffs' Pre-72 Recordings. Specifically, the plaintiffs alleged that the defendants had engaged in common law misappropriation, conversion, and unfair competition and had violated California Civil Code Section 980 (discussed at Section III.C. below), which provides that "[t]he author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein ....." (emphasis added). The case initially was assigned to Judge John Walter who issued both a temporary restraining order and preliminary injunction, finding that "by offering ... digital streaming transmissions of Plaintiffs' Recordings, Defendants' actions can cause irreparable damage to the perceived value of Plaintiffs' music and to Plaintiffs' digital distribution strategies and relationships." See Order Granting Temporary Restraining Order, Case No. 09-8030 JST at 6 (Docket No. 13); Temporary Restraining Order, Case No. 09-8030 JST (Docket No. 14) at 4

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("TRO"); Preliminary Injunction, Case No. 09-8030 JST (Docket No. 25) at

411 1(b).6

The TRO and

Preliminary Injunction enjoined the defendants from "directly or indirectly infringing in any

manner any right in any and all sound recordings originally fixed in a tangible medium of
expression prior to February 15, 1972, in which any Plaintiff.., owns or controls an exclusive right under state or common law (the 'Pre-1972 Sound Recordings'), including without limitation by directly or indirectly copying, reproducing, downloading, distributing, communicating to the public, uploading, linking to, transmitting, publicly performing, or otherwise exploiting in any manner any of Plaintiffs' Pre-1972 Sound Recordings..." TRO at 4; Preliminary Injunction at 2 (emphasis added). Several months later, the BlueBeat case was transferred to Judge Josephine Tucker who, after the completion of discovery, granted summary judgment to the plaintiffs, holding that the defendants "reproduced, sold, and publicly performed the pre-72 recordings without proper authorization" (emphasis added), and that "[for these actions, [defendants are] liable for misappropriation, unfair competition, and conversion." BlueBeat, 765 F. Supp. 2d at 1206. Thus, two judges concluded that defendants had violated the plaintiffs' rights, including by digitally performing their Pre-72 Recordings publicly.

