Pre-72 Hits: Appeals Court Deals Major Setback To Flo & Eddie

(Reuters) -- New York's top court handed Sirius XM Holdings Inc a major victory on Tuesday in a closely watched copyright battle with the founders of the 1960s' band The Turtles, a decision that will reduce a settlement both sides reached just weeks ago.

In a 4-2 ruling, the New York Court of Appeals agreed with Sirius that New York common law does not protect the public performance of songs made before 1972. Sirius had been playing the oldies without paying royalties.

Copyright "prevents copying of a work," the court said, "but does not prevent someone from using a copy, once it has been lawfully procured, in any other way the purchaser sees fit."

The case is one of a handful challenging New York-based Sirius and Pandora Media Inc over their playing of songs recorded before Feb. 15, 1972. Though such songs are not covered by federal copyright law, some recording artists and labels have won rulings entitling them to copyright protection under individual state laws.

Record sales have long been falling industrywide, forcing artists and labels to depend more on online or satellite services to make money.

In September 2014, Sirius was found liable to Flo & Eddie, a company controlled by founding Turtles members Howard Kaylan and Mark Volman, under California law. Flo & Eddie also sued Sirius in New York and Florida.

Last month, Sirius settled with Flo & Eddie and other owners of pre-1972 songs that Sirius has played since August 2009. The settlement needs approval by a federal judge in Los Angeles.

Sirius agreed to pay up to $99 million, depending on the outcome of appeals between the parties in New York, California and Florida.

The New York victory means Sirius does not have to make a $5 million bonus payment for past royalties and can cut the licensing rate for the next 10 years by 2 percent, according to court documents.

If Sirius wins in the other states, the licensing rate would be further reduced to zero, said Sirius' attorney Daniel Petrocelli.

"We are thrilled with the decision because it restores the law to where it has been for decades, and where it should remain," he said in an interview.

Henry Gradstein, a lawyer for Kaylan and Volman, in a statement said that because the laws over oldies are state specific, "the good fight to protect artists' rights rages on."

The case is Flo & Eddie Inc v. Sirius XM Radio, Inc, New York Court of Appeals, No. 172.