by Hillel I. Parness[1]
In recent weeks, a number of lawsuits have been filed over whether certain Internet-based radio stations are eligible to pay royalties for the music they play in accordance with the statutory royalty scheme, or whether they are instead required to individually negotiate for the right to play each musical composition. The question at the heart of the dispute is whether the features of these services – such as “skip” buttons – which allow users to tailor the stream of songs directed to their computers, make the services “interactive.” The dispute also presents a new angle to an ongoing issue – whether, and to what degree, proprietors of Internet-based websites and services can and should be held liable for the actions of the people that visit and use those sites.
The CDA, the DMCA, and ISP Immunity
In the last five years Congress has enacted two important pieces of legislation that provide some measure of protection for the proprietors of websites and other Internet-based services, from liability arising from the actions of third parties, such as customers. The Communications Decency Act (“CDA”) of 1996’s “good samaritan” provision[2] was designed to protect ISPs from liability for online libel and other speech violations by third parties. Under this provision, “interactive computer services” are not treated as the speakers or publishers of content posted by “information content providers.” The CDA, however, expressly provides that those good samaritan protections do not apply to intellectual property claims, including those arising under the Copyright Act. This was the motivation behind the enactment of the 1998 Digital Millennium Copyright Act (“DMCA”), namely to address these questions in the context of copyright law. The DMCA sets out four “safe harbors,” each of which immunizes “service providers” from liability for contributory or vicarious copyright infringement for people using their services under certain sets of circumstances.[3]
Both of these acts’ immunity provisions have begun to undergo testing in the courts. Outside the copyright context, in cases applying the CDA’s good samaritan provision, the courts have liberally interpreted “interactive computer service,” and granted wide-ranging protection to ICSs. In two California cases, for example, courts immunized the Internet auction service eBay, Inc. from liability for the auction of bootleg music CDs and counterfeit sports memorabilia, on the theory that eBay’s role (as an interactive computer service) was limited to the publication of written content (which the court classified as speech) generated by sellers (which it called information content providers).[4] In copyright cases, however, no court has yet granted any company immunity under any of the DMCA’s safe harbor provisions, setting high standards to qualify as a “service provider” and to satisfy the safe harbors. For instance, in A&M Records, Inc. v. Napster, Inc., Napster, which facilitated the exchange of digital music files between its users, was denied protection under the “transitory digital network communications” safe harbor, because it did not qualify as a “system” through which communications flowed. The court also expressed doubt as to whether Napster was a “service provider” under the statute.[5] And because the CDA does not apply to intellectual property matters, and because the DMCA is limited to copyright, there is no statutory immunity for ISPs in areas such as trademark.[6]
A series of lawsuits brought in recent weeks raises similar issues in the context of Internet radio stations. To appreciate the controversy, one must become familiar with the role of the Copyright Act, and subsequent statutes, in regulating the transmission of music over the radio and the Internet. Radio stations are allowed to broadcast musical recordings contingent on the payment of statutory license fees, and adherence to certain restrictions.[7] This system relieves the stations of the burden of negotiating for the right to play each song, and prevents the music companies from abusing their position of power and prohibiting the stations from playing particular songs. In 1995, with the passage of the Digital Performance Right in Sound Recordings Act (“DPRA”), the statutory scheme was expanded to include certain types of digital audio transmissions.[8] Under the DPRA, web-based radio stations may broadcast songs, as long as the transmission “is not part of an interactive service,” and adheres to other “performance complement” restrictions.
“Interactive service” is defined in the DPRA as “one that enables a member of the public to receive a transmission of a program specifically 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.”[9] The “performance complement” restrictions include, for example, that in a three-hour period, the station may not play (i) three selections from the same record (with no more than two consecutively), (ii) four selections from the same recording artist, or (iii) four selections from the same set or compilation of records (with no more than three played consecutively).[10] If a service is interactive, or does not adhere to the performance complement restrictions, it is not eligible for the statutory licensing scheme, and must negotiate licenses for each song it wishes to play.