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BlueBeat relied on, and was a natural result of, the two seminal California cases addressing
common law rights in Pre-72 Recordings Capitol Records, Inc. v. Erickson, 2 Cal. App. 3d 526 (1969) and il&M Records, Inc. v. Heilman, 75 Cal. App. 3d 554 (1977). In Erickson, the Court of Appeal held that the production, distribution, and sale of tape cartridges that copied the performances embodied in plaintiff's recordings gave rise to a claim for unfair competition because: Capitol expends substantial effort, skill and money in selecting performing artists and obtaining the exclusive right to record their performances, in mechanically reproducing their performances on discs and tapes of the highest quality, and in promoting the sale of the tapes and discs.... [Defendant] unfairly appropriates artistic performances produced by Capitol's efforts, and [defendant] profits Copies of these documents are included in the Appendix of Non-California Authorities filed concurrently herewith and subject to judicial notice. See Request for Judicial Notice, filed concurrently herewith. 6
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thereby to the disadvantage of Capitol. Such conduct by [defendant] is unfair competition.... 2 Cal. App. 3d at 5377 Erickson was followed by and expanded in Heilman, which held that making and distributing unauthorized copies of the performances embodied in plaintiffs' Pre-72 Recordings constituted unfair competition and also misappropriation and conversion. Heilman, 75 Cal. App. 3d at 564 (duplicating Pre-1972 Recordings and selling them for profit "presents a classic example of the unfair business practice of misappropriation of the valuable efforts of another. Such conduct unquestionably constitutes unfair competition...."). These cases recognized the basic proposition that there exists a property right in, and common law protection for, Pre-72 Recordings. Heilman, 75 Cal. App. 3d at 570 ("[R]ecorded performances are [plaintiff record company's] intangible personal property."); Erickson, 2 Cal. App. 3d at 537-38 (copying and distributing plaintiff's Pre-72 Recordings "appropriates artistic performances produced by [plaintiff's] efforts" and defendant "had appropriated the product itself performances embodied on the records."); see Lone Ranger Television, Inc. v. Program Radio Corp., 740 F.2d 718, 725 (9th Cir. 1984) (plaintiff had an "intangible property interest in the performances on its tapes" of scripts broadcast over the radio); see also Metropolitan Opera Ass 'n v. Wagner-Nichols Recorder Corp., 101 N.Y.S.2d 483 (N.Y. Sup. Ct. 1950), aff'd, 107 N.Y.S.2d 795 (N.Y. App. Div. 1951) (per curiam) ("[T]o refuse the groups who expend time, effort, money, and great skill in producing these artistic performances, the protection of giving them a property right in the resulting artistic creation would be contrary to existing law, inequitable, and repugnant to the public interest."). These cases protected the valuable intangible property in the recorded perfolinances in Pre72 Recordings (not the tangible tapes in which the intangible recordings were embodied). Defendants in those cases were selling, and their customers were buying, the ability to listen to ' The Pre-72 Recording found protectable and sold to the public in Erickson was "Goin' Out of My Head" by the Lettermen. 2 Cal. App. 3d at 529. Sirius XM also transmits recordings by the Letteimen without authorization or payment. See Complaint Schedule A; see also Heilman, 75 Cal. App. 3d at 560 n.5 (listing some of the recorded performances at issue here: "We've Only Just Begun" by the Carpenters and "You Were On My Mind" by We Five. See Complaint, Schedule A). 7
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and enjoy the recorded perfoimances in Pre-72 Recordings. In Erickson and Heilman, defendants accomplished that end by copying and distributing "hard copies" (i.e., tape recordings) of Pre-72 Recordings. That conduct violated the exclusive rights of the owners of those Pre-72 Recordings. Digital audio transmission is just another means of providing customers with access to the same Pre-72 Recordings that they could obtain and enjoy by other commercial means. The intangible property appropriated and used is the same, and the harm to the owners is the same. There is no factual or legal reason to carve out Sirius XM's means of commercial use digital audio transmission from the established exclusive property rights of owners of Pre-72 Recordings. These exclusive rights should apply regardless of the means by which a defendant uses Pre-72 Recordings and sells these recordings to the public. Collectively, Erickson, Heilman, and BlueBeat applied the well-developed elements of California common law causes of action for misappropriation, unfair competition, and conversion to Pre-72 Recordings. The BlueBeat court summarized the elements of these claims as applied to the copying, distribution, and digital public performance of Pre-72 Recordings as follows: For a successful misappropriation claim, a plaintiff must show that (1) the plaintiff has invested substantial time and money in development of its ... property; (2) the defendant has appropriated the [property] at little or no cost; and (3) the plaintiff has been injured by the defendant's conduct.... Under California Civil Code 980(a)(2), 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 ... 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 sound recording. For an unfair competition claim under California Business and Professions Code 17200, plaintiff must show anything that can properly be called a business practice and that at the same time is forbidden by law.... Section 17200 borrows violations from other laws by making them independently actionable as unfair competitive practices ... [and] a practice may be deemed unfair even if not specifically proscribed by some other law. ... Under California Business and Professions Code 17200, unfair competition ... include[s] any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising .... Finally, for a conversion claim, a plaintiff has to show ownership or right to possession of property, wrongful disposition of the property 8
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right and damages. BlueBeat, 765 F. Supp. 2d at 1205 (citations and quotations omitted). 8 These legal principles apply to the unauthorized exploitation by digital transmission of performances embodied in Pre-72 Recordings every bit as much as they apply to the unauthorized reproduction or distribution of the same performances embodied in Pre-72 Recordings. Nothing in the case law has negated the existence of a digital performance right in Pre-72 Recordings, or has limited or restricted an owner's property interest in Pre-72 Recordings to physical or digital reproduction or distribution rights. B.

The Policies And Principles Of California Law Confirm The Existence Of A Digital Performance Right In Pre-72 Recordings.

