United States v. ASCAP

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United States v. ASCAP
United States Court of Appeals For The Second Circuit Seal.svg
Court United States Court of Appeals for the Second Circuit
Full case nameUnited States v. American Society of Composers, Authors and Publishers et al.
DecidedSeptember 28, 2010
Citation(s)No. 09-0539, 2010 WL 3749292 (2nd Cir. 2010)
Court membership
Judge(s) sittingDennis Jacobs, John M. Walker, Jr. & Debra Ann Livingston

United States v. American Society of Composers, Authors and Publishers (ASCAP) et al., No. 09-0539, 2010 WL 3749292 (2nd Cir. 2010), was a United States Court of Appeals case involving copyright liability for third-party vendors that provide online music download services. In particular, the Second Circuit ruled that music downloads do not constitute public performances, upholding the district court's decision and consequently preventing ASCAP from claiming higher royalty fees from Yahoo! and RealNetworks for downloaded music. However, the Second Circuit disagreed with the district court's method of fee assessment and remanded the case for further proceedings. [1] ASCAP appealed the decision and requested a writ of certiorari for judicial review in the Supreme Court. [2]

Contents

Background information

Yahoo! and RealNetworks sought blanket licenses from ASCAP, a non-profit organization exclusively licensing more than 390,000 songwriters, composers, lyricists, and music publishers in the United States. [3] A blanket license is a "license that gives the licensee the right to perform all of the works in the repertory for a single stated fee that does not vary depending on how much music from the repertory the licensee actually uses." [1] In order to settle the royalty payments owed to the music owners represented by ASCAP, the companies and ASCAP sought an assessment from the United States District Court for the Southern District of New York.

During the proceedings to establish a reasonable royalty rate, ASCAP claimed that individual downloads count as public performances, allowing a copyright holder's exclusive performance rights to be factored into the assessment of fees in addition to the exclusive rights of reproduction and distribution. If downloads were to count as public performances, each download would serve to increase the rate of royalties owed to copyright holders that licensed through ASCAP. Yahoo! and RealNetworks disagreed, citing that downloads involved only reproduction and distribution rights, not performance rights. [4]

This case centers around the controversial issue of royalty rates for internet radio under the Digital Millennium Copyright Act (DMCA). The DMCA, passed in 1998, included provisions that required Internet and satellite radio providers to pay performance royalties in addition to the standard publishing royalties paid by radio stations. [5]

This case falls under a consent decree originally entered into by ASCAP and the judicial department in 1941 as part of an antitrust case. Some scholars question the utility of such consent decrees as a means for resolving modern copyright issues, citing that such decrees failed to anticipate the modern complexities of copyright enforcement. [6]

Second Circuit's analysis

Facts

The Second Circuit established relevant facts regarding the nature of the online services provided by Yahoo! and RealNetworks. The court first identified two main categories of media provided: "radio-style" webcasts, in which audio and video are streamed to users able to perceive the media while it is simultaneously being transmitted to their computers. In addition, both providers offered users downloadable copies of music, not perceived by the user during transmission. The court further noted that for both Yahoo! and RealNetworks, "only a small portion" of each company's website involved the performance of musical works. The court further identified two main sources of income from the performances of musical works. The primary source of revenue generated from each company's online services came from advertisements supported by user traffic; in the words of the court, "the larger the audience and the more times a site is visited, the greater the revenue generated." The remainder of performance based revenue was subscription based. Finally the court cited relevant earlier decisions passed down from the district court in 2007, 2008, and 2009. The district court first established that downloads did not constitute performances, later establishing a method for computing fees owed to ASCAP by Yahoo! and RealNetworks. The district court adopted a simple formula of a 2.5% royalty rate multiplied by the amount of revenue generated by the performance of musical works from ASCAP's repertory. For Yahoo!, the district court took into account the fact that musical performances did not account for all of the revenue generated by its website. It thus estimated a "music-use-adjustment factor" (MUAF), consisting of the amount of time users spent streaming music divided by the amount of time all of Yahoo!'s online services were used. The court then multiplied the MUAF by Yahoo!'s total revenue in order to estimate the total revenue generated from musical performances. The court followed a similar line of reasoning for determining RealNetworks's fee: first declining to use the MUAF since most of RealNetworks's revenue came from performances of musical works but ultimately adopting MUAFs without explaining the calculations behind them. [1]

Is a download a public performance?

