Stephen M. Kramarsky, in yesterday’s New York Law Journal (subscription only), reported on the Second Circuit Court of Appeals recent decision in Arista Records, LLC et al. v. Launch Media Inc., which held that customized internet “radio” services were free to pay a legally established royalty, rather than having to negotiate with each individual copyright holder.
The issue there was online services that let users create “customized” internet radio stations like Pandora Radio, Slacker, and Last.fm. These services allow users to create an internet radio channel that features the specific artists and styles that they designate. They also generally allow users to indicate which songs and artists they want to hear more or less of.
Generally, if a customized internet radio station is considered to be an “interactive service” (as defined in 17 USC § 114(j)), the service provider will have to negotiate royalties with each individual copyright holder, which entails more work, and probably higher royalties. It goes without saying that internet radio stations would prefer not to be in this category. If, on the other hand, a service is found to be “non-interactive,” they they are entitled to pay a standard statutory royalty, which service providers generally prefer.
The Second Circuit held held that § 114 of the copyright law should be interpreted in light of the reason Congress enacted it, which was to “prevent the diminution in record sales through outright piracy of music or new digital media.” Using that measuring stick, it held that “because the webcasting service does not provide sufficient control to users such that playlists are so predictable that users will choose to listen to the webcast in lieu of purchasing music, thereby- in the aggregate – diminishing record sales,” it does not qualify as an “interactive service,” which would require individualized royalty negotiations with copyright holders.
As customized internet radio websites and their users breathe a collective sigh of relief, it is notable that, as Mr. Kramarsky pointed out, this is the first case of a federal appeals court defining what “interactive” means in the context of the copyright law. It will be interesting to see whether other Circuits follow the Second Circuit’s example, or whether they will handle the issue differently, possibly setting up a split that would make the issue ripe for eventual Supreme Court treatment.
Picture courtesy of Watts Up With That.