The decisions in Erickson and Heilman to confirm ownership rights in Pre-72 Recordings were premised on established common law principles, embodying California public policy. These cases recognized that a defendant may not "gain substantial profit" by "circumvent[ing] the necessity of expending skill and money in acquiring the artists and recording their performances," and that providing a return to those who do expend "skill and money" encourages further investment and invention. Erickson, 2 Cal. App. 3d at 537-38. The courts in both cases supported their conclusions with a line of unfair competition cases, including the seminal decision in INS, 248 U.S. 215 (1918). These and other cases confirm that the valuable performances in Pre-72 Recordings should be and are protected from appropriation or use by digital transmission. In INS, the parties (INS and the Associated Press ("AP")) were competitors in the gathering and publication of news, which they sold to newspapers for an annual subscription or membership fee. AP alleged that INS appropriated AP's news through a variety of means, including by copying news items from early editions of AP's member papers and copying and disseminating the substance of AP's articles to the public. The Court held that AP was entitled to protect an intangible property interest in its timely collection and distribution of its news pieces as against their appropriation (by publication) by INS: Plaintiffs expect to prove all the elements of a violation of these causes of action; however, the issue here is the existence of the right, not its violation. 9
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[T]o both [parties], news matter, however little susceptible of ownership or dominion in the absolute sense, is stock in trade, to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it, as for any other merchandise. Regarding the news, therefore, as but the material out of which both parties are seeking to make profits at the same time and in the same field, we hardly can fail to recognize that for this purpose, and as between them, it must be regarded as quasi property, irrespective of the rights of either as against the public.... [D]efendant, by its very act, admits that it is taking material that has been acquired by complainant as the result of organization and the expenditure of labor, skill, and money, and which is salable by complainant for money, and that defendant in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of complainant's members is appropriating to itself the harvest of those who have sown. Stripped of all disguises, the process amounts to an unauthorized interference with the normal operation of complainant's legitimate business precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not; with special advantage to defendant in the competition because of the fact that it is not burdened with any part of the expense of gathering the news. The transaction speaks for itself, and a court of equity ought not to hesitate long in characterizing it as unfair competition in business. 248 U.S. at 236, 239-40. The basic concepts and policies espoused by INS namely, that one may not "reap where it has not sown" by profiting from the product of skill, labor and money of another were adopted virtually verbatim by the Court in Erickson, relying extensively on INS. See 2 Cal. App. 3d at 531-33. The INS doctrine is firmly embedded in California law and the policies it articulates are a precise fit to this case. See, e.g., Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327, 1342 (1990) (listing elements of misappropriation cause of action and citing INS); Hollywood Screentest of America, Inc. v. NBC Universal, Inc., 151 Cal. App. 4th 631, 650 (2007) (elements of misappropriation cause of action include "the defendant has appropriated the 'thing' at little or no cost, such that the court can characterize defendant's actions as 'reaping where it has not sown'."); see also Metropolitan Opera, 101 N.Y.S. 2d at 490 (unfair competition by recording and selling copies of radio broadcasts and "taking material that has been acquired by complainant as a result of organization and the expenditure of labor, skill, and money, and which is salable by 10
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complainant for money, and that defendant in appropriating it and selling it as its own is endeavoring to reap where it has not sown...."). It follows that the common law necessarily must, and does, adapt to keep pace with and meet technological changes and developments that create new ways to "reap where one has not sown." See, e.g., Ojala v. Bohlin, 178 Cal. App. 2d 292, 301 (1960) ("The legal concept of unfair competition has evolved as a broad and flexible doctrine with a capacity for further growth to meet changing conditions. . . ."); see also Law Offices of Mathew Higbee v. Expungement Assistance Services, 214 Cal. App. 4th 544, 551 (2013) ("[w]ith passage of time and accompanying epochal changes in industrial and economic conditions, the legal concept of unfair competition broadened appreciably."). As technology and circumstances have evolved, the common law governing Pre72 Recordings also has evolved, and the scope of rights has taken shape. This flexibility to adapt to new technologies and new circumstances was demonstrated in Erickson, where the court applied traditional common law principles to the copying and distribution of Pre-72 Recordings that were fixed in a then-new medium, tape cartridges. Erickson was decided in response to tape recording technology that changed the playing field by enabling the widespread, unauthorized copying and distribution to the public of tape recorded copies of sound recordings to the public without paying the owners. 2 Cal. App. 3d at 528; see H.R. Rep. No. 92-487 at 19 (1971) (Statement of Chaitinan, Committee on the Judiciary: "The widespread availability and use of phonograph record and tape-playing machines, particularly the comparatively inexpensive cassette or cartridge tape players, give added impetus to piracy of sound recordings."). New technological developments tap into new sources of value inherent in an owner's intellectual property. In the present environment, what was true for unlawful duplication and sale of Pre-72 Recordings as described by Erickson in 1969, is just as true today for digital transmission of Pre-72 Recordings. It is unfair for others to take the value belonging to the owner of that property without authorization or compensation. The precise means by which a defendant appropriates and uses that property interest is not the issue. Rather, the issue is that (1) the plaintiff has invested "effort, skill and money" in its endeavor, by virtue of which, the plaintiff has 11
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created something of value, and (2) the defendant has appropriated and profited from that valuable property. Erickson, 2 Cal. App. 3d at 537. That is the case whether the value is realized by the sale of CDs, as in Erickson, or, as with Sirius XM, by the sale of subscriptions for digital transmissions of those same recordings. By populating its channels with many of Plaintiffs' most valuable recordings, Sirius XM has engaged in precisely the type of "reaping without sowing" articulated in Erickson and INS. Indeed, many of the channels to which Sirius XM sells access would not exist were it not for Plaintiffs' Pre-72 Recordings. Sirius XM had no hand in creating these recordings, yet profits handsomely from them. C. The Plain Language And Structure Of California Civil Code Section 980 Confirm The Existence Of An Exclusive Digital Public Performance Right In Pre-72 Recordings.