On May 24, 2001, 10 recording companies brought an action in the Southern District of New York against Launch Media, Inc., for copyright infringement.[11] At its heart, the Complaint alleges that Launch’s LAUNCHcast service creates “interactive” radio stations for its users, as defined by the DPRA, by providing users with the following abilities:
1. Select specific artists;
2. Select music as follows: (a) “more music you haven’t rated”; (b) “a mix of music you’ve rated and not rated”; or (c) “more music from what you have rated”;
3. Rate artists, sound recordings and albums;
4. Permanently block particular recordings;
5. Skip the current recording and move on to the next one;
6. Pause the current recording and resume from the same point later.[12]
The plaintiffs assert that through the operation of these features, LAUNCHcast is “interactive.” Furthermore, they argue that “[o]n request from the user, conveyed through clicking the skip button, [Launch], it is believed, will transmit an excessive number of sound recordings from the same phonorecord or by the same featured recording artist within a three-hour period,” thus violating the performance complement restrictions.[13] On this basis, the plaintiffs charge Launch with copyright infringement: “Defendant has willfully, with full knowledge of plaintiffs’ copyrights, and without license or authorization, digitally transmitted thousands of plaintiffs’ copyrighted sound recordings in operating its interactive LAUNCHcast service at Launch.com.”[14] Implicit within this complaint is the acknowledgement that if LAUNCHcast is not interactive, Launch has not infringed the plaintiffs’ copyrights.
On June 1, 2001, Launch and other online webcasters, acting through the Digital Media Association (“DiMA”) struck back with a declaratory judgment action in the Northern District of California against the Recording Industry of America Association (“RIAA”).[15] The DiMA seeks a declaratory judgment that the webcasting services at issue are eligible to employ the statutory licensing scheme for the following reasons:
A. The songs played “ultimately are generated by a computer in a manner designed to ensure compliance with the DMCA’s statutory license provision,”
B. The users “do not determine the particular sound recordings or the particular artists which become the basis of the transmission; and [they] have no ability to select or obtain advance knowledge as to the particular songs that are streamed on the stations,”
C. “Artist identification on the services is representative only,”
D. The “skip” function on the services only operates forward; users “can never know which song they are ‘skipping forward to,’” and
E. “In all cases the consumer-influenced stations are available to every member of the general public.”[16]
On June 8, 2001, the record companies responded with three lawsuits in the Southern District of New York, against XACT Radio, LLC, Musicmatch, Inc., and MTVi Group, three entities that provide consumers with access to streamed digital music over the Internet,[17] asserting in each the same basic allegations alleged in the complaint against Launch. As in that complaint, these three complaints list, for each Internet service, the features of the service that make it, in the eyes of the plaintiffs, “interactive,”[18] and plaintiffs reiterate their belief that, through users’ use of the “skip” button, they will cause the defendants to “transmit an excessive number of sound recordings from the same phonorecord or by the same featured artist within a three-hour period,”[19] thereby making the defendants ineligible to pay statutory licenses, and requiring them to negotiate separately the right to play each musical composition.
