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August 24, 2009, Alert No. 1,979.
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2nd Circuit Rules Webcasting Service is Not an Interactive Service Under Section 114

8/21. The U.S. Court of Appeals (2ndCir) issued its opinion [42 pages in PDF] in Arista Records v. Launch Media, affirming the judgment of the District Court, and holding that a webcasting service is not an interactive service within the meaning of 17 U.S.C. § 114(j)(7).

This is the first Court of Appeals opinion on this issue. (The Library of Congress's Copyright Office declined to rule on the meaning of interactive service back in 2000.)

This ruling is a victory for internet radio providers and a defeat for record companies.

Jonathan Potter, head of the Digital Media Association (DiMA), which represents webcasters, stated in a release that "After ten years of record industry threats and litigation, DiMA is thrilled that the Second Circuit confirmed what Internet radio services and listeners already know -- that consumer-influenced radio promotes the discovery of new music, promotes artists and delivers to fans an experience that benefits all participants in the music industry. Hopefully this verdict will clear a path for a new wave of internet radio investment and innovation."

The Court of Appeals' decision turned on the meaning of obscure language in Section 114(j)(7) of the Copyright Act.

Background. The plaintiffs in the District Court and appellants before the 2nd Circuit are Arista Records, Bad Boy Records, BMG Music, and Zomba Recording. In addition, several other record companies were plaintiffs below, but did not join in the present appeal: Capitol Records, Virgin Records America, Sony Music Entertainment, UMG Recordings, Interscope Records and Motown Records.

Launch Media operates an internet radio website, or webcasting service, named Launchcast. The Court of Appeals wrote that Launchcast "enables a user to create ``stations´´ that play songs that are within a particular genre or similar to a particular artist or song the user selects", including sound recordings in which the plaintiffs hold the copyrights.

The Court of Appeals described the users' control of content with Launchcast. Among other things, "the user is prompted to select artists whose music the user prefers. The user is then asked which music genres the user enjoys and asked to rate the genres on a scale. The user is also asked the percentage of new music -- songs the user has not previously rated -- the user would like to incorporate into the user’s station (the ``unrated quota´´) and whether the user permits playing songs with profane lyrics." (Parentheses in original. Footnote omitted.)

Then, music is played "based on the user's preferred artists and genres" and "the user rates the songs, artists, or albums LAUNCHcast plays". Users can subscribe to the "stations" of other users. Users can pause or skip songs. There are numerous other features. But, the user cannot select the actual songs, or even a single song, on the playlist when it uses the Launchcast service. Song selections are randomly generated by the Launchcast service.

The plaintiffs filed a complaint in the U.S. District Court (SDNY) against Launch Media alleging willful infringement of their copyrights in sound recordings in violation of Section 114.

The plaintiffs alleged that between November 1999 and May 2001 Launchcast provided an interactive service and therefore was required to obtain individual licenses from from the plaintiffs to play their sound recordings.

Yahoo acquired Launch Media.

The case proceeded to trial by jury in the District Court. The jury returned a verdict that Launch Media does not provide an interactive service and is therefore not liable for paying the copyright holders a licensing fee for each individual song. This appeal followed.

Statute. 17 U.S.C. § 106(6) provides that subject to the limitations contained in Section 114 and elsewhere, "the owner of copyright ... has the exclusive rights to do and to authorize any of the following ... (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission".

Section 114 pertains to "Scope of exclusive rights in sound recordings".

Subsection 114(d)(3)(C) provides that "(d) Limitations on exclusive right. ... (3) Licenses for transmissions by interactive services. ... (C) Notwithstanding the grant of an exclusive or nonexclusive license of the right of public performance under section 106 (6), an interactive service may not publicly perform a sound recording unless a license has been granted for the public performance of any copyrighted musical work contained in the sound recording: Provided, That such license to publicly perform the copyrighted musical work may be granted either by a performing rights society representing the copyright owner or by the copyright owner."

Subsection 114(j) contains definitions. Subsection 114(j)(7) provides that "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." (Parentheses in original.)

Court of Appeals. The Court of Appeals affirmed.

