The Hundred Million Dollar Question

Submitted by patentadmin on Mon, 02/07/2011 - 13:24

Sometimes a lawsuit is nothing more than an effort by the plaintiff to remedy its own lack of foresight. (United States of America v. American Society Of Composers, Authors And Publishers, In the matter of Applications of Realnetworks, Inc. and Yahoo! Inc.)

The American Society Of Composers, Authors And Publishers, better known as ASCAP, licenses the non-dramatic, public performance rights in copyrighted musical works. ASCAP, which represents more than 295,000 composers, songwriters, lyricists and music publishers, licenses approximately 45% of all the musical works that are played online.

Realnetworks and Yahoo! are internet companies which enable subscribers both to listen to music online (“real time” or “on-demand” performances) and also to download copies of recordings to play later. As the Court took pains to make clear, “[w]ith a download, the song is not audible to the user during the transfer. Only after the file has been saved on the user’s hard drive can he listen to the song by playing it using a software program on his local computer.”

It was undisputed that the downloads create copies of the musical works, for which the parties agreed the copyright owners must be compensated. Indeed, the internet companies had taken licenses for the distribution and reproduction of copyrighted works online and paid royalties thereon. That was where the agreement ended. ASCAP took the position that the downloads are “public performances” and, therefore, were subject to an additional license fee. The internet companies, however, took the position that paying a separate fee for the alleged “public performances,” i.e. the playing of the downloaded songs by their subscribers, would constitute two separate licenses for the same act and would cost them over $100 million in additional royalties. Thus, the hundred million dollar question, as defined by the Court, was, “whether a download of a digital file containing a musical work constitutes a public performance of that musical work.”

The answer to the question, simply stated, was NO.

“[T]o ‘play’ is to ‘perform on a musical instrument,’ … ‘reproduce sound of recorded material’ or to ‘act on a stage or in some other dramatic medium.’ All three actions entail contemporaneous perceptibility … The downloads at issue … are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an online 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 [the copyright statute].”

So, no extra hundred million bucks for ASCAP.

THE LESSON TO BE LEARNED: This is a problem that could have been avoided by careful drafting of the license. ASCAP understood, from the beginning, how the service provided by the internet companies operated. ASCAP should have demanded a higher royalty rate when the license was negotiated.

Submitted by Anonymous (not verified) on Mon, 02/28/2011 - 16:31


Yes, but as we have seen since the advent of the internet, the music business is generally run by a number of people who are intellectually challenged. Foresight is not their strength, and so they seem to rely on a strategy of aggressively pursuing big winnings after someone has exploited a breach in their system. This case only demonstrates that the courts seem to have more sympathy for big behemoths like the US government than for poor college students busted for illegal downloading.

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