This dispute is being fought not only in federal court, but also before the Copyright Office, through its Copyright Arbitration Royalty Panels (“CARP”) procedure. On April 17, 2000, DiMA filed a rulemaking petition with the Copyright Office, seeking, in the words of the Copyright Office, “an amendment that, if adopted, would expand the current definition of the term ‘Service’ to state that a service is not interactive simply because it offers the consumer some degree of influence over the programming offered by the webcaster.”[20] Specifically, DiMA sought to have the DMCA’s definition of service expanded to include the following description, designed to include the Internet radio services:
simply because the consumer may express preferences to such Service as to the musical genres, artists and sound recordings that may be incorporated into the Service’s music programming to the public. Such a Service is not “interactive” under section 114(j)(7), as long as: (i) Its transmissions are made available to the public generally; (ii) the features offered by the Service do not enable the consumer to determine or learn in advance what sound recordings will be transmitted over the Service at any particular time; and (iii) its transmissions do not substantially consist of sound recordings performed within one hour of a request or at a time designated by the transmitting entity or the individual making the request.[21]
The Copyright Office denied DiMA’s petition, finding, among other things, that “[i]n light of the rapidly changing business models emerging in today’s digital marketplace, no rule can accurately draw the line demarcating the limits between an interactive service and a noninteractive service. Nor can one readily classify an entity which makes transmissions as exclusively interactive or noninteractive.”[22] While the Copyright Office wrote that “The panel’s responsibility is to establish the value of the performances and set appropriate rates, not to discern whether a particular service meets the eligibility requirements for using the license,”[23] it also stated that based upon the descriptions of Launch Media’s LAUNCHcast, and MTV’s Radio SonicNet by both the RIAA and DiMA, “there is considerable doubt whether either offering would qualify as a noninteractive service.”[24]
ISP
Liability Arising from Consumer Behavior
As defined by the parties in the various lawsuits discussed above, the parties have teed up some very specific legal issues, namely, whether the features of an Internet radio service make it “interactive” for purposes of the DPRA – whether the service provides the user with “a program specifically created for the recipient” or a recording “selected by or on behalf of the recipient.” More specifically, the music industry plaintiffs are seeking a finding that by providing users with a “skip” button, the Internet radio defendants have failed to comply with the performance complement restrictions, because users can skip to sound recordings by the same artist, or from the same album, in excess of the performance complement restrictions.
While these cases have their own, unique legal issues, they share a larger issue with cases addressing the ISP immunity provisions of the CDA and the DMCA, as well as other cases that have arisen in the Internet space. Unlike traditional radio stations, the Internet radio stations allow each user to receive his or her own stream of music, and allow the users to affect the composition of that stream, to various degrees, without human interaction at the station. And it is this level of user-directed interaction that drives the music industry plaintiffs’ concerns.[25]
In Napster, the defendant music-swapping service sought protection under the DMCA’s safe harbors, and also under a “fair use” theory built on an analogy to the reasoning of the Supreme Court’s 1984 decision in Sony v. Universal Studios, arguing that, like Sony, it was not responsible for copyright infringement by people using its product. The court rejected the analogy to Sony, criticizing Napster for its evident awareness that its service was used primarily for the illicit exchange of copyrighted musical works. In the complaints discussed above, the music industry plaintiffs seek to hold the Internet radio providers responsible for their customers’ purported use of their services in ways contrary to the statutory licensing scheme, and the defendants may ultimately raise a similar defense – that they are not responsible for the ways in which their services are used.
On the one hand, the Internet radio stations can comfortably argue that they are no Napster – they are not systems used by a preponderance of its members to circumvent the copyright laws, let alone designed for that purpose. Rather, according to the plaintiffs, they can be used, with enough effort, in a manner that takes the station out of compliance with the statutory licensing scheme. If a service on the Internet theoretically allows users to create an “all Aerosmith” station, through regular, if unorthodox, use of the software, they may posit, the provider should not automatically become responsible for the actions of its users.
On the other hand, despite this distinction that can be drawn between the Internet radio services and Napster, the courts have been extremely reluctant to extend the “fair use” umbrella created by the Supreme Court for the VCR in Sony to any new technology, such as the Rio portable MP3 player.[26] Furthermore, the question of whether the Internet radio stations are immunized from copyright infringement is clearly outside the scope of the CDA good samaritan provision (which does not apply to intellectual property), and likely outside that of the DMCA safe harbors, as well.[27]
The history of other Internet-related cases bears this out, too. In the RIAA’s case against MP3.com, Inc.,[28] the RIAA’s suit concerned the my.MP3.com service, which gave the user access to online, MP3 versions of CDs, after the user demonstrated that he owned his own copy of the CD (by inserting it in his computer’s CD-ROM drive). The case was grounded in copyright infringement – the copying of some 80,000 CDs prior to the launch of the service – but it was also premised on the fact that unscrupulous users could, by giving their passwords to others, share MP3 versions of their CDs with others who did not own copies of the CDs. Similarly, in the cases against iCraveTV, Inc.,[29] a Canadian-based company that rebroadcasted television signals over the Internet, the company had in place protocols to limit access to Canadians, but the protocols were easily evaded, which would cause the signals to be transmitted across the Internet into the United States. Both of these cases resulted in settlements, and the shut-down or modification of the system in question.