It wrote that the issue is "whether a webcasting service that provides users with individualized internet radio stations -- the content of which can be affected by users' ratings of songs, artists, and albums -- is an interactive service within the meaning of 17 U.S.C. § 114(j)(7). If it is an interactive service, the webcasting service would be required to pay individual licensing fees to those copyright holders of the sound recordings of songs the webcasting service plays for its users. If it is not an interactive service, the webcasting service must only pay a statutory licensing fee set by the Copyright Royalty Board."

After a lengthy discussion of the legislative history, and analysis of the statutory language, the Court of Appeals concluded that such a webcasting service is not an interactive service.

This case is Arista Records, LLC, et al. v. Launch Media, Inc., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 07-2576-cv, an appeal from the U.S. District Court for the Southern District of New York, Judge Owen presiding. Judge Wesley wrote the opinion of the Court of Appeals, in which Judges Calabresi and Christopher Droni (USDC/DConn) joined.

Judge Richard Wesley also wrote in this opinion that "The Commerce Department ... oversees the Copyright Office ..." (At page 13.)

He also wrote the 2004 opinion of the 2nd Circuit in Swedenburg v. Kelly, 358 F.3d 223, which the Supreme Court reversed in its 2005 opinion in Granholm v. Heald, 544 U.S. 460. See, story titled "Supreme Court Rules in Internet Wine Sales Case" in TLJ Daily E-Mail Alert No. 1,137, May 17, 2005. Wesley also wrote the July 1, 2009, opinion of the 2nd Circuit in Arnold's Wine v. Boyle. See, story titled "2nd Circuit Again Addresses Wine Sales and Commerce Clause" in TLJ Daily E-Mail Alert No. 1,965, July 2, 2009.

District Court Enjoins RealDVD

8/11. The U.S. District Court (NDCal) issued a preliminary injunction in litigation between RealNetworks and member companies of the Motion Picture Association of America (MPAA) regarding RealDVD software. The District Court enjoined sale of RealDVD on the grounds that it violates the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA) and the Content Scramble System (CSS) license.

MPAA member companies filed a complaint [18 pages in PDF] in U.S. District Court (CDCal) against RealNetworks on September 30, 2008, alleging violation of the anti-circumvention provisions of the DMCA, codified at 17 U.S.C. § 1201, and breach of contract. RealNetworks filed its own complaint in U.S. District Court (NDCal) against the movie companies seeking declaratory relief.

RealDVD software enables users to make permanent copies of copyrighted and CSS protected content of DVDs, including rental DVDs. See, story titled "Movie Companies Sue RealNetworks for Selling DVD Copying Software" in TLJ Daily E-Mail Alert No. 1,835, September 30, 2008.

RealNetworks stated in a release that "We are disappointed that a preliminary injunction has been placed on the sale of RealDVD. We have just received the Judge's detailed ruling and are reviewing it. After we have done so fully, we'll determine our course of action and will have more to say at that time."

Dan Glickman, head of the MPAA, stated in a release that "We are very pleased with the court’s decision. This is a victory for the creators and producers of motion pictures and television shows and for the rule of law in our digital economy. Judge Patel’s ruling affirms what we have known all along: RealNetworks took a license to build a DVD-player and instead made an illegal DVD-copier. Throughout the development of RealDVD, RealNetworks demonstrated that it was willing to break the law at the expense of those who create entertainment content."

This case is RealNetworks, Inc. and RealNetworks Home Entertainment, Inc. v. DVD Copy Control Association, Inc., et al., and consolidated cases, U.S. District Court for the Northern District of California, D.C. Nos. C08 04548 MHP and C08 04719 MHP, Judge Marilyn Patel presiding.

WTO Panel Rules in PRC IPR Case

8/11. A panel of the World Trade Organization (WTO) released its report [491 pages in PDF] on the complaint filed by the U.S. against the People's Republic of China (PRC) regarding its access barriers for US content distributors. See also, document containing the final 9 pages, subtitled "Conclusions and Recommendations". The panel concluded that the PRC's access barriers violate its WTO commitments.

On April 10, 2007, the U.S. filed its complaint (nominally a request for consultations) with the WTO. See, story titled "US to Complain to WTO Regarding PR China's Failure to Protect IPR" in TLJ Daily E-Mail Alert No. 1,562, April 9, 2007. The European Communities joined in the complaint in April. Japan, Korea, Taiwan and Australia reserved their third party rights.