California common law copyright, codified in Civil Code Section 980, provides a separate basis for a state law digital performance right in Pre-72 Recordings. Historically, that statute was worded broadly to confirm "exclusive ownership" rights in various types of common law property. See generally 13 B. E. Witkin, Summary of California Law, 46, 47 (10th ed. 2005). Its scope has been interpreted expansively. See, e.g., Smith v. Paul, 174 Cal. App. 2d 744, 746-58 (1959) (then Civil Code Section 980(b) applied to architectural designs, plans, and specifications, even though not specifically mentioned); Williams v. Weisser, 273 Cal. App. 2d 726, 730 (1969) (then Civil Code Section 980(a) applied to professors' lectures). In that context, in 1982 California added protection for Pre-72 Recordings by statute when it amended Civil Code Section 980 to explicitly provide comprehensive, exclusive rights to owners of Pre-72 Recordings: 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 sound 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. Civ. Code 980(a)(2) (emphasis added). When it was amended, this new Section 980(a)(2) continued to use the same broad language as in previous iterations, providing for "exclusive ownership" in Pre-72 Recordings "as 12
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against all persons." The plain language of the statute does not limit in any way the scope of the "exclusive" rights that are reserved to owners of Pre-72 Recordings. The inclusive statutory language was neither inadvertent nor imprecise. It tracked terms that have been defined in California law for over 100 years. See Civ. Code 654 (defining "Property" as "The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others ... Mlle thing of which there may be ownership is called property.") (emphasis added); id. 679 ("The ownership of property is absolute when a single person has the absolute dominion over it, and may use it or dispose of it according to his pleasure....") (emphasis added); see also, e.g.,

Lane v. Whitaker, 50 Cal. App. 2d 327, 330 (1942) ("[O]wnership is the right of a person to
possess and use a thing to the exclusion of others."). These terms had been applied specifically to define the meaning of "exclusive ownership" as used in an earlier version of Section 980: There may be ownership of such products of labor or skill as the composition of an author and of rights created by statute (Civ. Code 655). The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others. The thing of which there may be ownership is called property. (Civ. Code 654).... A product of the mind is property. It is an intangible, incorporeal right." Johnson v. Twentieth Century Film Corp., 82 Cal. App. 2d 796, 807-08 (1947) (citing former Civ. Code 980). Years later, when the legislature enacted Section 980(a)(2), it used the same statutorily defined teims to provide that the owner of a Pre-72 Recording has the right to "possess and use it to the exclusion of others" and that the ownership of that property was "absolute." This plain language of Section 980(a)(2) makes clear its intent and purpose to give owners of Pre-72 Recordings the sole right to use the product of their "labor or skill." See California

