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The Librarian of Congress has announced the appointment of two new judges to the Copyright Royalty Board – marking a total change in the three judge board since the decision in the last webcasting royalty case (about which we wrote here). The two new judges are David Strickler and Jesse Feder. Mr. Strickler will serve through 2016, taking the position of Judge Wisnewski (who resigned about a year ago) as the economics expert required by the statute creating the Board. Mr. Stricker is currently Senior Counsel at a law firm in New Jersey, specializing in business litigation, according to his biography on the firm’s website, here. He also has a Masters Degree in economics, and is an adjunct economics professor as Brookdale College in New Jersey.

Mr. Feder takes the place of Judge Roberts, who was one of the original CRB judges and had worked in the Copyright Office in connection with the CARP process that set the first rates for webcasting back in 2002. Judge Roberts recently resigned from the Board. The position that Mr. Feder takes is required by statute to be filled by someone with Copyright experience. According to Mr. Feder’s online profile, he was the Director of International Trade and Intellectual Property at the Business Software Alliance, and previously held several supervisory positions at the Copyright Office and in the Library of Congress. His appointment, filling Judge Roberts’ seat, lasts only until 2014 (but he could be reappointed). 

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This week, the Chairman of the US House of Representatives Judiciary Committee issued a press release stating that he intends that the Committee do a thorough reexamination of the Copyright Act, noting that new technologies stemming from digital media have upset many settled expectations in Copyright Law, and confused many issues. That this release was issued in the same week as a decision of New York’s Supreme Court, Appellate Division, First Department, on the obscure issue of pre-1972 sound recordings is perhaps appropriate, as this decision demonstrates how an obscure provision of the copyright act can have a fundamental effect on the functioning of many online media outlets – including essentially any outlet that allows user-generated content with audio. The Court’s ruling, which conflicts with a Federal Court’s decision on the same question, would essentially remove the safe harbor protection for sites that allow for the posting of user generated content – where that content contains any pre-1972 sound recordings which don’t fall within the protections of the Copyright Act. Let’s explore this decision and its ramifications in a little more depth.

As we have written before, an Internet service that allows users to post content to that service is exempt from any liability for that content under two statutes. The Digital Millennium Copyright Act insulates the service from any claims of copyright infringement contained in any of the user generated content, if the service has met several standards. These standards include the obligations for the service to take down the infringing material if given proper notice from the copyright holder. The Service cannot encourage the infringement or profit directly from the infringement itself, and it must register a contact person with the Copyright Office so that the copyright owner knows who to contact to provide the notice of the takedown. While the exact meaning of some of these provisions is subject to some debate (including debate in recent cases, including one that Viacom has been prosecuting against YouTube that we may address in a subsequent post), the general concept is well-established.

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We’ve written extensively about copyright issues for audio services, but the big copyright decision that recently made headlines is a TV issue, though one that could have an impact on audio as well. That was the Second Circuit decision in the Aereo case – upholding a lower court decision allowing a company to retransmit over-the-air TV signals to consumers over the Internet – without any royalties to the TV broadcasters or television program producers. The decision looked at the issue of what defines a “public performance” that would require the consent of the copyright owner. The Court found that there is no public performance of television programming where the service is set up so that the programming is streamed to the viewer individually, at their demand, rather than transmitted all at once to multiple consumers – as by a cable system or a  satellite television service. The decision is a controversial one – decided by a 2 to 1 vote with the dissenting judge issuing a strong dissent arguing that the Aereo service was nothing more than a “sham” designed to evade the royalty obligations or copyright permissions that would be necessary if the service were deemed a cable system or other type of multichannel video provider. What does this decision really mean for television stations, and could it have broader implications for the reuse of all sorts of broadcast content on the Internet?

The decision focused on the question of whether the Aereo service “publicly performs” the programming that it sends to its subscribers. Under the Copyright Act, a copyright owner has a bundle of rights which it has the exclusive ability to exploit. This includes the right to copy the copyrighted work, to distribute it, to make a “derivative work” (a work that uses the copyrighted material and changes it in some way - like putting new words to the melody of a copyrighted song), and the right to publicly perform it. The definition of a public performance includes any transmission or retransmission of a performance to multiple individuals at the same time or at different times. This language was added to the Copyright Act at the time of the advent of cable television, to make clear that services like cable, that take an existing performance (like that of a broadcast television station) and then further transmit it to other people (even people who could theoretically pick up the original performance) were themselves making a public performance that needed the consent of the copyright holder or a government-imposed statutory license (which allows the performance as long as the party making the performance pays the copyright holder an amount set by the government). From a cursory look, it would appear that Aereo is retransmitting the signal of the TV station to all of its customers. Why, then, did the Court rule that no public performance was involved?

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With the National Association of Broadcasters big convention coming up next week in Las Vegas, this week we’ll look at a couple of the issues that will likely be discussed when the industry gathers for its annual reunion. On Sunday, before most of the NAB Show begins, the Radio and Internet Newsletter (RAIN) will be holding its RAIN Summit West, where I will be moderating a panel called The Song Plays On – which will focus on the music royalties paid by Internet Radio and other digital music services. We’ll not focus on what the current royalties are, but instead to try to explore what they could be in the future. This is really one of the most difficult issues in the industry, as the two sides (and really there are many more than two sides to this issue) come at the issue from far different perspectives. We will try to bridge those differences and explore where there might be common ground for music users and copyright holders to come together to arrive at mutually beneficial solutions to this thorny issue.

The Internet Radio Fairness Act introduced in Congress last year brought this issue into sharp focus. That Act sought to bring about a number of reforms in the way that the Copyright Royalty Board sets various music royalties – particularly the rates that apply to Internet radio stations. We wrote about the provisions of the bill dealing with Internet radio royalties soon after the bill was introduced. After that article, there was a Congressional hearing on the issue, and lots of debate before the bill died at the end of the year as the session of Congress expired. This year, the Chair of the House Judiciary Committee has promised a number of hearings on all aspects of music and audio copyright issues, though none have yet been scheduled. But the debate about IRFA last year illustrated the divide between the various sides in the music royalty debate. 

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We've written many times before about those big name events, like March Madness, the Olympics and the Super Bowl. Events that you and your advertisers are just dying to tie into your own local event – a sale, a party or maybe the introduction of some special new product or service. Well, like the Super Bowl, March Madness is a trademarked term, and you need to exercise care in its use. While the company that owns the trademark (a company partially owned by the NCAA) may not be as aggressive as the NFL or the Olympic Committees in protecting its rights, it can still be an issue should you start promoting your March Madness sale without permission and get caught.

When we wrote our usual warning about the use of the term "Super Bowl" in advertising earlier this year, I received one message asking if I worked for the NFL. A reader who obviously had trademark law experience complained that I was too cautious in urging broadcasters to avoid the use of the term Super Bowl in a commercial. The argument from the reader was that, if used in the right way, not to name an event but just to say something like – "buy a big screen TV so that can watch the Super Bowl, the Academy Awards and all the best television that is coming your way this year," your use of the term in a commercial could probably be justified should it be challenged. While that may be the case, making the distinction between this arguably permissible kind of use, and a more problematic use (like "come on down to Joe's electronics for our Super Bowl Sale on big screen TVs") is a nuanced issue. By avoiding the trademarked term in advertising, and instead sticking with something more generic – like "it is tournament time again, and you can watch all the action with a new big screen TV from Joe's Electronics" - avoids any of the issues that might arise if you use the trademarked term in your commercial.