Ron Kirk, head of the Office of the U.S. Trade Representative (OUSTR) stated in a release the "WTO panel handed a significant victory to America's creative industries".

He continued that "These findings are an important step toward ensuring market access for legitimate U.S. products in the Chinese market, as well as ensuring market access for U.S. exporters and distributors of those products."

Kirk also said that "This decision promises to level the playing field for American companies working to distribute high-quality entertainment products in China, so that legitimate American products can get to market and beat out the pirates. To me, that is a clear win. We believe that this report will help pave the way toward more open trade between China and America."

The Motion Picture Association of America (MPAA) stated in a release that "The WTO decided in the U.S. government’s favor on virtually every count, declaring some of China’s most difficult barriers to its entertainment market to be clear violations of international trade rules. ... The WTO struck down China's film import monopoly as well as the barriers that keep U.S. companies from importing and distributing DVDs in China."

The MPAA added that the OUSTR "also challenged the monopoly China maintains over the distribution of U.S. movies shown in Chinese theaters, and the WTO ruled that -- based on the statements that China made during the proceeding -- China’s laws do not prevent opening this market to competition, another long-sought objective of the industry."

The MPAA also stated that "This ruling will complement our strategy to fight movie piracy in China. In spite of all the
restrictions we face, there is no shortage of U.S. filmed entertainment in China. Unfortunately, far too much of it is pirated, benefiting neither the legitimate Chinese businesses that are tied to and profit from showing U.S. movies nor, of course, the U.S. companies that are playing by the rules. This ruling represents a positive step in promoting the growth of legitimate U.S. movies in a market that is growing rapidly, and with great potential."

The Recording Industry Association of America (RIAA) stated in a release that "We highlight one aspect of the report on which the finding was not clear. The panel did not explicitly find that China’s discriminatory censorship process violated their WTO commitments. However, this finding -- or lack thereof -- was of a technical nature related to the panel's surprisingly narrow reading of the relevant U.S. claim. The panel was troubled by the discriminatory elements of the censorship review process, but was unclear that the U.S. has pled a particular cause of action. Nonetheless, the panel report has essentially provided a roadmap of how this measure could be challenged; having already found that it is facially discriminatory."

Ed Black, head of the Computer & Communications Industry Association (CCIA), stated in a release that "We're pleased with the ruling as it improves access to information for Chinese citizens and can help clear up problems that were contributing to the piracy of music and movies. The US government took on a legitimate concern of US innovators trying to do business in China. This is a good first step, but other US innovators continue to face trade barriers. We look forward to the US government continuing the fight not just against limiting hard information goods like a copyrighted song, but also attempts by China to block US companies from offering information services on the Internet."

In This Issue
This issue contains the following items:
 • 2nd Circuit Rules Webcasting Service is Not an Interactive Service Under Section 114
 • District Court Enjoins RealDVD
 • WTO Panel Rules in PRC IPR Case
 • FCC Releases Agenda for August 27 Meeting
FCC Releases Agenda for August 27 Meeting

8/20. The Federal Communications Commission (FCC) released an agenda for its event titled "Open Commission Meeting" scheduled for Thursday, August 27, 2009. It is scheduled to adopt three Notices of Inquiry (NOI).

The FCC is scheduled to adopt a NOI regarding "factors that encourage innovation and investment in wireless" communications. This proceeding is GN Docket No. 09-51.

The FCC is scheduled to adopt a NOI regarding its next annual report to the Congress on the status of competition in the mobile wireless market. This proceeding is WT Docket No. 09-66.

The FCC is scheduled to adopt a NOI regarding "whether there are opportunities to protect and empower American consumers by ensuring sufficient access to relevant information about communications services". This NOI references CC Docket No. 98-170 (a long running proceeding regarding government regulation of what carriers may and/or must put in their customers' bills), and WC Docket No. 04-36 (the far reaching IP enabled services proceeding).

This event is scheduled for 10:00 AM on Thursday, August 27, 2009, in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW.

The FCC's events titled "Open Commission Meeting" do not always begin at the scheduled time. These events sometimes do not take place. The FCC does not always take up all of the items on its published agendas. The FCC sometimes adds items to the program without providing the "one week" notice required 5 U.S.C. § 552b. The FCC does not release at its events copies of the items that it adopts at its events.

