Robert Allen, McKool Smith partner

CBS Corp. is at least one-third of the way back toward trial on whether it owes royalties under California law for streaming pre-1972 music over the internet.

Federal Circuit Judge Richard Linn, sitting as a visiting judge on the U.S. Court of Appeals for the Ninth Circuit, sounded extremely skeptical Thursday of the broadcaster's defense that the process of digitally remastering hits from the '60s and '70s made them derivative works of the 1980s and therefore subject to post-1972 federal copyright law.

During arguments in ABS Entertainment v. CBS, Linn said the remastering process was designed merely to improve sound quality, a perspective at odds with U.S. District Judge Percy Anderson of the Central District of California's finding that it added creative expression.

“The digital remasters don't contain any different voices, do they?” Linn asked McKool Smith partner Robert Allen, representing a class of recording artists and their licensees that is suing CBS.

“They do not, your honor,” Allen replied.

“Any different musicians?” Linn asked.

“They do not, your honor,” Allen repeated.

But Ninth Circuit Judges Marsha Berzon and Paul Watford sounded somewhat more open to CBS's argument, which if it stands could shut down a campaign that's produced tens if not hundreds of millions in settlements from other internet broadcasters.

Before 1972, federal copyright law made no mention of sound recordings. But the California Legislature has granted authors “exclusive ownership” of pre-1972 recordings. Music owners say the Legislature was trying to cover the gap in federal law, but the Ninth Circuit has asked the California Supreme Court to clarify. Similar litigation is playing out in New York, Florida and other states.

McKool Smith and Allen, a former legal affairs chief for Universal Music Publishing Group, represents a class that holds copyrights in the music of Al Green, the Everly Brothers, Mahalia Jackson and others. “When Al Green and his band went into the studio and recorded their vocal and instrumental performances, that was the date that sounds were initially fixed in a tangible medium,” Allen told the Ninth Circuit on Thursday. The fact that sound engineers may have later optimized them for digital transmission didn't create new derivative works, he argued.

Berzon didn't sound fully convinced. “My understanding is that the sound recording is not the act of recording, it's the fixing on a tangible medium,” she said. “The other way of looking at it would be that there's at least a factual dispute that there was a derivative work here.”

Judge Paul Watford implied that it might be premature for the Ninth Circuit to decide, given the California Supreme Court hasn't decided yet whether or how state copyright applies.

Robert Schwartz, the Irell & Manella partner who masterminded the defense for CBS, said engineers spend weeks and even months creating a new aesthetic when remastering recordings. That lets the music owners market it as, “If you want to hear the Everly Brothers as you've never heard them before, you need to buy this new remaster.”

“But it's the same recording,” Linn told him.

“It's not the same recording,” Schwartz replied. “It is the same studio performance.” But the engineer may say, “I want them to hear the bass line more. Or I want them to hear the background singers more.”

That, Schwartz said, “is creative expression … sufficient to create a new work that is subject to copyright.”

By the end of the argument, Watford and Berzon were triangulating toward Allen and the music owners' alternative argument: that if the remastered recordings are derivative works after 1972, they're covered by both state and federal copyright law.

“Why in the world would Congress have intended this regime to come into being?” Watford asked him. “I have to say I agree with CBS, it doesn't make a whole lot of sense.”

“I realize that it's problematic,” Allen said, but it's what the law says.