The Second Circuit first reiterated the exclusive rights of copyright holders under Section 106 of the Copyright Act, including the right "to perform the copyrighted work publicly." The court also noted the undisputed fact that both Yahoo! and RealNetworks provided services by which users could download, and hence copy, musical works, thus requiring compensation to be paid to the owners of those works through ASCAP. The court then identified the main issue under review, whether or not a download is a public performance, which would require separate compensation for the copyright holders. [1]

The circuit court first referenced the definition of a performance under Section 101 of the Copyright Act, which states that "[t]o 'perform' a work means to recite, render, play, dance, or act it, either directly or by means of any device or process." The court immediately ruled out a download as being a dance or an act, and subsequently dissected the statutes of "recite," "render," and "play." Referencing Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002), which held that plain statutes should be taken for "their ordinary, contemporary, common meaning," the court cited Webster's Third New International Dictionary 1895 (1981) to arrive at the definitions of the three remaining statutes. The court concluded that a musical performance "entails contemporaneous perceptibility," further citing the final clause of Section 101 as a confirmation of this definition. Thus, the circuit court upheld the district court's ruling:

The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work, as defined by § 101. [1]

ASCAP further argued that a download fulfilled the "public" portion of the definition under Section 101 since a download transmits a musical work to the public, thus constituting a public performance. However, the court dismissed this claim as a misreading of the definition of a performance, stating that "the definition of 'publicly' simply defines the circumstances under which a performance will be considered public; it does not define the meaning of 'performance.'" [1]

Assessment of fees

The Second Circuit also reviewed the district court's methods for determining royalty fees for each company. The circuit court found the district court's assessments flawed in the following two areas: [1]

Conclusion and Precedence

The Second Circuit affirmed the district court's ruling that downloads are not performances, but it also vacated the district court's assessment of fees. The court thus remanded the case (send it back to the District Court for further action). This decision serves to limit the reach of copyright holders in assessing various fees to content providers.

See also

Related Research Articles

A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, educational, or musical form. Copyright is intended to protect the original expression of an idea in the form of a creative work, but not the idea itself. A copyright is subject to limitations based on public interest considerations, such as the fair use doctrine in the United States.

<span class="mw-page-title-main">American Society of Composers, Authors and Publishers</span> Non-profit performance-rights organization

The American Society of Composers, Authors, and Publishers (ASCAP) is an American not-for-profit performance-rights organization (PRO) that collectively licenses the public performance rights of its members' musical works to venues, broadcasters, and digital streaming services.

<span class="mw-page-title-main">Broadcast Music, Inc.</span> Performing rights organization in the United States

Broadcast Music, Inc. (BMI) is a performance rights organization in the United States. It collects blanket license fees from businesses that use music, entitling those businesses to play or sync any songs from BMI's repertoire of over 20.6 million musical works. On a quarterly basis, BMI distributes the money to songwriters, composers, and music publishers as royalties to those members whose works have been performed.

Copyrights can either be licensed or assigned by the owner of the copyright. A copyright collective is a non-governmental body created by copyright law or private agreement which licenses copyrighted works on behalf of the authors and engages in collective rights management. Copyright societies track all the events and venues where copyrighted works are used and ensure that the copyright holders listed with the society are remunerated for such usage. The copyright society publishes its own tariff scheme on its websites and collects a nominal administrative fee on every transaction.

A performance rights organisation (PRO), also known as a performing rights society, provides intermediary functions, particularly collection of royalties, between copyright holders and parties who wish to use copyrighted works publicly in locations such as shopping and dining venues. Legal consumer purchase of works, such as buying CDs from a music store, confer private performance rights. PROs usually only collect royalties when use of a work is incidental to an organisation's purpose. Royalties for works essential to an organisation's purpose, such as theaters and radio, are usually negotiated directly with the rights holder. The interest of the organisations varies: many have the sole focus of musical works, while others may also encompass works and authors for audiovisual, drama, literature, or the visual arts.

<span class="mw-page-title-main">PRS for Music</span> British music rights society

PRS for Music Limited is a British music copyright collective, made up of 2 collection societies: the Mechanical-Copyright Protection Society (MCPS) and the Performing Right Society (PRS). It undertakes collective rights management for musical works on behalf of its 160,000 members. PRS for Music was formed in 1997 following the MCPS-PRS Alliance. In 2009, PRS and MCPS-PRS Alliance realigned their brands and became PRS for Music.

A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

APRA AMCOS consists of Australasian Performing Right Association (APRA) and Australasian Mechanical Copyright Owners Society (AMCOS), both copyright management organisations or copyright collectives which jointly represent over 100,000 songwriters, composers and music publishers in Australia and New Zealand. The two organisations work together to license public performances and administer performance, communication and reproduction rights on behalf of their members, who are creators of musical works, aiming to ensure fair payments to members and to defend their rights under the Australian Copyright Act (1968).

Music licensing is the licensed use of copyrighted music. Music licensing is intended to ensure that the owners of copyrights on musical works are compensated for certain uses of their work. A purchaser has limited rights to use the work without a separate agreement.

Performing rights are the right to perform music in public. It is part of copyright law and demands payment to the music's composer/lyricist and publisher. Performances are considered "public" if they take place in a public place and the audience is outside of a normal circle of friends and family, including concerts nightclubs, restaurants etc. Public performance also includes broadcast and cable television, radio, and any other transmitted performance of a live song.