Washington Tech Calendar
New items are highlighted in red.
Monday, August 24

The House will not meet. It will return from its August recess on September 8.

The Senate will not meet. It will return from its August recess on September 8.

Deadline to submit comments to the Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS) regarding "the E-Verify Program Designated Agent Process under which a participating employer may choose to outsource submission of employment eligibility verification queries for newly hired employees to a Designated Agent". See, notice in the Federal Register, June 23, 2009, Vol. 74, No. 119, at Page 29711.

Tuesday, August 25

12:00 NOON - 1:30 PM. The Center for American Progress (CAP) will host a panel discussion on immigration policy. See notice and registration page. Lunch will be served. Location: 1333 H St., NW.

6:00 - 9:15 PM. The DC Bar Association will host an event titled "How to Recognize Critical Software Intellectual Property Issues in Everyday Practice". The speakers will be David Temeles (Bean Kinney & Korman) and Todd Trivett (Jeff Parmet & Associates). The price to attend ranges from $89 to $129. Most DC Bar events are not open to the public. See, notice. Location: DC Bar Conference Center, 1101 K St., NW.

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) regarding complaints concerning invention promoters and responses from the invention promoters to these complaints. See, notice in the Federal Register, June 26, 2009, Vol. 74, No. 122, at Pages 30528-30529.

Wednesday, August 26

No events listed.

Thursday, August 27

The Federal Communications Committee (FCC) may hold a meeting titled "August Agenda Meeting". Location: FCC, Commission Meeting Room, 445 12th St., SW.

Friday, August 28

The Federal Communications Commission (FCC) will hold a mock auction in advance of Auction 79, regarding 122 construction permits in the FM broadcast service. See, May 29, 2009, public notice (DA 09-152), and notice in the Federal Register, May 29, 2009, Vol. 74, No. 102, at Pages 25737-25744.

Deadline to submit certain reply comments to the Federal Communications Commission (FCC) in response to its supplemental Notice of Inquiry [22 pages in PDF] regarding its preparation of a video competition report for the years ending June 30, 2007, June 30, 2008, and June 20, 2009. This deadline pertains to comments regarding 2009. See, notice in the Federal Register, April 27, 2009, Vol. 74, No. 79, at Pages 19085-19091. See also, story titled "FCC Resumes Its Statutory Obligation to Study Video Competition" in TLJ Daily E-Mail Alert No. 1,886, January 21, 2009, and story titled "FCC Releases Amended NOI on Annual Video Competition Reports" in TLJ Daily E-Mail Alert No. 1924, April 11, 2009.

Deadline to submit comments to the Copyright Office (CO) in response to its notice of proposed rulemaking regarding requiring that applications for registration paid for by deposit account debits be submitted electronically using the electronic Copyright Office registration system. The CO is also requesting comment as to whether deposit accounts offer sufficient efficiencies to continue offering this service. See, notice in the Federal Register, July 14, 2009, Vol. 74, No. 133, at Pages 33930-33932.

Monday, August 31

Further extended deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) regarding deferral of examination for patent applications. See, notice in the Federal Register, June 16, 2009, Vol.74, No. 114, at Pages 28473-28474. The extended deadline was May 29, 2009. See, notice of extension in the Federal Register, March 9, 2009, Vol. 74, No. 44, at Page 10036. The original deadline was February 27, 2009. See, original notice in the Federal Register, January 28, 2009, Vol. 74, No. 17, at Pages 4946-4947.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its further notice of proposed rulemaking (FNPRM) regarding number porting. The FCC adopted and released the text [56 pages in PDF] of this FNPRM on May 13, 2009. It is FCC 09-41 in WC Docket No. 07-244 and CC Docket No. 95-116. See, notice in the Federal Register, July 2, 2009, Vol. 74, No. 126, at Pages 31667-31675.

Deadline to submit initial comments to the Copyright Office regarding its proposed rules regarding registration of copyright in online works. See, notice in the Federal Register, July 15, 2009, Vol. 74, No. 134, at Pages 34286-34290, and story titled "Copyright Office Proposes New Rules for Registration of Online Only Works" in TLJ Daily E-Mail Alert No. 1,970, July 15, 2009.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft Special Publication (SP) 800-126 [42 pages in PDF] titled "The Technical Specification for the Security Content Automation Protocol (SCAP)".

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