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In the digital world, it seems that everything is reinvented, and someone claims that they have a patent on that reinvention. In the last few weeks, we have seen news about patent claims asserted against radio broadcasters for their digital music storage systems, against public broadcasters for podcasts, and even against companies trying to comply with the FCC's new guidelines for E-911 (emergency communications over wireless and VoIP networks) providers. These claims highlight that media companies and others in the communications industry have to be prepared for patent litigation almost as a cost of doing business – and need to consult with patent lawyers about strategies if they are faced with such claims, and consider the potential of concerted defenses with others similarly situated if the defense does not violate other laws (such as the antitrust laws). What claims have been raised recently?

Over the last two years, thousands of radio stations across the country have received letters claiming that their digital music storage systems violated a patent from a company called Mission Abstract Data. While the patents in question have a checkered history at the Patent Office – after being issued, they were reexamined and their basis questioned, with the Patent Office ultimately agreeing that the patents, as limited through the reexamination, were in fact valid. But that decision was itself challenged by equipment manufacturers whose music systems could infringe on the patent. That further reexamination is still underway.  Nevertheless, as that reexamination continues, the company that currently has rights to the patent, Digimedia, has sued four radio station owners in Texas claiming that they are violating these patents controlled by the company. These suits are in addition to a long-pending case against a number of large broadcasters, which has been stayed pending the outcome of the Patent Office reexamination (though the patent holder has asked that the stay be lifted – an argument to be considered later this month). Some observers have suggested that these new suits may be a precursor to other actions to try to convince reluctant broadcasters to take out a license rather than fight a lawsuit.

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Deciding how to pay music royalties has always been difficult – trying to figure out what permissions are necessary, who has the rights to grant such permission, and how much the rights will cost. The one place where the rights were fairly simple - paying for the right to publicly perform musical compositions – may be getting more difficult. According to an article in the New York Post, Pandora may be getting a taste of that new reality, having to pay significantly more money to Sony ATV music publishers than it had previously paid for that same music when it was licensed by ASCAP and BMI. 

The rights to publicly perform musical compositions had until very recently been relatively straightforward. All a broadcaster, digital media company or other music user needed to do was to pay ASCAP, BMI and SESAC royalties (ASCAP, BMI and SESAC are often referred to as the PROs, or Performing Rights Organizations) – and the music service essentially had the rights to publicly perform virtually all the musical compositions in the world. And ASCAP and BMI were covered by antitrust decrees – so their rates were more or less known for most categories of music use – only subject to a rate court hearing once every now and then when these collection societies could not come to an agreement with the members of a particular class of music users. While SESAC is not subject to the antitrust consent decrees, and not necessarily as easy to deal with, most music services figured out a way to cut a deal with the society too.

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With the league championship match-ups set, and the Super Bowl only 3 weeks away, broadcasters are once again getting ready for the onslaught of advertising opportunities that come with the big game. But, as we write every year at this time, broadcasters need to be extremely careful in using the term "Super Bowl" in any advertising by a sponsor who has not been authorized to use that term. Super Bowl is a trademarked term, meaning that its use, particularly for commercial purposes, is limited. Trademarked terms should not be used in commercial messages except by authorized advertisers. These advertisers have paid big bucks to be able to say that they are a Super Bowl sponsor. See this article from the New York Times about the pricing of Super Bowl advertising. As the NFL enforces its trademarks rigorously (so that they can get the big bucks from the official advertisers), don't risk their use without official permission.

This does not prevent all discussions of the Super Bowl on the air. News reports about the game can still air, using the name of the game. DJs can still chat about who is going to win the Super Bowl. But don't try to commercially exploit these terms (e.g. saying that you are "Springfield's Super Bowl station") unless you really have really the rights to use the trademarked term. Be careful, as a cute promotional idea can end up costing your station far more than you intended.

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The royalties that Sirius XM will pay to SoundExchange for the next 5 years will be decided by the Copyright Royalty Board ("CRB") in December. To summarize the hearings that have been held over the last year, the CRB held an oral argument last week, where Sirius XM and SoundExchange presented their arguments as to what those royalties should be. Sirius argued that the rates should be decreased, while SoundExchange contended that the rates should go up significantly from the 8% of revenue that the service now pays (see our summary of the current Sirius XM rates here). How can these parties have such different perspectives on the value of music, and what did this argument say about the application of the 801(b) standard that applies to Sirius?  This standard is the standard that webcasters are seeking to apply to Internet Radio services through the Internet Radio Fairness Act which we wrote about here.  If the IRFA is adopted, it would apply when the CRB next reviews webcasting rates in a case that will be decided by the end of 2015.

Sirius XM and cable music provider Music Choice, which was also part of the proceeding, are both governed by the 801(b) standard rather than the “willing buyer, willing seller” standard that applies to Internet Radio. The oral argument made clear that the adoption of the 801(b) standard is not in and of itself a panacea for the concerns about the royalties that have been set by the Copyright Royalty Board. Last week’s argument focused on the value of music in a marketplace – essentially the “willing buyer, willing seller” question. While other 801(b) factors were discussed, they were seemingly passed over quickly, with most of the focus being on the questions of the marketplace value of the music.

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Last week, the Radio Music License Committee (“RMLC” – see our article about the RMLC), filed a complaint in US District Court in Pennsylvania against SESAC, arguing that SESAC is a monopoly and should be treated like ASCAP and BMI.  RMLC is asking that SESAC be subject to an antitrust consent decree as are these two bigger collection societies. As we have written before, SESAC is not a non-profit organization like ASCAP and BMI, and is not subject to consent decrees like these other performing rights organizations (“PROs”). Instead, it is a private company, owned by venture funds which, up to now, has set its own prices for licenses subject only to negotiations with the rights holders. So what is this suit all about, and will broadcasters see any changes in SESAC licensing in the short-term? 

RMLC claims that SESAC, by effectively being the only way to license the public performance of compositions by thousands of different composers, effectively can get monopoly prices. Practically speaking, radio stations cannot individually license all the songs written by SESAC performers and, even if the stations were able to directly license some of the music from SESAC writers, SESAC still would not reduce their fees.  All SESAC licenses are blanket licenses that give stations the right to use all the music in the SESAC catalog, but are not reduced by any pro rata amount should any music be directly licensed. Thus, argues RMLC, stations cannot try to reduce their licensing liability through direct licenses with songwriters even if such deals could be negotiated.

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The recent introduction of a bill by Congressman Jason Chaffetz offers proposals for reform of the operations of the Copyright Royalty Board – reforms that many in the Internet Radio industry have hailed as promising real change in the way that royalty decisions for webcasters have been made. While some webcasters seem to think that relief is at hand, in fact, the bill has simply been introduced into Congress co-sponsored by four congressmen, so it has a long way to go before it can be adopted by Congress and become the law of the land. But it is worth looking at the many issues that the Bill addresses so that webcasters know what it says so that they can rationally argue for its passage.

