United States v. ASCAP
Encyclopedia
United States v. American Society of Composers, Authors and Publishers (ASCAP) et al., No. 09-0539, 2010 WL 3749292 (2nd Cir. 2010), was a United States Court of Appeals
case involving copyright
liability for third-party vendors that provide online music download services. In particular, the Second Circuit
ruled that music downloads do not constitute public performances, upholding the district court's decision and consequently preventing ASCAP from claiming higher royalty fees from Yahoo!
and RealNetworks
for downloaded music. However, the Second Circuit disagreed with the district court's method of fee assessment and remanded the case for further proceedings. ASCAP appealed the decision and requested a writ of certiorari for judicial review
in the Supreme Court.
s from ASCAP, a non-profit organization exclusively licensing more than 390,000 songwriters, composers, lyricists, and music publishers in the United States. A blanket license is a "license that gives the licensee the right to perform all of the works in the repertory for a single stated fee that does not vary depending on how much music from the repertory the licensee actually uses." In order to settle the royalty payments owed to the music owners represented by ASCAP, the companies and ASCAP sought an assessment from the United States District Court for the Southern District of New York
.
During the proceedings to establish a reasonable royalty rate, ASCAP claimed that individual downloads count as public performances, allowing a copyright holder's exclusive performance rights to be factored into the assessment of fees in addition to the exclusive rights of reproduction and distribution. If downloads were to count as public performances, each download would serve to increase the rate of royalties owed to copyright holders that licensed through ASCAP. Yahoo! and RealNetworks disagreed, citing that downloads involved only reproduction and distribution rights, not performance rights.
This case centers around the controversial issue of royalty rates for internet radio under the Digital Millennium Copyright Act
(DMCA). The DMCA, passed in 1998, included provisions that required Internet
and satellite radio providers to pay performance royalties in addition to the standard publishing royalties paid by radio stations.
This case falls under a consent decree
originally entered into by ASCAP and the judicial department in 1941 as part of an antitrust case. Some scholars question the utility of such consent decrees as a means for resolving modern copyright issues, citing that such decrees failed to anticipate the modern complexities of copyright enforcement.
s, in which audio and video are streamed to users able perceive the media while it is simultaneously being transmitted to their computers. In addition, both providers offered users downloadable copies of music, not perceived by the user during transmission. The court further noted that for both Yahoo! and RealNetworks, "only a small portion" of each company's website involved the performance of musical works. The court further identified two main sources of income from the performances of musical works. The primary source of revenue
generated from each company's online services came from advertisements supported by user traffic; in the words of the court, "the larger the audience and the more times a site is visited, the greater the revenue generated." The remainder of performance based revenue was subscription based. Finally the court cited relevant earlier decisions passed down from the district court in 2007, 2008, and 2009. The district court 1st established that downloads did not constitute performances, later establishing a method for computing fees owed to ASCAP by Yahoo! and RealNetworks. The district court adopted a simple formula of a 2.5% royalty rate multiplied by the amount of revenue generated by the performance of musical works from ASCAP's repertory. For Yahoo!, the district court took into account the fact that musical performances did not account for all of the revenue generated by its website. It thus estimated a "music-use-adjustment factor" (MUAF), consisting of the amount of time users spent streaming music divided by the amount of time all of Yahoo!'s online services were used. The court then multiplied the MUAF by Yahoo!'s total revenue in order to estimate the total revenue generated from musical performances. The court followed a similar line of reasoning for determining RealNetworks's fee: first declining to use the MUAF since most of RealNetworks's revenue came from performances of musical works but ultimately adopting MUAFs without explaining the calculations behind them.
, including the right "to perform the copyrighted work publicly." The court also noted the undisputed fact that both Yahoo! and RealNetworks provided services by which users could download, and hence copy, musical works, thus requiring compensation to be paid to the owners of those works through ASCAP. The court then identified the main issue under review, whether or not a download is a public performance, which would require separate compensation for the copyright holders.
United States court of appeals
The United States courts of appeals are the intermediate appellate courts of the United States federal court system...
case involving copyright
Copyright
Copyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...
liability for third-party vendors that provide online music download services. In particular, the Second Circuit
United States Court of Appeals for the Second Circuit
The United States Court of Appeals for the Second Circuit is one of the thirteen United States Courts of Appeals...
ruled that music downloads do not constitute public performances, upholding the district court's decision and consequently preventing ASCAP from claiming higher royalty fees from Yahoo!
Yahoo!
Yahoo! Inc. is an American multinational internet corporation headquartered in Sunnyvale, California, United States. The company is perhaps best known for its web portal, search engine , Yahoo! Directory, Yahoo! Mail, Yahoo! News, Yahoo! Groups, Yahoo! Answers, advertising, online mapping ,...
and RealNetworks
RealNetworks
RealNetworks, Inc. is a provider of Internet media delivery software and services based in Downtown Seattle, Washington, United States. The company is the creator of RealAudio, a compressed audio format; RealVideo, a compressed video format; RealPlayer, a media player; RealDownloader, a download...
for downloaded music. However, the Second Circuit disagreed with the district court's method of fee assessment and remanded the case for further proceedings. ASCAP appealed the decision and requested a writ of certiorari for judicial review
Judicial review
Judicial review is the doctrine under which legislative and executive actions are subject to review by the judiciary. Specific courts with judicial review power must annul the acts of the state when it finds them incompatible with a higher authority...
in the Supreme Court.
Background information
Yahoo! and RealNetworks sought blanket licenseLicense
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
s from ASCAP, a non-profit organization exclusively licensing more than 390,000 songwriters, composers, lyricists, and music publishers in the United States. A blanket license is a "license that gives the licensee the right to perform all of the works in the repertory for a single stated fee that does not vary depending on how much music from the repertory the licensee actually uses." In order to settle the royalty payments owed to the music owners represented by ASCAP, the companies and ASCAP sought an assessment from the United States District Court for the Southern District of New York
United States District Court for the Southern District of New York
The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit The United States District Court for the Southern District of New York (in case...
