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April 30, 2007

S.D.N.Y. Jury: Yahoo!’s Personalized Webcasts Not “Interactive”

A federal jury in the Southern District of New York on Friday handed down its verdict in Sony v. Launch Media, finding that Yahoo!’s LaunchCast service was not an “interactive service” under the Copyright Act. Billboard.biz has an in-depth report on the closing arguments, along with interviews with jurors.

Here’s some quick background. Section 114 of the Copyright Act allows webcasters to obtain a statutory license for the performance of sound recordings, so long as they meet numerous conditions. One of those conditions is that they must not be an “interactive service.” Section 114(j)(7) states:

An “interactive service” is one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the public at large, or in the case of a subscription service, by all subscribers of the service, does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated by either the transmitting entity or the individual making such request. If an entity offers both interactive and noninteractive services (either concurrently or at different times), the noninteractive component shall not be treated as part of an interactive service.

The issue was whether LaunchCast, which allows users to list favorite artists and creates a station that plays music the user is likely to enjoy based on those preferences, is “interactive.” If it is interactive, Yahoo! has no statutory license to perform the sound recordings, and it’s a copyright infringer. If it isn’t interactive, Yahoo! has a statutory license, and isn’t liable. The judge denied both parties’ motions for summary judgment, finding that the question of interactivity was a fact question the jury should decide.

From the Billboard report, it sounds like the quality of lawyering was high on both sides, with Yahoo! emphasizing that there’s no danger of piracy and the record companies emphasizing the plain meaning of the text of the statute. I’m particularly impressed that Yahoo! convinced the jury that a webcast sent to a user based on that user’s preferences was not “a program specially created for the recipient.”

April 27, 2007

Legislation Watch: One Good, One Bad

It’s been an eventful 24 hours in copyright. Jack Valenti died, leading to some nice encomia — and leading one wag to comment, “I suppose now he’ll find out how the Boston Strangler felt about being compared to a VCR.”

And two copyright bills were introduced in Congress: one good, one bad.

First, the bad. Rep. William Delahunt (D-MA) has reintroduced a bill that would extend copyright to fashion designs. If you’re wondering why this is a bad idea, read Chris Sprigman and Kal Raustiala’s law review article on the subject, “The Piracy Paradox: Innovation and Intellectual Property in Fashion Design.”

Second, the good. Reps. Jay Inslee (D-WA) and Don Manzullo (R-IL) have introduced H.R. 2060, the “Internet Radio Equality Act.” The bill would have several effects on the rates paid by webcasters for their digital transmissions of sound recordings:

  • The bill would nullify the March 2, 2007 rate determination issued by the Copyright Royalty Board, which would otherwise double webcasting rates over the next five years.
  • With regard to commercial webcasters, the bill would:
    • Set an interim rate for webcasts made between 2006 and 2011. Webcasters could choose to pay $0.0033 per hour of sound recordings transmitted to a single listener or 7.5% of gross revenues “directly related to” webcasting.
    • Set a new standard that the Copyright Royalty Board will use to set rates for webcasts made after 2011. Instead of the current standard — in which the rates are those that “would have been negotiated in the marketplace between a willing buyer and a willing seller” — the bill directs the Copyright Royalty Board to set a rate based on the factors set forth in 17 U.S.C. 801(b)(1). Those factors include the furthering the public interest in access to copyrighted works, delivering a fair return to the copyright holder, recognizing owners’ and users’ respective roles in making works available to the public, and avoiding unnecessary disruption of existing industry practices.
  • With regard to non-commercial webcasters, the bill would:
    • Set an interim rate. For each year between 2005 and whenever the parties agree on a rate or the Copyright Royalty Board sets a new rate under the new standard set forth below, non-commercial webcasters must pay 150% of whatever they paid in 2004.
    • Set a new standard. The bill would add sound recordings to the kinds of works covered by the collective bargaining provision of section 118, and would add all “non-profit institution[s] or organization[s]” to the class of users who can take advantage of section 118. (My reading of this is that groups of noncommercial webcasters could bargain collectively with SoundExchange, and if they can’t come to an agreement, the Copyright Royalty Board would set a rate based on the rate negotiated by other groups of noncommercial broadcasters and webcasters.)

  • The bill orders three studies:
    • One by the National Telecommunications and Information Administration on the competitiveness of the Internet radio marketplace and the effects of webcasting royalties thereon.
    • One by the FCC on the effects of webcasting royalties on localism, diversity, and competition.
    • One by the Corporation for Public Broadcasting on the effect of webcasting royalties on public radio stations.

While it’s almost certain to be modified before passage, the bill represents a great step forward in coming up with a set of webcasting royalty rates that fairly compensate copyright holders without destroying webcasters.

April 26, 2007

S.D.N.Y.: A Music Download Is Not A Public Performance

Let’s say you download a song from the iTunes Music Store. Everybody agrees that you’ve made a copy of the song: it’s sitting right there on your hard drive. But, in transmitting the song to you, did Apple publicly perform the song, too?

It seems like a silly question, but some ambiguities in the language of section 101 of the Copyright Act have allowed some copyright holders to argue that Apple needs a license not only to reproduce the song, but to perform it publicly, too.

A little over two years ago, I posted about ASCAP’s attempts to license podcasting. This was surprising, since podcasts are reproductions (you download them), not performances (you don’t stream them). ASCAP argued — wrongly, I thought — that podcasts are performances, too, since they’re transmitted over the Internet to the user.

ASCAP made the same argument to AOL, asking it to take a license for the performances involved in its music download service. The dispute ended up in federal court in the Southern District of New York. (Wonks: This was a rate court proceeding pursuant to the ASCAP consent decree.)

Via Sherwin Siy at Public Knowledge comes news that the court has ruled in favor of AOL, holding that “the downloading of a digital music file, in and of itself, does not” constitute a public performance under the Copyright Act.

The statute says that to “perform” a work means “to recite, render, play, dance, or act it, either directly or by means of any device or process.” 17 U.S.C. 101. The statute defines “public performance” to includes “to transmit or otherwise communicate a performance . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”

Looking at the dictionary definitions of those words, along with the statute’s legislative history, the court found that “in order for a song to be performed, it must be transmitted in a manner designed for contemporaneous perception.”

I think that’s exactly right. The key factor is the intent of the alleged infringer, as expressed through his choice of technological means for transmitting the copyrighted work. If the work is transmitted in a manner designed for contemporaneous perception and not for storage — like streaming audio — then there’s a performance, and not a reproduction. If the work is transmitted in a manner designed for storage and not for contemporaneous perception — like downloading an audio file — then there’s a reproduction, and not a performance.

Because the raw audio data itself doesn’t tell us anything about whether the transmission is “designed for contemporaneous perception,” we have to look to metadata, file headers, and other indicia of the purpose for which the data is being transmitted. There isn’t always a clear answer to this question — consider, for example, a case in which a user clicks on a link to an MP3 file on the web when the user has a broswer plugin installed that plays back the song as it is being downloaded and doesn’t keep a permanent copy on the hard drive. But just because the answer isn’t always easy doesn’t mean we should adopt ASCAP’s bright-line rule that every transmission is a public performance.

It is to be hoped that this decision will bring some certainty to the online music licensing marketplace, perhaps eliminating the need for legislation mooting the stream-versus-download question.

Disclaimer Haiku:
West wind seems to say,
"This is not legal advice;
I'm not your lawyer."

(And if you're a client with whom I have a preexisting attorney-client relationship, this still isn't legal advice.)

In case you're wondering, this blog is also not intended as advertising, as a representation of anything but my personal opinion, or as an offer of representation.

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