Most webcasters have focused on the provisions of the bill that would substitute the standards set out in Section 801(b) of the Copyright Act for the standard that currently applies – "the willing buyer, willing seller" standard. 801(b) sets out five factors to be considered in determining the rates to be set for a statutory royalty. These factors are:

(A) To maximize the availability of creative works to the public.

(B) To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions.

(C) To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication.

(D) To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 

In contrast, the current “willing buyer, willing seller” standard looks only at one question – what a willing buyer and willing seller would agree to in a marketplace transaction.   What is the difference between these two standards?

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I was fortunate enough to spend some time earlier this month in London, at the Olympics. While there, I noticed just how closely the Olympic venues were guarding against any advertising from any non-official Olympic sponsors. This article from the AP notes how even the restroom fixtures had tape covering all brand names to prevent the manufacturers from getting any Olympic tie-in. I witnessed the tape and had puzzled over it many times when in London. At Wimbledon, too, where the tennis finals were held, the drink Pimms Cup, a fixture at events there, was not available as Pimms had not shelled out to be an Olympic sponsor. Again, I can attest that we spectators had to instead drink "No 1 Fruit Cup" which, I am told, was the same beverage. The AP article talks about many other similar enforcement actions taken by Olympic committees, zealously guarding Olympic trademarks. These actions all contain a warning for broadcasters – be very careful using any Olympic trademarks, symbols or other branded content in advertising and marketing campaigns, or those of other big events where trademarks (or service marks, as trademarks are known where they apply to services as opposed to goods) limit the use of the name of the big event.

We've written before (here and here) how Olympic sponsors pay big bucks for the rights to sponsor the Olympics, and to get exclusivity to associate their brands with the games. Thus, the sponsors guard their territory carefully, as do the Olympic organizations whose ability to stage the games is dependent on such sponsorship. Thus, when a broadcaster is approached by a local car dealer, who wants to promote an “Olympics of Savings”, or a local gym that wants to show in its commercial its exercise facilities with the Olympic rings hanging over a bank of treadmills, don’t do it, as there could be consequences far beyond the advertising revenues that you receive. And don’t plan your own WXXX Hometown Olympic festival, as that also could bring issues from the Olympic “police.”  (see this video on one local festival that confronted this issue from Comedy Central's the Daily Show, not the first time that Comedy Central has explained trademark law -see our reference to a Colbert Report story dealing with the same question at the Winter Olympics).  And the Olympics is not the only event over which you should have this concern. 

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Radio stations are once again hearing about the Mission Abstract Data patents, as a firm representing them has been seeking a royalty for the use of the patent for certain digital music storage and retrieval systems. We’ve written about that patent before. When we last wrote on the subject, the patent was subject to review by the Patent Office, which had raised issues appearing to question the underlying validity of that patent. Since then, the Patent Office reversed itself, finding that the patent (as clarified and narrowed by the holder) was in fact valid. But that determination was itself challenged by certain companies that have interests in digital music storage systems for radio stations and, in an order released last week, the Patent Office has once again suggested that there may be issues with the patent that could undermine its validity.

While this development appears promising for broadcasters concerned about the patent, broadcasters need to take this news with a grain of salt.  The Patent Office letter is at best preliminary, and the patent owner can file comments addressing the concerns raised by the Patent Office in the next 60 days, and then the challengers to the patent can reply 60 days after that. As we have seen in the past, a preliminary indication from the Patent Office that the patent may not be valid does not always withstand scrutiny when the final evaluation is completed, after presentations from both sides are received.  So what is a broadcaster to do? 

 

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Radio broadcasters have been receiving invoices from the Radio Music License Committee (“RMLC”), and many are asking whether the invoice is “real.”  Some stations seem concerned that they are being asked to pay some fee that they really don’t owe. The truth is that this is one bill that most commercial stations in fact do owe, and it is a bill that they should actually be happy to pay. RMLC is the committee that represented radio broadcasters in the recent negotiations with ASCAP and BMI, leading to new agreements covering the royalties to be paid to these organizations through 2016. We wrote about the ASCAP agreement, here. The BMI agreement was announced recently, and we’ll try to get a summary of that agreement up on the blog sometime soon. These settlement agreements significantly reduced the amount of royalties that the radio industry as a whole pays to ASCAP and BMI for the public performance of musical compositions on over-the-air radio (and in connection with their digital uses of music as well).   As part of these settlement agreements, the Court overseeing the antitrust consent decrees with ASCAP and BMI, which had to approve the settlements, approved the fees to RMLC as well. 

Under the terms of the Court approval, all stations that either elected to be represented by RMLC in the negotiations (see our article on that election here), or those who elect to be covered by the settlement by signing an agreement with ASCAP and BMI under the terms that RMLC negotiated, are required to pay the fee to RMLC.  The fee funds RMLC operations in the future, and pays for the cost of the litigation and negotiations that led to the settlements.

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As we wrote about last year around this time, MARCH MADNESS is a term that is protected by trademark law.  It is owned by the March Madness Athletic Association (MMAA), a joint venture between the NCAA and the Illinois High School Athletic Association (IHSA).   The IHSA was actually first to begin using this mark to describe its high school basketball tournament in the 1940s. 

Brent Musburger brought MARCH MADNESS to public attention in using that term to describe the NCAA college basketball tournament, during which many hearts are broken each year....if you are lucky enough to have a team that made it this far. (Northwestern came this close to its first NCAA appearance.)

Normally, this would be a case of so-called "reverse confusion," in which the junior user of a mark (here, the NCAA) is so much bigger than the senior user of the mark (the IHSA) that the public thinks the mark belongs to the junior user.  In the typical reverse confusion case, the senior user can stop the junior user from using the mark.  But that did not happen here.  Why? 

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The Copyright Royalty Board makes many important decisions, yet for the last several years, there has been a cloud over its operations, as there have been questions as to whether its members were constitutionally appointed (see our articles here, here and here). Well, the question is before the Courts again – this time squarely in front of the US Court of Appeals for the District of Columbia – a Court one step below the Supreme Court. The Copyright Royalty Board sets the royalty rates to be paid by Internet radio stations for the public performance of sound recordings, and in doing so, they have made some controversial decisions over the last few years. They also set royalties for other digital non-interactive music services, including Sirius XM, music services that come with cable and satellite television services, and background music services. The Board also oversees the distribution of funds that are collected for the retransmission of distant television signals by cable systems. It also sets the rates under Section 115 of the Copyright Act for the reproductions of musical compositions made by record companies when producing musical recordings or downloads, by digital music companies in connection with on-demand music services, and by wireless carriers in selling ringtones. 

The case before the Court involves a seemingly small matter – the appeal of Intercollegiate Broadcasting Services from the CRB decision setting default rates for Internet radio services that are not covered by one of the many Webcaster Settlement Act agreements (about which we wrote here and here). IBS essentially is objecting to the fact that the Board would not lower the annual minimum royalty fee paid by some of IBS’ smaller members below $500. But, in connection with its appeal, IBS raised the issue of the constitutionality of the appointment of the Judges, and the Court this week heard an oral argument on the issue – mentioning the rate questions only in passing while concentrating on the constitutionality of the appointment of the Judges.