.
During the proceedings to establish a reasonable royalty rate, ASCAP claimed that individual downloads count as public performances, allowing a copyright holder's exclusive performance rights to be factored into the assessment of fees in addition to the exclusive rights of reproduction and distribution. If downloads were to count as public performances, each download would serve to increase the rate of royalties owed to copyright holders that licensed through ASCAP. Yahoo! and RealNetworks disagreed, citing that downloads involved only reproduction and distribution rights, not performance rights.
This case centers around the controversial issue of royalty rates for internet radio under the Digital Millennium Copyright Act
Digital Millennium Copyright Act
The Digital Millennium Copyright Act is a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization . It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures that control access to...
(DMCA). The DMCA, passed in 1998, included provisions that required Internet
Internet radio
Internet radio is an audio service transmitted via the Internet...
and satellite radio providers to pay performance royalties in addition to the standard publishing royalties paid by radio stations.
This case falls under a consent decree
Consent decree
A consent decree is a final, binding judicial decree or judgment memorializing a voluntary agreement between parties to a suit in return for withdrawal of a criminal charge or an end to a civil litigation...
originally entered into by ASCAP and the judicial department in 1941 as part of an antitrust case. Some scholars question the utility of such consent decrees as a means for resolving modern copyright issues, citing that such decrees failed to anticipate the modern complexities of copyright enforcement.
Facts
The Second Circuit established relevant facts regarding the nature of the online services provided by Yahoo! and RealNetworks. The court first identified two main categories of media provided: "radio-style" webcastWebcast
A webcast is a media presentation distributed over the Internet using streaming media technology to distribute a single content source to many simultaneous listeners/viewers. A webcast may either be distributed live or on demand...
s, in which audio and video are streamed to users able perceive the media while it is simultaneously being transmitted to their computers. In addition, both providers offered users downloadable copies of music, not perceived by the user during transmission. The court further noted that for both Yahoo! and RealNetworks, "only a small portion" of each company's website involved the performance of musical works. The court further identified two main sources of income from the performances of musical works. The primary source of revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
generated from each company's online services came from advertisements supported by user traffic; in the words of the court, "the larger the audience and the more times a site is visited, the greater the revenue generated." The remainder of performance based revenue was subscription based. Finally the court cited relevant earlier decisions passed down from the district court in 2007, 2008, and 2009. The district court 1st established that downloads did not constitute performances, later establishing a method for computing fees owed to ASCAP by Yahoo! and RealNetworks. The district court adopted a simple formula of a 2.5% royalty rate multiplied by the amount of revenue generated by the performance of musical works from ASCAP's repertory. For Yahoo!, the district court took into account the fact that musical performances did not account for all of the revenue generated by its website. It thus estimated a "music-use-adjustment factor" (MUAF), consisting of the amount of time users spent streaming music divided by the amount of time all of Yahoo!'s online services were used. The court then multiplied the MUAF by Yahoo!'s total revenue in order to estimate the total revenue generated from musical performances. The court followed a similar line of reasoning for determining RealNetworks's fee: first declining to use the MUAF since most of RealNetworks's revenue came from performances of musical works but ultimately adopting MUAFs without explaining the calculations behind them.
Is a download a public performance?
The Second Circuit first reiterated the exclusive rights of copyright holders under Section 106 of the Copyright ActCopyright Act of 1976
The Copyright Act of 1976 is a United States copyright law and remains the primary basis of copyright law in the United States, as amended by several later enacted copyright provisions...
, including the right "to perform the copyrighted work publicly." The court also noted the undisputed fact that both Yahoo! and RealNetworks provided services by which users could download, and hence copy, musical works, thus requiring compensation to be paid to the owners of those works through ASCAP. The court then identified the main issue under review, whether or not a download is a public performance, which would require separate compensation for the copyright holders.
The circuit court first referenced the definition of a performance under Section 101 of the Copyright Act, which states that "[t]o 'perform' a work means to recite, render, play, dance, or act it, either directly or by means of any device or process." The court immediately ruled out a download as being a dance or an act, and subsequently dissected the statutes of "recite," "render," and "play." Referencing Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002), which held that plain statues should be taken for "their ordinary, contemporary, common meaning," the court cited Webster'sWebster's DictionaryWebster's Dictionary refers to the line of dictionaries first developed by Noah Webster in the early 19th century, and also to numerous unrelated dictionaries that added Webster's name just to share his prestige. The term is a genericized trademark in the U.S.A...
Third New International Dictionary 1895 (1981) to arrive at the definitions of the three remaining statutes. The court concluded that a musical performance "entails contemporaneous perceptibility," further citing the final clause of Section 101 as a confirmation of this definition. Thus, the circuit court upheld the district court's ruling:
The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work, as defined by § 101.
ASCAP further argued that a download fulfilled the "public" portion of the definition under Section 101 since a download transmits a musical work to the public, thus constituting a public performance. However, the court dismissed this claim as a misreading of the definition of a performance, stating that "the definition of 'publicly' simply defines the circumstances under which a performance will be considered public; it does not define the meaning of 'performance.'"
Assessment of fees
The Second Circuit also reviewed the district court's methods for determining royalty fees for each company. The circuit court found the district court's assessments flawed in the following two areas:- The district court did not adequately support its methodology in determining the amount of performances of musical works that each company services provided, specifically with regards to the MUAF
- The district court did not supply an adequate explanation for the use of a uniform 2.5% royalty rate applied to each company