In the cases against Launch.com and the other Internet radio stations, the recording industry is arguing that the stations are “interactive,” and that the potential that users might use these systems in ways that bring the stations out of compliance with the performance complement is enough to make the stations liable for copyright infringement. While the stations may win on the merits, there does not appear to be a ready statute they can turn to for immunity in this context. In an environment such as this, and with the track record of the RIAA for bringing successful suits in this area, it behooves companies transmitting music over the Internet to carefully examine not only whether they, themselves, are in compliance with the various applicable laws, but also whether, and how, their users could potentially use their services in ways that raise issues of liability – whether direct, contributory or vicarious – for the services themselves.
[1] © Hillel I. Parness.
Hillel I. Parness, J.D. Columbia 1995, is an Intellectual Property
attorney in New York. His most recent
article, “Federal Court Says No ISP Immunity for Contributory Trademark
Infringement, ” appeared in the April 2001 issue of Cyberspace Lawyer. Mr.
Parness can be reached at hillel@hiplaw.com, and his prior articles are
reprinted at www.hiplaw.com.
[2] 47 U.S.C. § 230.
[3] 17 U.S.C. §§ 512(a)-(d).
[4] See Order, Stoner v. eBay, Inc., No. 305666 (Cal. Super. Ct. Nov. 7, 2000) (copy on file with author); Telephonic Ruling, Gentry v. eBay Inc., No. 746980 (Cal. Super. Ct., San Diego Cty. Jan. 18, 2001) (available at http://www.krausekalfayan.com/ebrulin2.htm). The application of the CDA in these cases did not involve copyright issues because the plaintiff did not allege copyright infringement against the defendants, but rather violations of state statutes not classified as “intellectual property.” For analysis of these decisions, see Hillel I. Parness, “Storm Warning to Good Samaritans: Sail Clear of the Safe Harbor,” Cyberspace Lawyer (December 2000), and Hillel I. Parness, “eBay Victorious (Again), Yahoo Attacked (Again), as the Auction Wars Continue,” Cyberspace Lawyer (March 2001).
[5] A&M Records, Inc. v. Napster, Inc., No. C 99-05183, 2000 WL 573136 (N.D. Cal. May 12, 2000).
[6] Gucci America, Inc. v. Hall & Assocs., 135 F. Supp. 2d 409 (S.D.N.Y. 2001). For an analysis of this decision, see Hillel I. Parness, “Federal Court Says No ISP Immunity for Contributory Trademark Infringement,” Cyberspace Lawyer (April 2001).
[7] See 17 U.S.C. § 114(d)(1).
[8] Pub. L. 104-39, codified at 17 U.S.C. § 114(d)(2). The DPRA was modified in 1998 by the DMCA.
[9] Id. § 114(j)(7) (emphases added).
[10] 17 U.S.C. § 114(j)(13).
[11] Complaint, Arista Records Inc. v. Launch Media, Inc., 01 CV 4450 (S.D.N.Y. May 24, 2001) (copy on file with author).
[12] Id. ¶¶ 39-40 (emphases added).
[13] Id. ¶ 47.
[14] Id. ¶ 53.
[15] Complaint for Declaratory Judgment, Digital Media Association v. Recording Industry Association of America, Inc., C 01 2129 (N.D. Cal. Jun. 1, 2001). According to the Complaint, it was filed in response to the RIAA’s motion in an ongoing Copyright Arbitration Royalty Panel (“CARP”) seeking a finding that certain webcasting activities are not eligible for the statutory license. DiMA Complaint ¶ 3.
