Internet Radio – 2nd Cir. Weighs In

It is not novel that the Internet and file sharing have hit the Recording industry particularly hard.   Struggling to mount continual efforts to win court orders to insulate them from the loss of dwindling profits, they have clawed, lobbied and litigated their way through these past few years.  Indeed, for all the glamour often associated with the recording industry, the reality of their economic standing paints a rather different picture.

Not helping the situation was the Aug. 21, 2009, decision held by the US Court of Appeals for the Second Circuits in Arista Records LLC et al. v. Launch Media Inc.  In this case of first impression, the court held that webcasting services (such as an internet radio site) that provide users with individualized radio stations are not in violation of the Digital Millennium Copyright Act which grants sound recording copyright holders an exclusive right to perform (play or broadcast) sound recordings via a digital audio transmission for transmission through paid services and “interactive services.” 17 U.S.C. § 114(d).  The issue in this case was whether the webcast provided an interactive service as defined by the statute: “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 on behalf of the recipient.” In essence, an internet radio station will not be held to license the rights to play a song from the individual copyright holders so long as they don’t enable the user to receive a transmission of a particular sound recording at their will.  If a user cannot request or expect to demand a particular song, the webcaster will not be required to seek an additional license and will only have to pay a statutory licensing fee set by the Copyright Royalty Board.  One of the reasons behind this decision is that in situations where webcasters are merely streaming a certain genre of music with limited user choice functions to produce a “unique playlist” for the user, they are not undercutting the copyright user’s ability to market the recording.

Here, LAUNCHcast did not provide the threshold level of control to the user to violate the statute since it pulled songs from a pool of 10,000 songs, did not allow the user to view future songs on the play list and gave little credence to their identified preferences. As they stated “the webcasting service does not provide sufficient control to users such that playlists are so predictable that users will choose to listen to the webcast in lieu of purchasing music, thereby – in the aggregate – diminishing record sales.”  The court has made it clear that they will not hold webcasters in violation for merely providing a digitized version of broadcast radio.  It indeed will be interesting to see what happens as the boundaries of this decision get pushed by webcasters alike, but for now log on, sit back and let the music take you away.

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