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ASCAP and the Radio Music Licensing Committee have reached a settlement on the amount that radio stations will pay to ASCAP for the use of music for the period through the end of 2016. The agreement was approved last week by the US District Court in the Southern District of New York acting as a “rate court” to consider those fees. We reported that a settlement had been reached in early December, and now we’ve seen the actual documents and can provide some details of this agreement between the commercial radio broadcast industry and ASCAP. It should result in significant savings for broadcasters from rates that they had been paying prior to January 1, 2010.

As we wrote in 2010 when RMLC and ASCAP were first trying to reach a deal on new rates, the biggest problem with the old rates was the payment structure. Rather than making ASCAP a partner of the broadcaster by cutting them in for a percentage of the broadcaster’s revenue, under the deal that ended in 2009, ASCAP was to receive a set fee each year from the broadcast industry.  That set fee was divided among all commercial radio stations not based on station revenues, but instead based on the market size and technical coverage of each station. So all similarly powered stations in a market paid the same ASCAP fee, whether they were big revenue producers or not.  And the agreement was entered into during a period where radio broadcasters thought that revenues would be ever-increasing, so that set fee to be paid to ASCAP increased each year. As the economy and broadcast revenues fell during the later years of the deal, while the set fee kept increasing,broadcasters were paying an ever-increasing percentage of their revenues to ASCAP – far more than would have been paid had the industry stuck to a percentage of revenue formula.

Well, the experiment is over, as the new deal returns to a traditional percentage of revenue deal. Music radio pays ASCAP 1.7% of “revenues subject to fee from radio broadcasting." Essentially, that is all the revenue that a station receives from advertising and promotions, less a 12% deduction (presumably to cover commissions and costs of collection). Barter revenues, and payments made to networks (as opposed to the stations themselves), are excluded from the gross revenue calculation. All revenues from HD programming (including any amounts received for brokered programming) is also included (at least for the time being – subject to reevaluation should HD revenues account for 25% of radio revenues by 2015). New Media revenues, if the arise exclusively from streaming your station on the Internet, are also included in this gross revenue calculation.

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One of the questions we commonly get from broadcasters and others around this time of year is whether and/or how they can use the term SUPER BOWL.  Some refer to it as a trademark while others call it a copyright.  Who is right...and how can it be used?  The term SUPER BOWL is a registered trademark owned by the National Football League. We previously discussed this issue in 2009, 2010 and 2011. 

Actually, the NFL owns at least eight trademark registrations containing the words SUPER BOWL, as well trademark registrations for the terms PRO BOWL and even SUPER SUNDAY.  Aside from these trademark registrations, the NFL also owns the copyright to the telecast of the game itself.  You may have heard that in past years, the NFL tried to stop Super Bowl parties shown on large TV screens.  This was an enforcement of the NFL's copyright in the game.  Now, the NFL apparently no longer tries to stop Super Bowl parties unless the proprietor charges admission to see the game.  Again, this is a copyright issue.  But what do these rights mean for a broadcaster who wants to run a Super Bowl promotion or an advertiser who wants to run a campaign involving the Big Game?

 

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As we reported last week, the FCC has adopted a Report and Order establishing rules for the closed captioning of video programming delivered via Internet protocol (i.e., IP video), as required by the 21st Century Communications and Video Accessibility Act (CVAA). DWT has now released an advisory with further details about the new rules, which is available here. The new rules govern TV stations, cable systems, broadcast and cable networks and virtually every other professional video program producer who is now, or will be in the future, making programming available online. The rules also impose new requirements on hardware (such as set-top boxes, PCs, smartphones DVD players, Blu-ray and tablets) designed to receive or play back video programming transmitted simultaneously with sound and integrated software.

With rules that are so wide-reaching, everyone involved in these businesses needs to understand what the new rules entail.  A summary of the Commission's Order follows below, and please see our advisory for complete details about the new rules. Consistent with CVAA's mandate, the FCC has adopted rules that:

• Extend to all full-length video programming previously distributed on television with captions to require that captioning appears when such programming is displayed online via IP;
• Establish a two-year transition for uncaptioned, archival IP-delivered content that is shown on TV with captions after the new rules’ effective date;
• Require video programming owners to send caption files for covered IP video to video programming distributors and video programming providers along with the program files, or alternatively, inform the distributors–using a mechanism agreed to by the parties–that captions are not required for a particular program;
• Require video programming distributors and video programming providers to enable the rendering or pass-through of all required captions to the end user;
• Require captioning of covered IP video to be of at least the same quality as the captioning that the programming had when it appeared on TV;
• Establish deadlines by which categories of covered IP video must be captioned, as follows:
  • Programming that is prerecorded and unedited for online distribution, when subject to the new requirements, must be captioned within 6 months of the rules’ effective date;
  • Programming that is aired live or “near-live” on TV, when subject to the new requirements, must be captioned within 12 months of the rules’ effective date;
  • Programming that is prerecorded and edited for online distribution, when subject to the new requirements, must be captioned within 18 months of the rules’ effective date;
• Adopt the Society of Motion Picture and Television Engineers (SMPTE) Timed Text format (SMPTE ST 2052-1:2010: “Time Text Format (SMPTE-TT)” 2010 as a safe-harbor interchange and delivery format, but stop short of requiring all covered entities to use this standard;
• Decline to adopt categorical exemptions other than that mandated by the CVAA (i.e., consumer generated programming. which is statutorily exempt);
• Establish procedures by which video programming providers and video programming owners may petition for exemptions from the new requirements based on economic burden;
• Accommodate de minimis failures to comply with the new captioning obligations;
• Adopt procedures for complaints alleging violations of the new rules;
• Decline to adopt specific forfeiture amounts, opting instead to penalize violations based upon the facts and circumstances of each case;
• Permit entities to comply with the new requirements by alternate means; and
• Impose requirements for devices subject to the closed captioning requirements.

Given the scope of the new rules, there will undoubtedly be questions and requests for clarification that arise along the way.  We wll continue to track these new rules and provide further updates on this important issue. 

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Many radio broadcasters have recently received a notice from a company called Mission Abstract Data, asking to begin discussions about royalty payments for the use of digital music storage systems, which that company claims fall under a patent they control.  This claim seemingly covered systems used by most music radio stations – systems sold by several well-known companies in the broadcast industry. Before blanketing the country with the demands a few weeks ago, the company had initiated similar actions against several of the largest broadcast companies, filing a lawsuit against a number of them. After that action was filed, challenges to the underlying Mission Abstract Data patent were filed with the Patent and Trademark Office ("PTO"), arguing that the patents should be invalidated as there was “prior art”, i.e. there were other systems in existence at the time that the patent was filed and thus the technology on which the patent was filed was not a new invention warranting patent protection. Last week, a unit in the PTO tasked to review challenges to existing patents issued a preliminary decision agreeing with the challengers that many (but not all) aspects of the patent were improperly granted and thus should be invalidated.

