Sunday, August 23, 2009

LAUNCHcast Wins - Service Deemed Noninteractive by US 2nd Circuit Court of Appeals

Those who are calculating CRB royalties may be interested to read this decision published August 21, 2009 in the Federal Register.

The US Court of Appeals' Second Circuit upheld a 1997 jury decision that Yahoo's LAUNCHcast - a webcasting service now operated by CBS that provides Internet radio stations customized for individual users – is not an "interactive service" as defined in 17 U.S.C. §114(j)(7):

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.

Specifically, the US Court of Appeals found that LAUNCHcast's
  1. Users could not request specific musical works through LAUNCHcast
  2. Transmissions were not specially created for the user within the meaning of §114(j)(7)

Nobody disputes point #1 above, but point #2 is debatable. At least I found BMG's argument that "...Any service that reflects user input is specially created for and by the user and therefore qualifies as an interactive service" to be compelling. But the court did not "read the statute so broadly." Ultimately, the intent of §114(j)(7), as revised, guided the court to its decision.

The decision means that LAUNCHcast may pay statutory master performance royalties to SoundExchange instead of negotiating fees for each master with various record companies. The designation of a music service as "non-interactive" impacts royalties reportable to music publishers as well.


"Other cases in other circuits would not be bound by this decision, though they will no doubt find it to be instructive."
Do you agree with the Second Circuit?

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.

Thursday, August 20, 2009

NYT on Google Class Action Settlement

Microsoft, Yahoo and Amazon are now funding the fight against a pending settlement between Google, publishers and authors according to this week's New York Times article by Miguel Helft.

Authors: Do you support the Google class-action settlement with publisher and author groups? Why?

Publishers: Have you sent takedown notices to Google? How long did it take Google to remove your work(s) from its library?

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.

Wednesday, August 12, 2009

Transparency Initiatives

A transparency initiative in Nigeria disclosed questionable oil and gas transactions (see link here). If only the USA Interior Department and the states were as proactive in auditing our natural resource contracts!

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.

Monday, August 3, 2009

CRB Retroactove Rates for Limited Downloads Prior to 2008

I recently began an analysis of the publishing royalty rates adopted by the United States Copyright Royalty Judges in November 2008 pursuant to an agreement reached by all of the participants in the proceeding (e.g., the RIAA, NMPA and DiMA) with respect to interactive streaming, limited downloads and incidental digital phonorecord deliveries.

Among other things, my analysis has so far caused me to question which rates apply to limited downloads prior to 2008. Interestingly, I have not heard this topic reported in the media or discussed by my colleagues in the music industry.

Section 385.11 of the Copyright Royalty Judges' Final Determination of Rates and Terms (page 77) states that:
"A limited download is a general digital phonorecord delivery under 17 U.S.C. 115(c)(3)(C) and (D)."

As published in the February 9, 1999 Federal Register, 37 CFR part 255.5 was revised in 1999 to set rates for digital phonorecord deliveries in general. As a result, US Register of Copyrights Marybeth Peters wrote in the January 26, 2009 Federal Register:
"With respect to limited downloads, the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads, whether such downloads were promotional or not."

The Copyright Royalty Judges must have mostly concurred because they responded by amending their Final Determination of Rates and Terms to strike provisions including one that allowed licensees to report no royalties for certain limited downloads deemed to be promotional, including limited downloads that occurred prior to 2008.

Setting aside the issue of promotional units, according to the logic of the Register of Copyrights, it seems that the statutory mechanical royalty rates for all limited downloads through December 31, 2007 are equal to unit rates applicable to permanent downloads and physical records:

Playing time 0:00 - 5:00 minutes:
1996-1997 = $0.0695
1998-1999 = $0.071
2000-2001 = $0.0755
2002-2003 = $0.08
2004-2005 = $0.085
2006-2007 = $0.091

However, the participants' agreement and the Copyright Royalty Judges Final Determination of Rates and Terms (as amended) set forth contrary rates for limited downloads prior to 2008.

Is the Register of Copyrights correct that "the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads"? Which rates do you think apply and for which time periods?

Based on the summary of reportable rates that the Harry Fox Agency published, it represents that the rates for limited downloads prior to 2008 are set forth in the participants' agreement, not the rates applicable to all digital phonorecord deliveries in general.

While I think this may have been the intent of the participants (and the 1999 rate setting panel), perhaps the Register of Copyrights is technically correct that this would be impermissible retroactive rulemaking because when the participants and the CRJs deemed limited downloads to be general digital phonorecord deliveries, they subjected licensees to the same statutory royalty rates that were applicable to other general digital phonorecord deliveries (i.e., permanent downloads) through 2007. Attention attorneys: Please feel free to post comments or email me at boschan@royaltyauditors.com to tell me what you think.

Regardless of what the answer is, that the Copyright Royalty Judges did not clarify rates applicable to limited downloads during the period from inception to December 31, 2007 is troubling to those of us who must compute and audit royalties therefor.

Regrettably, this point is but one example of the confusion arising from the labyrinthine rates that the US music industry took over a decade to issue. The challenge of complying with such royalty rate calculations is great for my business, which reports, certifies and audits such royalties, but bad news for the music business as a whole. I think the Copyright Royalty Judges and the participants cost the music industry much needed profit in choosing to adopt such complex rates.

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.