[16] DiMA Complaint ¶ 46.
[17] Complaint, Arista Records, Inc. v. XACT Radio, LLC, 01 CV 5090 (S.D.N.Y. Jun. 8, 2001) (available at http://www.riaa.com/pdf/xactcomplaint.pdf); Complaint, Zoomba Recording Corp. v. MusicMatch, Inc., 01 CV 5091 (S.D.N.Y. Jun. 8, 2001) (available at http://www.riaa.com/pdf/musicmatchcomplaint.pdf); Complaint, Sony Music Entertainment Inc. v. MTVi Group LLC, 01 CV 5092 (S.D.N.Y. Jun. 8, 2001) (available at http://www.riaa.com/pdf/mtvicomplaintfiled.pdf).
[18] See, e.g., Arista v. XACT ¶¶ 36-38 (noting that because the XACT user can assign ratings to artists and sound recordings, permanently “deleting” particular recordings, determine the frequency of unrated recordings, skip particular recordings, or pause any recording, it is an “interactive service” under the DMCA).
[19] See, e.g., id. ¶ 39.
[20] Public Performance of Sound Recordings: Definition of a Service, 65 FR 77330, 77330 (Dec. 11, 2000) (available at http://www.loc.gov/copyright/fedreg/2000/65fr77330.pdf).
[21] Id. at 77331 (quoting DiMA
Petition).
[22] Id. at 77332-33.
[23] Id. at 73333.
[24] Id. at 73332 n. 1 (as corrected, 65 FR 78434 (available at http://www.loc.gov/copyright/fedreg/2000/65fr78434.pdf)). According to DiMA’s complaint, on April 11, 2001, five webcasters submitted direct written cases to the Copyright Office under CARP for rulings on their eligibility for the statutory licensing scheme, and on May 25, 2001, the RIAA moved to strike all or part of the direct cases, on the grounds that the webcasters were not eligible for statutory licenses. DiMA Complaint ¶ 12.
[25] In its declaratory judgment action, one of the factual defenses put forth by the DiMA is that the songs “ultimately are generated by a computer in a manner designed to ensure compliance with the DMCA’s statutory license provision.” DiMA Complaint ¶ 46. If the software already prevents – or will be modified to prevent – the service from playing songs that would take it out of statutory eligibility, that may put an end to the controversy.
[26] See, e.g., Recording Industry Association
of America, Inc. v. Diamond Multimedia Systems, Inc., 29 F. Supp. 2d 624
(C.D. Cal. 1998), aff’d, 180 F.3d
1072 (9th Cir. 1999) (ultimately finding that the Rio did not violate the Audio
Home Recording Act).
[27] At first blush, it may seem as if the DMCA’s “Transitory Digital Network Communications” safe harbor, 17 U.S.C. § 512(a), might apply, but based on the very narrow read the court gave this section in Napster, it seems unlikely that the Internet radio stations would qualify. This outcome is made all the more unlikely by the fact that, if Internet radio stations were given protection under any of the safe harbors, they would never have to pay any licenses – statutory or otherwise, because all of their transmissions, made at the direction of users, would not make them liable for copyright infringement.
[28] See UMG Recordings, Inc. v. MP3.com, Inc., No. 00 Civ. 472, 92 F. Supp. 2d 349
(S.D.N.Y. May 4, 2000).
[29] See “Cross-border iCraveTV.com Lawsuit A Legal Tangle,” EXN Technology Newsbites (Jan. 25, 2000) (available at http://exn.ca/Stories/2000/01/25/01.asp); Complaint, Twentieth Century Fox Film Corp. v. iCraveTV, Civ. Action No. 00-120 (W.D. Pa. Jan. 20, 2000) (available at http://www.mpaa.org/Press/icrave_complaint.htm).