November 01, 2010
Intellectual Property, Internet & E-Commerce Alerts

Digital Music Downloading is Not a Public Performance Under the Copyright Act
by Cyrus Wadia

The United States Court of Appeals for the Second Circuit recently held that music downloading does not constitute a "public performance" that would be subject to license fees under the Copyright Act.  United States of America v. American Society of Composers, Authors and Publishers, et al.  __ F 3d __ (2nd Cir, September 28, 2010).
Under a 1941 antitrust consent decree against the American Society of Composers, Authors and Publishers ("ASCAP"), the United States District Court for the Southern District of New York acts as a "rate court" in determining a reasonable ASCAP license fee for the use of copyrighted musical works.  Since 2007, RealNetworks, Inc., Yahoo!, Inc., and ASCAP have disputed the amount of fees owed for the public performance of copyrighted music, i.e. online streaming.  ASCAP, for its part, sought to include the process of downloading music as a public performance, thereby entitling it to an additional license fee under the U.S. Copyright Act, 17 U.S.C. § 101.  Real and Yahoo sought blanket licenses for their music streaming and downloading services, but the parties were unable to mutually agree to a license and ASCAP applied to the district court for resolution. 
The District Court held that downloading music was merely a reproduction of a file that is inconsistent with the "recite, render and play" definition of public performance.  However, it maintained the reasonableness of ASCAP's proposed royalty rate formula based on music stream time as reflecting benchmark agreements set by similar ASCAP fee applicants. 

The Second Circuit affirmed the district court's assessment of music downloads as not constituting public performances, finding that such downloading lacks the "contemporaneous perceptibility" of such following examples: "Itzakh Perlman gives a 'recital' of Beethoven's Violin Concerto in D Major when he performs it aloud before an audience.  Jimi Hendrix memorably (or not, depending on one's sensibility) offered a 'rendition' of the Star-Spangled Banner at Woodstock when he performed it aloud in 1969.  Yo-Yo Ma 'plays' the Cello Suite No. 1 when he draws the bow across his cello strings to audibly reproduce the notes that Bach inscribed.  Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener."  Digital downloading is simply not contemporaneously perceived in the same manner, held the Second Circuit.
As for the single royalty rate formula applied by the District Court, the Second Circuit found it unreasonable as the lower court used an "imprecise metric" it its calculations.  It noted that each internet company requires a rate that factors in variables such as revenues derived from performances and how those revenues differ depending on the companies' different sites and services.  Specifically, the Second Circuit disagreed with using stream time as a basis for royalty as it " has no necessary correlation with page views, as a proxy for the number of times a page is viewed; time spent on-line is not reflective of how a user interacts with a particular page."  The Second Circuit remanded the matter back to district court for further proceedings. 

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