XM Radio 2014 Annual Report Download - page 139

pay subscriptions, the contents of advertising for our products and services, refunds we provide to
consumers, and consumer complaints. All of the changes contemplated by these settlement
agreements have been implemented. We also agreed to provide, upon the request of the States,
certain additional information about our consumer practices, to participate in a process designed to
address any previously unresolved consumer complaints, and to make an aggregate payment to the
States of approximately $4,000.
A separate investigation into our consumer practices is being conducted by the Attorney
General of the State of New York. We are cooperating with this investigation and believe our
consumer practices comply with all applicable federal and New York State laws and regulations. In
our view, the result of this investigation, including a possible settlement, will not have a material
adverse effect on our business, financial condition or results of operations.
Pre-1972 Sound Recording Matters. We are a defendant in three class action suits and one
additional suit, which were commenced in August and September 2013 and challenge our use and
public performance via satellite radio and the Internet of sound recordings fixed prior to February
15, 1972 under California, New York and/or Florida law. The plaintiffs in each of these suits purport
to seek in excess of $100,000 in compensatory damages along with unspecified punitive damages
and injunctive relief. Accordingly, at this point we cannot estimate the reasonably possible loss, or
range of loss, which could be incurred if the plaintiffs were to prevail in the allegations, but we
believe we have substantial defenses to the claims asserted. We intend to defend these actions
vigorously.
In September 2014, the United States District Court for the Central District of California ruled
that the grant of “exclusive ownership” to the owner of a sound recording under California’s
copyright statute included the exclusive right to control public performances of the sound recording.
The court further found that the unauthorized public performance of sound recordings violated
California laws on unfair competition, misappropriation and conversion. In October 2014, the
Superior Court of the State of California for the County of Los Angeles adopted the Central District
Court’s interpretation of “exclusive ownership” under California’s copyright statute. That Court did
not find that the unauthorized public performance of sound recordings violated California laws on
unfair competition, misappropriation and conversion. In November 2014, the United States District
Court for the Southern District of New York ruled that sound recordings fixed before February 15,
1972 were entitled under various theories of New York common law to the benefits of a public
performances right. We intend to appeal these decisions.
These cases are titled Flo & Eddie Inc. v. Sirius XM Radio Inc. et al., No. 2:13-cv-5693-PSG-RZ
(C.D. Cal.), Flo & Eddie, Inc. v. Sirius XM Radio Inc., et al., No. 1:13-cv-23182-DPG (S.D. Fla.),
Flo & Eddie, Inc. v. Sirius XM Radio Inc. et al., No. 1:13-cv-5784-CM (S.D.N.Y.), and Capitol Records
LLC et al. v. Sirius XM Radio Inc., No. BC-520981 (Super. Ct. L.A. County). Additional information
concerning each of these actions is publicly available in court filings under their docket numbers.
In addition, in August 2013, SoundExchange, Inc. filed a complaint in the United States District
Court for the District of Columbia alleging that we underpaid royalties for statutory licenses during
the 2007-2012 rate period in violation of the regulations established by the Copyright Royalty Board
for that period. SoundExchange principally alleges that we improperly reduced our calculation of
gross revenues, on which the royalty payments are based, by deducting non-recognized revenue
attributable to pre-1972 recordings and Premier package revenue that is not “separately charged”
as required by the regulations. SoundExchange is seeking compensatory damages of not less than
$50,000 and up to $100,000 or more, payment of late fees and interest, and attorneys’ fees and
costs.
In August 2014, the United States District Court for the District of Columbia granted our motion
to dismiss the complaint without prejudice on the grounds that the case properly should be pursued
before the Copyright Royalty Board rather than the district court. In December 2014,
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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollar amounts in thousands, unless otherwise stated)