A big week for copyrights and piracy
The sale of The Pirate Bay probably ranks as the week's biggest news for those of us who obsess about copyright issues, followed by the ruling that Usenet.com's newsgroup-access service infringed on the major record companies' copyrights and the Supreme Court's decision not to take Hollywood's appeal of the Cablevision network DVR ruling. But two other developments in U.S. courts seem more important to the average music fan because of the potential they have for disrupting digital services.
The first is the latest lawsuit filed Monday by MCS Music America of Nashville and a dozen other music publishers against the operators of two current and one former subscription-music services. The suit seeks a hefty financial penalty from the companies for including the publishers' songs in their services, even though federal law compels the publishers to grant the necessary licenses. The second is a move by the American Society of Composers, Authors and Publishers to have a federal court declare that cellphone ringtones aren't downloadsbut rather public performances for which they are entitled royalties. In other words, ASCAP argues that playing a 15-second snippet of "Don't Talk to Me About Love" when a call comes in is the legal equivalent of blasting the song over the speakers at a hockey rink. In fact, ASCAP argues, it's an infringement even with the volume turned off.
The two cases illustrate the minefield that copyright law presents to companies that dare to venture into the digital music business. But first, here's some background information about the different types of copyrights held by music publishers (who represent songwriters). In the analog world, music publishers collected either a "mechanical" royalty when their songs were recorded and copied onto a single or album, or a (significantly lower) "performance" royalty when their songs were played in public. The latter included not just concerts, but also music played in public spaces (bars, restaurants, office-building elevators).
In the digital world, you might think that downloads would trigger mechanical royalties and that streams would trigger performance royalties. Unfortunately, the transition hasn't proved to be so simple. Courts and the Copyright Office have ruled that publishers can collect both kinds of royalties on some services, such as on-demand streams from an online jukebox. The rationale is that a copy of the full song is made in the process of delivering the stream. The publishers also argue that users will substitute on-demand streams for downloads, so the royalty payments should be equivalent.
One more note: Until last year, the online music services' trade group, the Digital Media Assn., or DiMA, contended that on-demand streams were purely performances, not downloads. In September 2008, however, DiMA reached a deal with the National Music Publishers Assn. and two other groups of songwriters acknowledging that on-demand streams were a form of download, and setting a royalty rate retroactive to the launch of the first services. These royalties were eventually incorporated by the Copyright Office into the regulation that applies to all services and copyright holders.
Unfortunately for RealNetworks (which co-owns the Rhapsody subscription service), Microsoft (which operates Zune Pass) and Yahoo (which used to offer Yahoo Music Unlimited), the 13 plaintiffs in the MCS lawsuit are not members of the NMPA. They claim that the services infringed their copyrights repeatedly by offering on-demand streams and temporary downloads (another class of service covered by DiMA's deal with the NMPA). This is the "gotcha" aspect of the case, which is the second MCS has brought against online music operators (it settled with Napster last year).
ASCAP, BMI and SESAC offer blanket licenses for performance rights, giving services a three-stop solution on that front. But there's no similar group or groups for mechanical licenses despite the fact that Section 115 of the Copyright Act compels publishers to provide such licenses upon request. The NMPA is the largest collection of publishers, with more than 700 members representing tens of thousands of songwriters. But thousands of others aren't affiliated, which presents an enormous logistical problem for companies such as Napster, RealNetworks and Microsoft that want to offer comprehensive libraries of music. Making matters worse, there's no central registry of copyright holders. "The problem is, the law is made for aggressive outliers," complained Jonathan Potter, executive director of DiMA. Referring to MCS, he added, "These guys are copyright trolls."
Attorney Stephen Grauberger, who represents the music publishers in the case, asserted in an interview that there was no compulsory license for temporary downloads until the Copyright Office's regulation took effect March 1, and that the regulation doesn't apply to on-demand streams regardless of the NMPA's position to the contrary. Even if he's wrong on those points, his clients may still win by showing that the three services or their subscribers made copies of the songs without first asking for licenses. As it's written today, the licenses in Section 115 may be compulsory, but they're not issued automatically.
DiMA and the NMPA tried to help services guard themselves against such lawsuits, teaming up behind a bill in 2006 to make it easier for services to take advantage of the compulsory licenses called for by Section 115. The measure would have created one or more clearinghouses where services could report the songs performed and pay the appropriate royalties, which the clearinghouses would distribute to the respective songwriters or publishers. The burden would have been on the copyright holders to tell the clearinghouses which songs they owned rather than requiring the services to track down that information. But the bill died in subcommittee in the face of opposition from broadcasters and tech companies that were concerned about its unintended consequences. Both Potter and David M. Israelite, president and chief executive of the NMPA, said there's been no effort to revive the proposal since then.
In the ringtone case, ASCAP's argument is the mirror image of the NMPA's on interactive streams: It contends that ringtones involve a public performance when they're first delivered to a cellphone, and again when the phone rings. My favorite part of ASCAP's latest brief is when it explains what makes a ringtone a public performance: "It need only be 'capable' of being performed to the public; whether the ringtone is set to play, and indeed whether anyone hears it, is of no moment" (emphasis added).
As if that wasn't bold enough, the brief later says, "Whether the device is on or off, the volume is turned down, or the phone is placed on vibrate, AT&T has caused a public performance." (ASCAP brought a similar action against Verizon Wireless.) I'm no lawyer, but from a policy standpoint, it's absurd to argue that a public performance occurs when there's no performance to anyone, anywhere.
ASCAP has said it doesn't plan to try to collect royalties from people whose phones play music not of their own creation. Thanks, but that's cold comfort. As three tech advocacy groups argued Wednesday in a brief opposing ASCAP, by asserting that AT&T was liable for its customers' use of ringtones, "the infringement accusation [by ASCAP] against consumers is plain." And if a ringtone is an infringing public performance, then so is singing in the YMCA shower or playing an iPod with headphones that leak music (although, as a regular user of public transit, I'd strongly support a prohibition on leaky headphones).
Some folks may pick ringtones precisely because the public will hear and admire them, just as some people carry boom boxes in public or sing as they shop. But as the advocacy groups note, copyright law provides a specific exemption from infringement claims for performances that aren't transmissions to the public, seek no commercial advantage and collect no compensation. Does that ring a bell?
-- Jon Healey