School Employees Assn. v. Travis Unified School Dist., 156 Cal. App. 3d 242, 247 (1984) ("We
are required to give effect to statutes according to the usual, ordinary import of the language employed in framing them."). There is no basis for the Court to impose exceptions in Section 980(a)(1) where none exist. Cassel v. Superior Court, 51 Cal. 4th 113, 124 (2011) ("Judicial construction, and judicially crafted exceptions, are permitted only where due process is implicated, or where literal construction of a statute would produce absurd results."). When the Legislature chose to draft Section 980(a)(2), it pointedly did not, as it surely could have, construct the statute 13
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to enumerate limited, specific rights accorded to the owners of sound recordings unlike the structure of the federal Copyright Act. See 17 U.S.C. 106 (listing exclusive rights of copyright owners). Rather, the statute employed language that provided ownership rights that were not tethered to specific enumerated uses. It made ownership rights broad and provided for "exclusive ownership" in order to most effectively protect the investment, creativity, and commercial exploitation of those performances.' Lopez v. Superior Court, 50 Cal. 4th 1055, 1063 (2010) (courts should apply "the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute...."). Section 980 is to be liberally construed to effectuate its purpose of protecting the commercial value created and contributions made by owners of Pre-72 Recordings by affording them exclusive ownership rights to what was, and is, a "large industry in California." Goldstein, 412 U.S. at 571; see Cal. Civ. Code 4 ("The [Civil Code] establishes the law of this state respecting the subjects to which it relates, and its provisions are to be liberally construed with a view to effect its objects and to promote justice."); Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524, 530 (2011) ("courts should liberally construe remedial statutes in favor of their protective purpose"); see also, e.g., Leader v. Cords, 182 Cal. App. 4th 1588, 1597 (2010) (a remedial statute, i.e., "one which provides a means for the enforcement of a right or the redress of a wrong," must be liberally construed). The fact that the technology now used to exploit Pre-72

Mitchell Silberberg & Knupp LLP

The only "exception" made a part of Section 980 was the "independent fixation of other sounds" (i.e., "cover" recordings or re-recordings that are made by others and do not use the performances on the original recording). Geertz v. Ausonio, 4 Cal. App. 4th 1363, 1370 (1992) ("We presume 21 the Legislature included all the exceptions it intended to create."). Had the California legislature intended that other exceptions be applied to the broad rights provided to sound recording owners, 22 it would have done so. Fnb Mortgage Corp. v. Pac. General Corp., 76 Cal. App. 4th 1116, 1133 (1999) ("where exceptions to a general rule are specified by statute, other exceptions are not to be 23 implied or presumed, absent a discernible and contrary legislative intent."). 24 On the other hand, other states did what California chose not to do expressly exclude by statute public performance rights in Pre-72 Recordings. At the time Civil Code Section 980(a)(2) was 25 adopted, at least three states had statutes that denied any common law performance right in sound recordings. See N.C. Gen. Stat. 66-28 (enacted 1939) (abrogating common law rights in Pre-72 26 Recordings for commercial use of recorded performances after initial sale of recording); S.C. Code 39-3-510 (enacted 1939; previously codified at 6641, 66-101) (same); Fla. Stat. 543.02 27 (enacted 1941) ("[A]ll asserted common law rights" in recorded performances embodied in sound recordings are "abrogated and expressly repealed" after initial sale). The Florida statute later was 28 repealed, effective July 1, 1977. See Laws of Florida, 1977, c. 77-440, 1. 14
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Recordings through digital transmission did not exist in 1982 when Section 980(a)(2) was enacted in no way deprives Plaintiffs of their exclusive right to exploit (or authorize others to exploit) their property using this technology, as the BlueBeat court recognized. 765 F. Supp. 2d at 1205; see, e.g., WorldMark, The Club v. Wyndham Resort Development Corp., 187 Cal. App. 4th 1017, 1036

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(2010) (statute requiring disclosure of "address" includes e-mail addresses, stating "courts must be sufficiently receptive to the notion of adapting legal principles to address societal changes.... This is a particularly apt formulation of the standard in cases of emerging technologies lest our laws be interpreted only in light of yesterday's accomplishments"). Owners of Pre-72 Recordings invest their time, creativity, and money to make and provide their product to the public. The right to exploit the value they have created could not be any more clear or any more justifiable. D.
Congress Has Recognized That A Digital Public Performance Right Is Necessary To Protect Owners Of Sound Recordings.