This is a preliminary ruling to which the patent holder can respond (with an early December date set for the filing of such responses). Nevertheless, it does seem to be an important decision for the many radio broadcasters who received the notice. As we wrote several weeks ago, if you are one of the stations that received that notice, be sure to consult an attorney to determine your potential liabilities in this situation and how this PTO decision may affect the demands made by this company.  More and more claims like this are arising throughout the digital media landscape so, even if this one goes away, don't be surprised to see some other claim cross your desk at some point in the not too distant future. 

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Have you received a claim that some system that your station is using, such as the system for digital storage of your music library, is infringing a patent? Don’t ignore it! We understand that a number of radio stations have received these sorts of notices. There have been many recent situations where patent holders have alleged that broadcasters or digital media companies have infringed their patents. The mere fact that you bought a system from a third party vendor does not insulate you from possible infringement liability. Patent holders can seek a recovery either from a manufacturer of a system that infringes their patent, or from a user of that system. Sometimes these claims look like they can’t be real, as they appear to claim patent rights on systems that have been in use for a long time. But, if these parties file suit and you don’t defend, you may end up with liability simply because you did not defend against the claims. Some of these suits are filed with the expectation that some defendants won’t respond, or that they will settle so long as the costs of settlement are less than the costs of defending against the litigation. Talk to an attorney if you have received one of these claims to discuss your options.

When you get one of these claims, if it involves a hardware or software system that you bought from a third-party vendor, you should review your contract with the vendor to see if the vendor has agreed to defend claims about your use of their system. If so, you want to get them involved quickly, as soon as you receive a claim.  For the future, these suits highlight a provision that you should be sure is in all agreements that you sign with your vendors. Your vendors should warrant to you that their system does not infringe any patents, and that if any claim is made, the vendor will defend you against claims that are made and indemnify you for any losses that you suffer as a result of a claim against your use of their service. In today’s digital world, a little protection up front may protect you from big liability in the future. 

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Do you allow the posting of content created by third parties on your website (e.g. videos, audio files, or even written comments)?  Do you run any on-line service where you collect information provided by third parties (whether that be a dating service, auction site or other classified service)?  If you do, you probably know that you are safe from copyright claims for infringing content that is posted by those who are not your employees or agents if you follow certain steps.  We have written about these steps to give you the "safe harbor" from copyright liability for "user-generated content" before.  The steps include requirements that you not encourage or profit from the infringing content, that you have terms of use for your service that forbid users from posting infringing content, and that you take down infringing content when you receive notice from copyright holders that it has been uploaded to your site or service by a third party.  To take advantage of this safe harbor from liability, services are required to register with the Copyright Office the name of someone in their company who can be served with "take-down notices" from copyright owners.  The process of registration is now proposed to be changed in a Notice of Proposed Rulemaking just issued by the Copyright Office.  Comments on this notice can be filed through November 28. Replies are due by December 27.

The safe harbor was created by the Digital Millennium Copyright Act, adopted in 1998.  Since that time, the registration of agents to receive take-down notices has been governed by interim rules.  Services register by sending a paper form and a filing fee to the Copyright Office, and that information is manually entered by the Copyright Office into a list that is available on the Copyright Office website.  From experience, the time from the filing of such a registration to its appearance on the Copyright Office's website can take several weeks or more.  The Copyright Office, in its Notice, states that it has done some informal checks on the information in its database of registered agents, and found that the list contains duplicate registrations, registrations for companies or sites that are no longer in operation (services are supposed to tell the Office when they stop their operations), and many outdated addresses (services are supposed to update their agents as employees change, but apparently they sometimes forget).  The NPRM proposes to move to an electronic registration system, which will automatically request a verification of the registered information on a regular basis.  In making this proposal, the Copyright Office asks for public comment on a number of issues.

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ICANN (the Internet Corporation for Assigned Names and Numbers) has approved the use of .xxx as a domain (like .com) for the adult entertainment industry. In September, broadcasters and others with registered marks will have an opportunity to reserve their marks defensively in the .xxx domain.   

While adult-oriented website operators may be interested in reserving spots in the .xxx top level domain (TLD), broadcasters may be just as eager to prevent their call signs and other marks from being used in that TLD where they may be associated with adult content. The ICM Registry, which will operate the .xxx domain, will allow those who own registered trademarks to reserve .xxx domain names to prevent others from using their marks in that domain.

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Like "Super Bowl," "Olympics" and "NASCAR," "March Madness" is also a term that is protected by trademark law, and its unauthorized use in commercials could result in legal liability.  But the development of March Madness is a bit more interesting, and you can probably thank Brent Musburger for that.  The Illinois High School Association (IHSA) has been using the term "March Madness" to describe its state high school basketball tournament since the early 1940's.  Broadcaster Brent Musburger went to journalism school in Chicago, then worked for both a Chicago newspaper and television station, where he almost certainly covered that basketball tournament and was well aware of the term "March Madness."  When he later began covering the NCAA basketball tournament for CBS in 1982, he naturally began referring to that tournament as "March Madness" as well.

As you know, the term caught on.  It ultimately led to a trademark infringement suit in 1996, and that led to a joint venture between IHSA and NCAA, called the March Madness Athletic Association (MMAA) which now holds all trademark rights to the term "March Madness."  In fact, they own 15 federal registrations containing that term, covering everything from the actual tournaments to broadcasting and webcasting the tournaments to mugs, T-shirts, towels, and even carbonated soft drinks.

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As we have advised before in both 2009 and 2010, "Super Bowl" is a registered trademark belonging to the NFL, and they will aggressively enforce their trademark rights against any station that attempts to use this term in connection with advertising or promotional matter of any kind, including ticket giveaways, if not specifically authorized by the NFL. You are free to use trademark protected terms like "Super Bowl" in news stories or noncommercial discussions about the event under a concept known as "nominative fair use," but use of trademarked terms in a commercial context crosses the line from acceptable to unacceptable use.

Although the NFL is more aggressive than many other trademark owners in enforcing its rights, these same principles apply to other registered trademarks, including "March Madness," "NASCAR" and even TV shows such as "American Idol."  Discussions among DJs or with listeners and viewers are fine, but you cannot use these terms to sell products or do station promotions without authorization from the trademark owners.

Refer to our previous posts linked to above for more guidelines on what stations can and cannot do with regard to the Super Bowl and other registered marks.

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The Copyright Office today announced an extension of time for the fling of comments in its inquiry into the possibe extension of Federal Copyright protection to pre-1972 sound recordings.  We provided a details of that proceeding here.  Internet radio operators and other digital music services that play significant numbers of pre-1972 sound recordings (particularly recordings first made in the United States), may want to comment in this proceeding, as the statutory royalty paid to SoundExchange currently does not appear to cover such recordings, though, should the Copyright Office recommend the extension of the law to cover the recordings, and if Congress takes actions to amend the Copyright Act as a result of this suggestion, royalty obligations could be extended to these recordings.  At the request of the RIAA, the Copyright Office has extended the deadline for comment until January 31, 2011.  Reply comments are now due on March 2, 2011.