<span class="mw-page-title-main">GEMA (German organization)</span> German performing rights society

The Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte is a government-mandated collecting society and performance rights organization based in Germany, with administrative offices in Berlin and Munich. GEMA represents the usage rights stemming from authors' rights for the musical works of those composers, lyricists, and publishers who are members in the organization. It is the only such institution in Germany and a member of BIEM and CISAC. Other collecting societies include the (AKM) Society of authors, composers and music publishers in Austria and SUISA in Switzerland.

Public domain music is music to which no exclusive intellectual property rights apply.

The Japanese Society for Rights of Authors, Composers and Publishers, often referred to as JASRAC, is a Japanese copyright collection society. It was founded in 1939 as a nonprofit organization, and is the largest musical copyright administration society in Japan.

Production music is recorded music that can be licensed to customers for use in film, television, radio and other media. Often, the music is produced and owned by production music libraries.

<span class="mw-page-title-main">Music Reports</span>

Music Reports serves individuals and organizations seeking expertise and solutions in music rights licensing, administration, royalty accounting, and software development and hosting. Music Reports operates the largest registry of worldwide music rights and related business information.

The Composers, Authors and Publishers Association of Canada was a Canadian copyright collective for the right to communicate with the public and publicly perform musical works. CAPAC administered these rights on behalf of its members and those of affiliated international organizations by licensing the use of their music in Canada. Royalties were paid to the music creators after administration costs were deducted to pay for the operation of CAPAC.

<i>Arista Records, LLC v. Launch Media, Inc</i> American legal case

Arista Records, LLC v. LAUNCH Media, Inc., 578 F.3d 148, is a legal case brought by Arista Records, LLC, Bad Boy Records, BMG Music, and Zomba Recording LLC alleging that the webcasting service provided by LAUNCH Media, Inc. ("Launch") willfully infringed BMG's sound recording copyrights. The lawsuit concerns the scope of the statutory term "interactive service" codified in 17 U.S.C. § 114, as amended by the Digital Millennium Copyright Act of 1998 ("DMCA"). If the webcasting service is an interactive service, Launch would be required to pay individual licensing fees to BMG's sound recording copyright holders; otherwise, Launch only need to pay "a statutory licensing fee set by the Copyright Royalty Board."

<i>Society of Composers, Authors and Music Publishers of Canada v Bell Canada</i> Supreme Court of Canada case

Society of Composers, Authors and Music Publishers of Canada (SOCAN) v. Bell Canada, 2012 SCC 36, is a leading Canadian case on the application of fair dealing under s. 29 of the Copyright Act. It pertained to the use of previews of musical works on online music services that sell digital files of musical works.

<i>Entertainment Software Assn v. Society of Composers, Authors and Music Publishers of Canada</i> Supreme Court of Canada case

Entertainment Software Ass'n v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 34, is a landmark Supreme Court of Canada judgement that clarified the nature of and relationship between, the bundle of rights created for copyright owners under section 3(1) of the Copyright Act of Canada. In particular, the Supreme Court considered the relationship between the reproduction and communication rights under the Copyright Act, and applied the principle of technological neutrality to hold that downloading a work engaged only the reproduction right, and not the communication right.

The Jamaica Association of Composers, Authors and Publishers (JACAP) is a Jamaican not-for-profit membership collective management organization which was established in 1998. JACAP administers the public performance and, if assigned also, the mechanical (reproductive) rights and synchronization rights of lyricists (authors), music composers and music publishers in Jamaica. JACAP is a member of the umbrella organisation for copyright societies CISAC - The International Confederation of Societies of Authors and Composers. JACAP is also a founding member of The Association of Caribbean Copyright Societies (ACCS).

References

  1. 1 2 3 4 5 6 7 United States v. American Society of Composers, Authors and Publishers (ASCAP) et al. , No. 09-0539, 2010 WL 3749292 (2nd Cir. 2010) (retrieved October 18, 2011)
  2. Nathan, Deborah. "ASCAP asks high court to review 'public performance' ruling". Westlaw Journal Intellectual Property. Retrieved October 18, 2011.
  3. McCool, Grant. "US Court Orders Music Download License Fee Review". Reuters UK. Retrieved November 6, 2011.
  4. "Second Circuit Rules That Public Performance Rights Don't Apply to Certain Digital Downloads". Wilson Sonsini Goodrich & Rosati. Retrieved October 18, 2011.
  5. Michael Roberts (May 2, 2002). "Digital Dilemma: Will new royalty fees kill Web radio?" Archived October 27, 2010, at the Wayback Machine . Westword. Retrieved November 6, 2011.
  6. Hillman, Noel (1998), "Intractable Consent: A Legislative Solution to the Problem of the Aging Consent Decrees in United States v. ASCAP and United States v. BMI", Fordham Intellectual Property, Media & Entertainment Law Journal