As discussed above, the digital transmission to the public of Pre-72 Recordings as part of a commercial venture exploits a valuable property right protected under California law. In addition, Congress's analysis of the digital performance right under federal law is highly instructive, and further illustrates the wisdom of applying California law to digital technologies such as those used by Sirius XM. Prior to 1995, federal law, unlike California law, expressly denied a performance right in sound recordings. See 17 U.S.C. 114(a). In 1995, Congress amended the Copyright Act by the Digital Performance Right in Sound Recordings Act ("DPRA"). The DPRA conferred on the owners of Post-72 Recordings the exclusive right to publicly perform these recordings by digital audio transmission (including by satellite transmissions or over the Internet). When it enacted the DPRA, Congress noted the impact of current technology on the marketplace for sound recordings and required services like Sirius XM to obtain consent and pay for the right to reproduce and digitally perform Post-72 Recordings, i.e. all sound recordings within the purview of the Copyright Act: Trends within the music industry, as well as the telecommunications and information services industries, suggest that digital transmission of sound recordings is likely to become a very important outlet for the performance of recorded music in the near future.... These new 15
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digital transmission technologies may permit consumers to enjoy performances of a broader range of higher-quality recordings than has ever before been possible.... [C]urrent copyright law is inadequate to address all of the issues raised by these new technologies dealing with the digital transmission of sound recordings and musical works and, thus, to protect the livelihoods of the recording artists, songwriters, record companies, music publishers and others who depend upon revenues derived from traditional record sales. S. Rep. No. 104-128, at 14 (1995) ("S. Rep."). As Congress repeatedly recognized, new technologies "affect the ways in which ... creative works are used" (id. at 10) and "Whese new technologies also may lead to new systems for the electronic distribution of phonorecords...." H.R. Rep. No. 104-274, at 12. Congress was not "unmindful of the possibility that technological developments could well cause substantial changes in existing systems for public delivery of sound recordings." S. Rep. 104-128, at 11. Accordingly, Congress's expressed "purpose" was to "ensure that performing artists, record companies, and others whose livelihood depends upon effective copyright protection for sound recordings will be protected as new technologies affect the way in which their creative works are used." Id. at 10. More specifically, the digital performance right was the result of "a concern on the part of Congress to protect record companies and recording artists from the danger of reduced record sales due to technological advances enabling high-quality copying by a large number of listeners." Bonneville Intl Corp. v. Peters, 153 F. Supp. 2d 763, 778-79 (E.D. Pa. 2001), aff'd 347 F.3d 485 (2003). As the Bonneville court explained, "[t]he motivating force behind Congress' creation of the limited public performance right was the desire to protect record companies and recording artists from a reduction of record sales threatened by technological developments, specifically interactive and subscription services made possible by the emergence of digital audio services capable of delivering high-quality transmissions of sound recordings." Id. at 767, citing S. Rep. at 14-15; H.R. Rep. No. 104-274 at 5-9, 12-13. Again, in 1998, in enacting the Digital Millennium Copyright Act (commonly known as the "DMCA"), Congress reiterated its objective "to ensure that recording artists and record companies will be protected as new technologies affect the ways in which their creative works are used." H.R. Conf. Rep. No. 105-796, at 79 (1998). 16
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These same considerations namely, to protect the property rights of record companies and recording artists from new ways in which their creative works are used commercially, specifically, digital transmission apply to and provide further support for the existence of a digital performance right under California law. The amendments to the Copyright Act enacted by the DPRA were driven by the need to adapt the statute to technological change. However, unlike the Copyright Act, which previously excluded performance rights for sound recordings, California has long provided evolving and flexible common law protection to intellectual property, including Pre-72 Recordings, and broad, exclusive statutory protection specifically to Pre-72 Recordings. Thus, both California Civil Code Section 980 and California common law accommodate and include a digital performance right in Pre-72 Recordings. That property right is made all the more valuable and necessary by the ability to offer high-quality transmissions of Pre-72 Recordings to the public. There is no basis or authority to construe California law to provide less protection to digital transmissions of Pre-72 Recordings than federal law does to Post-72 Recordings, especially when California traditionally has, if anything, provided greater protection for sound recordings than has federal law. See, e.g., Goldstein, 412 U.S. at 546 (affirming California protection for sound recordings at a time when no federal protection existed). In practical terms, there is no legal or logical reason why Sirius XM should have to pay, for example, for the right to digitally transmit to the public a Justin Bieber recording but not pay for most of the iconic recordings of the Beatles or the Rolling Stones, or, for that matter, to pay for the right to transmit the Rolling Stones' "Start Me Up" (1981) but not their "(I Can't Get No) Satisfaction" (1965).

