August 24th, 2009
Sony loses bid to force royalties out of webcaster
On the hunt for money to beef up their rapidly deteriorating industry, the Big Four record labels sued LAUNCH, owned by Yahoo, and currently operated by CBS Radio (CBS also owns ZDNet). Their gripe: LAUNCH lets users create channels by genre and skip songs they don’t like. This, they claimed, made it an “interactive service” for purposes of the Digital Millenium Copyright Act.
Follow the money: If LAUNCH is interactive, then Yahoo (and thus, Pandora, and any damn webradio service in the world that lets you create “stations” or “channels”) would have to pay individual performance royalties for every song played. Big bucks for the RIAA! If not, they get “only” the statutory royalties set by the Copyright Royalty Board.
They lost at trial but Sony appealed. And lost, Reuters reports. And wasn’t this a brilliant move, Ray Beckerman points out:
Had there been no appeal, all there would have been is a jury verdict, which in any other case could have been explained away as being based on, and limited to, a jury’s conclusion as to the facts of the Launch Media case. But SONY just had to pursue its appeal, resulting in a 42-page appellate decision holding that “as a matter of law” a personalized internet radio station of the type provided by Launch Media is NOT interactive, no matter what the jury might have found. This decision now creates a safe harbor for a whole industry and business model. Thank you SONY!
So, what’s an interactive service? According to the law, 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 which is selected by or on behalf of the recipient.”
Non-interactive services’ “primary purpose . . . is to provide to the public such audio or other entertainment programming.”
It’s not so simple as, can you request Mr. Tambourine Man? The House report for the DMCA, which updated the definition of “interactive service” indicated:
If a transmission recipient has the ability to move forward and backward between songs in a program, the transmission is interactive. It is not necessary that the transmission recipient be able to select the actual songs that comprise the program.
The question turns on what Congress meant by “specially created.” The court looked at the legislative history, Congress’s concerns, etc., and decided that the salient issue is not whether the user can request a song, but whether the service provides a “degree of predictability – based on choices made by the user – that approximates the predictability the music listener seeks when purchasing music.”
After a long and tedious description of LAUNCH’s workings, the court concludes that there’s nothing predictable about LAUNCH - a user can’t expect to hear specific music on his or her channel. Indeed:
LAUNCHcast listeners do not even enjoy the limited predictability that once graced the AM airwaves on weekends in America when “special requests” represented love-struck adolescents’ attempts to communicate their feelings to “that special friend.” Therefore, we cannot say LAUNCHcast falls within the scope of the DMCA’s definition of an interactive service created for individual users.