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Many station owners think they can adopt any name, positioning statement or slogan for their station so long as no one else in the market is using the exact same name or slogan.  That thinking is often incorrect, and can be very costly if a name is adopted and has to be changed later because it infringes on someone else's intellectual property rights.  Nicknames and slogans used in station advertising or promotion are controlled by trademark law.  Even a station's call sign, which must be approved by the FCC, cannot be too similar to an in-market competitor's call sign without running afoul of trademark law.  You may have read about recent litigation concerning the station nicknames "Bob" and "Bob FM."  In that case, there is apparent contour overlap between two separately owned stations using the same name.  But trademark law can come into play even when stations are not in the same market and do not have overlapping contours.

Trademark rights can be established in one of two ways.  The first station to use a name or slogan can establish priority within that station's geographic market or contour.  Alternatively, one can file an application for registration of a station name or slogan at the US Patent and Trademark Office (the "PTO"), and thereby obtain nationwide rights in that name or slogan, if no one else had prior use or a prior application.  Since trademark applications can be filed on an intent-to-use basis, a station can establish priority for a mark it is not yet using.  This is why a trademark search is so important prior to using a mark. 

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The Copyright Office has just released a Notice of Inquiry asking whether Federal protection should be extended to sound recordings recorded prior to 1972.  A sound recording is a song as recorded by a particular artist.  Sound recordings were first protected under Federal law in 1972.  Prior to that, unauthorized recordings or reproductions of an artist's recoding were policed under various state criminal and civil law.  While the Copyright Act has provided for the protection of pre-1972 sound recordings first registered in other countries, US sound recordings recorded prior to 1972, have not received Federal copyright protections.  Many have assumed that this also exempts pre-1972 sound recordings from royalty requirements under Section 114 of the Copyright Act - i.e. the royalties paid by Internet and satellite radio and other digital music providers under the statutory license.  How would a change in the law affect Internet radio operators?

That is one of the questions that is asked by the Notice of Inquiry.  Many Internet radio operators have not excluded pre-1972 recordings from royalty payments based on any exception that may exist for pre-1972 sound recordings, as the possibility has not been widely publicized.  Moreover, some copyright holders have suggested that the digitization of older songs may somehow bring pre-1972 recordings under the coverage of the Copyright Act, or that there may be state remedies that are somehow the equivalent of the Federal public performance right.  Others may just not want to go to the trouble of determining which copyrighted songs are subject to the Uruguay Round Agreements Act (making the non-US pre-1972 sound recordings subject to US Federal law).  The Copyright Office's Notice of Inquiry asks what impact the inclusion of pre-1972 sound recordings would have on many undertakings - including the archiving and restoration of sound recordings, and on the current benefits that copyright holders and others enjoy under state laws.  In addition, it asks about the benefits and issues that would arise under Section 114 of the Copyright Act - the section that sets out the statutory license under which most Internet radio companies operate.

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Dave Oxenford this week conducted a seminar on legal issues facing broadcasters in their digital media efforts.  The seminar was organized by the Michigan Association of Broadcasters, and originated before a group of broadcasters in Lansing, but was webcast live to broadcasters in ten other states.  Dave addressed a variety of legal issues for broadcasters in connection with their website operations and other digital media platforms.  These issues included a discussion of service marks and copyrights, employment matters, music on websites, the use of social media, privacy, and sponsorship disclosure.  The slides used in the Lansing presentation are available here.    During the seminar, Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the content posted to their website by their audience, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine's Guide to The Basics of Music Licensing in a Digital Age.   Dave also presented this seminar at the Connecticut Broadcasters Association's Annual Convention in Hartford on October 14.

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Last week, the Department of Commerce's Internet Policy Task Force asked for comments on the relationship between the protection of copyrighted content on the Internet and the effect of such protections on technology innovation and the expectations of consumers.  The purpose of the inquiry is to develop a report to be circulated among the various government departments that have power over the enforcement of copyrights and the development of rules and regulations that deal with copyrighted materials - to essentially develop government policy in this area.  While the request for comments dwell on the concerns about copyright infringement that are raised by many Internet applications, the proceeding will obviously be controversial among media companies.  Many of these companies are concerned about the unauthorized use of their content on various websites, while other media companies (or divisions of the same media companies who are concerned about the unauthorized use of content) are concerned about too tight restrictions on the use of copyrighted content and how that will impact various websites, especially those that feature user-generated content.

As we have written before, the Digital Millennium Copyright Act allows Internet companies to allow users to post material on their websites, without fear of liability, if they take certain precautions - including adopting terms of use warning users that they need to observe the intellectual property rights of others, not otherwise encouraging infringing uses, registering with the Copyright Office to provide a contact person at the website operator that a copyright owner can contact if they believe that their content is being used improperly, and taking steps to take down improper content if the website operator is notified of the infringing use.    This Commerce Department's notice asks if this "safe harbor" provision has served the public interest, or if adjustments to this regime should be made.  Obviously, many websites that have grown businesses based on user generated content (e.g. many of the social networking and video-sharing sites) and will be very concerned with a proposal to alter their safe harbor and require them to take on a greater burden of reviewing content for potential copyright violations, while many content owners, who have complained about the inability to monitor all of these sites, may be looking for these reforms.   Obviously, there will be conflicting views on these proposals.

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Last week, a US District Court Judge adopted a new interim rate to be paid by commercial radio broadcasters to ASCAP for the use of ASCAP-licensed music by over-the-air radio stations, reducing the fees paid by the industry by about $40 million dollars, or about 20% of the total that had been paid by the industry under the rate deal that expired at the end of 2009. These rates replace interim fees that had been negotiated between ASCAP and radio representatives earlier this year.  The rate just adopted by the Court is the rate that will apply until a permanent rate for ASCAP fees is set by the Court (or agreed to in a settlement).  The permanent fees will be retroactive to January 1, 2010, so this apparent reduction in the ASCAP fees should not be taken to mean that the fees that will be paid by radio stations under this order will be the full extent of the ASCAP liability for any station. As we have written before,the Radio Music Licensing Committee (representing most commercial radio broadcasters), has been trying to renegotiate the rates charged by both ASCAP and BMI downward from their current levels. Both the ASCAP and the BMI agreements for over-the-air radio broadcasters expired at the end of 2009, and final rates for the future need to be set by rate court or by negotiations between the parties. As negotiations have yet to produce a deal, the RMLC has initiated rate court actions - which will involve long hearings, and may not be resolved fro quite some time (if there is no settlement prior to a final decision).  Each action is heard by a different judge, so this decision is not necessarily indicative of the interim or final rates that will be set by the Judge hearing the BMI case.

Besides the rates, which are clearly the major issue, there are other matters to be decided in a rate court proceeding. In the past, the rates paid by broadcasters covered their over-the-air broadcasts, plus the streaming of their over-the-air signals. Other use of music on websites, including “side channels” of music streamed by broadcasters that was not heard over-the-air, plus other digital music uses (e.g. mobile media uses), required independent ASCAP and BMI agreements. There has been an attempt to include all uses of music under the single ASCAP and BMI license given to commercial radio stations.