Conclusion California common law and Civil Code Section 980 both provide that unauthorized exploitation of performances embodied in Pre-72 Recordings violates the exclusive rights of their owners. Whether such exploitation is by the sale of CDs, digital downloads, or digital transmissions is not the point. The digital transmission of Pre-72 Recordings to the public is the 17
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equivalent of copying and distributing those recordings to the public. Failing to compensate for digital transmissions causes the same harm and loss of revenue as does unauthorized distribution of CDs or unauthorized downloading of digital copies embodying those sound recordings. Such commercial exploitation of Pre-72 Recordings without authorization violates a fundamental right to control the use of property and "unfairly appropriates artistic performances produced by [plaintiff's] effort, and [defendant] profits thereby to the disadvantage of [plaintiff]." Erickson, 2 Cal. App. 3d at 537. By publicly performing Pre-72 Recordings owned by Plaintiffs by means of a digital audio transmission without authorization or compensation, Sirius XM is misappropriating Plaintiffs' exclusive property interests under California law. Plaintiffs ask the Court to accept and adopt their proposed jury instruction in its entirety.

DATED: February 3, 2014

Respectfully submitted, MITCHELL SILBERBERG & KNUPP LLP RUSSELL J. FRACKMAN MARC E. MAYER EMILY F. EVITT

By:

fr.;1 --Ztitiev"Pt4.27 7
-

Russell J. Fr an Attorneys forTlaintiffs

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PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California, I am over the age of eighteen years and am not a party to this action; my business address is Mitchell Silberberg & Knupp LLP, 11377 West Olympic Boulevard, Los Angeles, CA 90064-1683, and my business email address is dvc@msk.com . On February 3, 2014, I served a copy of the foregoing document(s) described as NOTICE OF MOTION AND MOTION OF PLAINTIFFS FOR JURY INSTRUCTION REGARDING A DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS FIXED BEFORE FEBRUARY 15,1972; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT on the interested parties in this action at their last known address as set forth below by taking the action described below: SEE ATTACHED SERVICE LIST BY ELECTRONIC SERVICE: I served the above-mentioned document electronically using the CaseAnywhere website email service on the parties listed at the email addresses in the attached Service List, and, to the best of my knowledge, the transmission was complete and without error in that I did not receive an electronic notification to the contrary.

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I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on February 3, 2014, at Los Angeles, C lifornia.

Desiree Cabrera

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1 2

SERVICE LIST
Fred R. Puglisi Valerie E. Alter Jay Ramsey Kent Raygor Sheppard Mullin Richter & Hampton LLP 1901 Avenue of the Stars, Suite 1600 Los Angeles, CA 90067 Phone: 310-228-3733 Fax: 310-228-3933 E-mails: fpuglisi@sheppardmullin.com ; valter@sheppardmullin.com ; jramsey@sheppardmullin.com ; kraygor@sheppardmullin.com Attorneys for Defendant Sirius XM Radio Inc.

R. Bruce Rich Benjamin E. Marks Todd Larson 4 John Gerba , Bruce Meyer 5 Weil, Gotshal & Manges LLP 767 Fifth Avenue 6 New York, NY 10153 Phone: 212-310-8029 7 Fax: 212-310-8007 E-mails: bruce.rich weil.com ; 8 benjamin.marks@weil.com ; todd.larson@weil.com ; john.gerba@weil.com ; 9 bruce.meyer@weil.com Attorneys for Defendant 10 Sirius XM Radio Inc. 3 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
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Michael S. Oberman Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036 Phone: 212-715-9100 Fax: 212-715-8000 E-mail: mobennan@kramerlevin.com Attorneys for Defendant Sirius XM Radio Inc.

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