US v. ASCAP: Downloading Music from the Internet Does Not Constitute a Public Performance for Which a Performance Royalty Fee Is Due to ASCAP; Only A Reproduction Fee Applies.

In its decision in US v. ASCAP, 485 F. Supp. 2d 438 (SDNY 2007), the Southern District of New York clarified how the Copyright Law concept of “public performance” applies to the Internet concepts of downloading versus streaming. While on its face, the decision appears to establish a bright line rule, the Court did acknowledge the possibility of more questionable applications in the future.

Background

The American Society of Composers, Authors, and Publishers (“ASCAP”) is an unincorporated membership association that aggregates the licensing authority of thousands of composers, authors, lyricists, and music publishers, and issues licenses affording users access to its amassed collection of several million musical works.  The artists grant ASCAP the non-exclusive right to license their music; in exchange for licenses, ASCAP collects royalties.

AOL LLC, Yahoo! Inc, and RealNetworks Inc. (collectively, the “Applicants”) are large, global Internet service companies that provide numerous media services, including online distribution of music, to their subscribers.  Music is provided in either of two ways:  1) “streaming,” by which a live connection is sustained between the host computer and the subscriber’s computer while a song is played; or 2) “downloading,” by which a song’s data file is transmitted from the host computer to the subscriber.  Streaming does not involve any actual data file transfers from the host to the subscriber, so that subscribers may listen to the song only while it is streaming.  Downloading does involve a file transfer so that subscribers have their own copy of the song thereafter, but subscribers do not simultaneously listen to the song while it is downloading.

The parties generally agree that streaming is a form of public performance, and the Applicants paid ASCAP a public performance royalty fee for “performing” songs when streaming them.  However, the Applicants paid a different license fee, a “reproduction” fee, for downloading song data files and reproducing them.

ASCAP initiated this royalty rate proceeding regarding downloading, specifically.  ASCAP asserted that every download was both a reproduction and a performance.  ASCAP argued that the act of downloading actually triggers two separate fees:  a reproduction fee as well as a public performance royalty.  To substantiate its position that downloading was also a public performance, ASCAP pointed to Section 101 of the Copyright Act, which defines a public performance as follows:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or
(2) to transmit or otherwise communicate a performance or display of the work to a place specified by a clause; or (3) to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. §101.

Downloading music from the Internet does not involve the contemporaneous perception of a “public performance”

The Southern District of New York rejected ASCAP’s assertion that a download equaled a public performance under the Copyright Act, and thereby triggering a double royalty. The Court and the parties agreed that streaming a song clearly constitutes a public performance under the Copyright Act.  Simply downloading a song, however, does not constitute a public performance because the file transfer is not perceptible to the subscriber.  “[I]n order for a song to be performed,” the Court wrote, “it must be transmitted in a manner designed for contemporaneous perception.”  U.S. v. ASCAP, 485 F. Supp. 2d at 443.  Therefore, because a user/subscriber does not hear a song as its data file is transferred in an Internet music download, it is not a public performance under the Copyright Act.

In reaching its decision, the Court looked to a variety of sources to substantiate its understanding and definition of a public performance as one that requires contemporaneous perception. The Court pointed to the plain language of the statute, as well as legislative history indicating that a digital download was not intended to constitute a public performance. Id.¹ at 443.

For further support, the Court also referenced the famous Napster case, A&M Records Inc. v. Napster Inc., 239 F. 3d 1004, 1014 (9th Cir. 2001), which found that users who download files that contain copyrighted music violated the plaintiff’s reproduction rights (i.e., not their public performance royalty rights).  Id. at 444.

In the instant case, ASCAP attempted to get the Court to rethink its definition of a “download,” likening downloads to transmission of broadcast signals.  Specifically, ASCAP pointed to the decision in David v. Showtime/The Movie Channel Inc., 697 F. Supp. 752, 758 (SDNY 1988), in which the Court found that the transmission of ASCAP-licensed musical compositions from global broadcasters to local broadcasters constituted a public performance, even though the signal was only viewed after retransmitted by the local broadcasters. The Court rejected the comparison, however, finding that the signal broadcasts invoked the public performance royalty fee because they were like live streaming, in so far as both were designed for real-time perception and not for retention of a physical copy.  The Court reasoned that downloading, alternatively, is designed to transfer a physical copy to an end user who can then keep the copy and listen to it whenever he or she wants in perpetuity, but not contemporaneously to the download.  485 F. Supp. 2d at 446.

This ruling may not apply to simultaneous downloading and streaming, however

Additionally, the Court addressed the situation where a subscriber could actually listen to a song while he or she is still mid-download, determining that such contemporaneous perception would not necessarily transform the download into a public performance.  The Court stated:  “[T]he mere fact that a customer’s online purchase is conveyed to him in a piecemeal manner, each segment of which is capable of playback as soon as the transmission is completed, does not change the fact that the transaction is a data transmission rather than a musical broadcast.  Surely ASCAP would not contend that if a retail purchaser of musical records begins audibly playing each tape or disc as soon as he receives it the vendor is engaging in a public performance.” Id. at 446.

Regardless, the Court did recognize the possibility of future technology that would more thoroughly blend streaming and downloading activities together, which would cause the parties and the Court to revisit the definitions and application of the Copyright Act (and possibly result in the invocation of both royalties).  In a footnote, the Court noted: “We do not mean to foreclose the possibility, however, that a transmission might, under certain circumstances, constitute both a stream and a download, each of which implicates a different right of a copyright holder.” Id. at n.5.

Conclusion and Update

The U.S. v. ASCAP ruling is yet another example of the Court applying laws and regulations to situations involving developing technology that were not clearly envisioned when the laws were originally passed.  Many members of the music industry applaud this particular ruling as a “common sense” decision for Copyright Law.

However, as of this ruling, the discussion—and this case—were not over.  On April 30, 2008, the Southern District of New York published a subsequent 153-page opinion in which it established a formula by which the parties in this case would determine the proper and reasonable license fees that the Applicants owed ASCAP from as far back as July 1, 2002 and forward through December 31, 2009.  U.S. v. American Society of Composers, Authors and Publishers, No. Civ.A 41-1395, 2008 WL 1967722 (SDNY 2008). Under the Court’s formula, the total payments the Applicants may owe ASCAP reach $100 million.

In a press release, ASCAP refers to this most recent opinion as “a major step toward proper valuation of the music contributions of songwriters, composers and publishers to these types of online businesses – many of which have built much of their success on the foundation of the creative works of others.”  The press release continues: “This historic decision … provides a clear validation of the flexibility and applicability of the ASCAP blanket license model relative to the use of musical works on the Internet.”

While ASCAP promised to appeal the original decision which holds that downloading is not a public performance, the Applicants are now considering an appeal of the Court’s latter decision setting a formula for the payment of fees due ASCAP.

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Olivier Taillieu

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