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David Oxenford, Bob Corn-Revere, David Silverman, Brendan Holland, and others from Davis Wright Tremaine's media and communications practice will be in Las Vegas, Nevada from April 10-15 for the 2010 NAB Show.  The NAB convention is an annual event and a focal point for engineering, legal, and business issues for the broadcasting and greater media worlds.  Bob Corn-Revere will be speaking at the American Bar Association Conference, Representing Your Local Broadcaster, on April 11, on a panel on new technology and the dangers it poses for journalists reporting from disaster areas or other scenes where immediate verification of information is not possible - the panel is called:  "Clear and Present Danger, Guiding Journalists Through the Catastrophic Perils."  David Oxenford, on the morning of April 12, will be speaking at the NAB Show on a panel called, "Copyright Licensing: Seeking a Bridge Over Troubled Waters", a panel dealing with the proposed broadcast performance royalty, streaming fees, the current ASCAP and BMI negotiations, and other copyright issues that arise in day-to-day operation of a broadcast station.  Dave will also be moderating a panel at the Radio and Internet Newsletter's RAIN Internet Radio Summit, to be held in conjunction with the NAB Show, at the Renaissance Hotel on April 12.  Be sure to join us at these and other events in Las Vegas.

To help you attend the Show, we have been offered some discounts and free admissions for our readers.  The RAIN Summit, Internet Radio's main event, has offered readers of the Broadcast Law Blog a 30% discount on admission to the conference.  That conference includes a full day of discussion of Internet radio topics, and will feature many of the industry's biggest names.  From past experience, this always a great event with much great information, important for anyone with any interest in Internet radio and digital media.  The Summit features great networking opportunities, with a box lunch and post-conference reception.  An Exhibit Hall pass to the NAB Show is also included for RAIN attendees

For those not interested in Internet radio, we can still get you into the NAB Show's Exhibit Hall - for free!  The NAB has offered our readers free access to the Exhibit Hall at the show. This free Exhibits-Only pass includes:

• Access to the Exhibit Hall at the Show
• Access to the Opening Keynote and State of the Industry Address
• Access to Info Sessions on the Convention floor
• Content Theater and Destination Broadband Theater

To find out how to register for these discounted offers, click on the Continue Reading link below.

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The .co top level domain (TLD) is being opened to the general public, and one can envision a run on registrations similar to that experienced for .com.  It is easy to see why the Colombia country code, formerly available in that country only, may become very popular in the US and elsewhere.  For one thing, .co is the standard abbreviation for "company."   It is also a very common misspelling of .com.  It has been estimated that google.co gets 15,000 hits per day by mistake.   From April 26 until June 10, a window will open in which only registered trademark owners will be able to register their marks in the .co TLD.  Beginning in July, however, .co will be opened to the general public.  We suggest that any companies with registered marks protect those marks in the .co TLD in April, and those that do not should register their call signs, company names or nicknames as soon as possible in July.  If someone else registers your call sign or company name in the .co TLD before you do, it could be very difficult and costly to recover it.

It is difficult to believe that the first .com domain name was registered just 25 years ago this week.  By the end of 1985, only five .com domain names had been registered.   Ten years later there were 120,000 .com domain names.  Now, there are nearly 85 million registered .com domain names.  Beginning sometime next year (2011), ICANN (the Internet Corporation for Assigned Names and Numbers) is expected to allow companies to buy their own TLDs (meaning that your company name could follow the "dot" in a URL), although the cost is expected to be close to $200,000 per TLD.  However, Canon has already announced that it intends to apply for .canon, and it is expected that other large companies will follow suit.

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Broadcasters need to be aware that ASCAP, BMI and SESAC (the "performing rights organizations" or PROs) don't cover them for all uses of music - especially uses that may be made on station websites.  Offering downloads, podcasts, and streaming video featuring music all require specific permission from music rights holders.  And, as we wrote just last week, incorporating music into recorded commercials also requires specific permission from rights holders - not just your routine payment to the PROs.  As music usually has two different classes of rights holders - those that hold the rights to the musical composition (the lyrics and music in the song, usually held by a publishing company), and the rights to the "sound recording" or "master recording" (usually held by the record companies), knowing who to ask for what rights can sometimes be complicated.  To help explain some of the basic issues of where to go for what rights, Davis Wright Tremaine has put together a Guide to the Basics of Music Licensing, available here. 

The Guide also addresses some of the controversial issues in music licensing, and the question of "fair use", a concept often cited but also often misunderstood.  So check out ourGuide for a basic introduction to the law governing music rights issues. 

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Using music in commercials is not as simple as just paying your ASCAP, BMI and SESAC royalties.  While many broadcasters think that paying these royalties is enough to give them the rights to do anything they want with music on their stations, it does not.  The payments to these Performing Rights Organizations (PROs) only cover the right to publicly perform music, i.e. to broadcast it.  They do not give you the right to take the music and "synchronize" it with other words or video material, e.g.  you cannot put music in a recorded commercial or otherwise permanently fix it into a recorded audio or video production.  Instead, to make such a production, the producer needs to get the rights to both the underlying musical composition (the words and musical notes) and, if you are planning to use a particular recording of a song, the rights to use that particular recording ( the "sound recording" or "master recording").  Getting these rights may very well require that you deal both with the record company or performing artist whose recording you plan to use, and the publishing company that represents the composer of the music.  And, as some artists may have concerns about having their music used to pitch some products, getting the rights to that artist's version of a particular song may not be easy. 

Even using the tune of a familiar song in an advertisement, with different words, is not permitted without getting the rights to do so from the publishing company.  A copyright holder in a musical composition has the right to prepare "derivative works" of that composition.  A derivative work is one that uses the original copyrighted material, but changes it somehow - like putting new words to an old tune.  Many think that "fair use" permits the making of a parody of a song, so they are allowed to use the tune as long as they produce a new version that is funny.  However, in the copyright world, fair use is not that simple.  A parody, to allow use of the original tune, must be making commentary or criticism of the original song.  Being independently funny or amusing, or otherwise dealing with some independent social or political issue, does not give you the right to use the music without securing permission from the composer of the music first.  A recent story in the Hollywood reporter's legal blog, THR,esq.com, told the story of a Congressional candidate, Joe Walsh, who thought that it would be cute to use the music of former Eagle Joe Walsh, to make fun of Democratic politicians.  As set out in that story, Eagle Joe Walsh's attorney did not find the campaign song very funny, and sent a very strong letter objecting to that use (the LA Times site had at one point had a link to a video of a band playing the candidate's version of the Joe Walsh song "Walk Away", but it now says that the video has been taken down due to a copyright objection). Don't let your station be the recipient of such a letter - get the rights to use music in commercials or other productions. 

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Getting legal education from a fake news program is always dangerous, but a recent episode of the Stephen Colbert Show, here, nicely demonstrated trademark law.  The clip illustrates what we have written before, that the term "Olympics", like "Super Bowl" and "March Madness" are trademarked, and attempts to use them in commercials or promotions, or to otherwise imply that a product or program is associated with one of these events, can lead a broadcaster into legal trouble and potential liability.  The Colbert program shows Stephen discussing with his brother, a trademark lawyer, Stephen's ideas for associating his program with the Olympics and, when his brother consistently rejects the plans, Colbert tries to change the 5 ringed Olympic symbol to five interlocking triangles, and other symbols that are similar, and Colbert is told that each is likely to bring a lawsuit.  Only when Colbert abandons the Olympic name, and the symbols, and comes up with a name - The Quadrennial Cold Weather Athletic Competition - that is the equivalent to the "Big Game" that many use when referencing the Super Bowl, was the brother satisfied that Colbert would not get successfully sued.  Stations should take similar precautions when thinking about using these terms in their programs.

Using the trademarked word or phrase in news reports about the event, or in other commentary, is in many cases just fine.  But trying to imply an endorsement or connection to the event for which true sponsors pay "big bucks", can get you into trouble, as explained by Mr. Colbert.  Thus, just as we looked to Colbert for examples of how music licensing works, and on when a candidate becomes legally qualified, he illustrated another legal concept.  When will we next look to Mr. Colbert for an explanation of the law?  Stay tuned.

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With the Super Bowl and the Winter Olympics less than 2 weeks away, and March Madness not far behind, we once again need to remind our readers that all three are trademarked terms, meaning that their use, particularly for commercial purposes, is limited.  We've wrote here last year about the use of the term "Super Bowl" in commercials, and about the use of "Olympics" two years ago (here).  Our warning then bears repeating now - the trademarked terms should not be used in commercial messages except by authorized advertisers.  These advertisers have paid big bucks to be able to say that they are an Olympic sponsor, or that they are having a Super Bowl sale.  The holders of these trademarks enforce them rigorously (so that they can get the big bucks from the official advertisers), so don't risk their use without official permission.  See our Super Bowl post from last year for details on how to refer to these events without running afoul of trademark limitations.

As we wrote last year, this does not prevent all use of these terms.  News reports about the events can still be given.  DJs can still chat about who is going to win the Super Bowl, or about the latest judging controversy in Ice Dancing at the Winter Olympics.  But don't try to commercially exploit these terms (e.g. saying that you are "Springfield's March Madness station") unless you have really paid for the rights to use the trademarked term.  Be careful, as a cute promotional idea can end up costing your station far more than you intended. 

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At the end of 2009, we wrote about the interim royalties agreed to by both ASCAP and BMI, agreeing to reduce the amount of royalties paid by commercial radio stations by 7% until final royalties were agreed to by these Performing Rights Organizations and broadcast groups (principally the Radio Music Licensing Committee), either through negotiations or by litigation.  While many had assumed that these reduced rates would stay in place until the final royalties were set, we have now learned that, in fact, these are but "provisional rates" to be in place only until interim royalties are set by the Courts which supervise the royalty-setting process. Recently, the PROs and the RMLC filed motions with the courts that oversee the ASCAP and BMI antitrust decrees under which these organizations have operated for half a century, stating that they have not been able to agree to either final or interim royalties, and thus need the Court to set interim royalties until a final royalty is determined.

The interim royalty process does allow the presentation of evidence and argument by the parties to the Court as to what the appropriate royalty should be until the final royalty-setting process runs its course.  There is a legal presumption that, in the absence of some compelling evidence otherwise, the rates that were previously in place would continue while final royalties are litigated.  Whether the Courts will look back to the royalties paid by radio owners in 2009, or whether the provisional royalties that were set in these end-of-the-year agreements will have any effect on the interim royalties remains to be seen.  But don't count on the interim 7% reductions being in place for long, as the Court should set the interim royalties relatively quickly, probably later this year.  And once these interim royalties are set, the more difficult issue will face the PROs and RMLC - reaching a deal or litigating over the final royalties that will be paid by radio broadcasters for the public performance of musical compositions.  Given the inability of the parties to reach any agreement on interim royalties after a year of discussions, it may well be quite some time before final royalties are set - at which time there will be a "true up" back to January 1 of this year.  So broadcasters need to watch these developments carefully, and to not count any discounts as final until the final royalties are established. 

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Another year is upon us, and it’s time for predictions as to what Washington may have in store for broadcasters in 2010.  Each year, when we look at what might be coming, we are amazed at the number of issues that could affect the industry – often issues that are the same year to year as final decisions are often hard to come by in Washington with the interplay between the FCC and other government agencies, the courts and Congress. This year, as usual, we see a whole list of issues, many of which remain from prior years. But this year is different, as we have had a list topped by issues such as the suggestion that television spectrum be reallotted for wireless uses and the radio performance royalty, that could fundamentally affect the broadcast business.  The new administration at the FCC is only beginning to get down to business, having filling most of the decision-making positions at the Commission.  Thus far, its attention has been focused on broadband, working diligently to complete a report to Congress on plans for implementation of a national broadband plan, a report that is required to be issued in February.  But, from what little we have seen from the new Commission and its employees, there seems to be a willingness to reexamine many of the fundamental tenants of broadcasting.  And Congress is not shy about offering its own opinions on how to make broadcasting "better."  This willingness to reexamine some of the most fundamental tenets of broadcasting should make this a most interesting, and potentially frightening, year. Some of the issues to likely be facing television, radio and the broadcasting industry generally are set out below.

Television Issues.

In the television world, at this time last year, we were discussing the end of the digital television transition, and expressing the concern of broadcasters about the FCC’s White Spaces decision allowing unlicensed wireless devices into the television spectrum. While the White Spaces process still has not been finalized, that concern over the encroachment on the TV spectrum has taken a back seat to a far more fundamental issue of whether to repurpose large chunks of the television spectrum (if not the entire spectrum) for wireless users, while compressing television into an even smaller part of what’s left of the television band – if not migrating it altogether to multichannel providers like cable or satellite, with subscription fees for the poorest citizens being paid for from spectrum auction receipts. This proposal, while floated for years in academic circles, has in the last three months become one that is being legitimately debated in Washington, and one that television broadcasters have to take seriously, no matter how absurd it may seem at first glance. Who would have thought that just six month after the completion of the digital transition, when so much time and effort was expended to make sure that homes that receive free over-the-air television would not be adversely impacted by the digital transition, we could now be talking about abolishing free over-the-air television entirely? This cannot happen overnight, and it is a process sure to be resisted as broadcasters seek to protect their ability to roll out new digital multicast channels and their mobile platforms. But it is a real proposal which, if implemented, could fundamentally change the face of the television industry.  Watch for this debate to continue this year.

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The Radio Music Licensing Committee ("RMLC") has announced that it has entered into agreements with both ASCAP and BMI for interim royalties to be paid by commercial radio stations until final royalties are set.  These royalties will be set either through negotiation or through litigation in Federal Courts which act as a "rate court" to determine what reasonable rates will be under the antitrust decrees that govern these organizations.  As we wrote here and here, the RMLC has been involved in negotiations seeking a significant reduction in the royalties paid by radio stations for the right to make a public performance of musical compositions (or "musical works").  Both organizations have agreed to a 7% reduction in the amount currently paid by radio broadcasters, to be reflected on the invoices sent by these organizations for 2010 royalties.  According to the press release on the ASCAP agreement, the discounts are interim agreements only, and will be subject to retroactive adjustment to January 1, 2010 once final royalties are set.

This money goes to composers of music, as contrasted to the controversial SoundExchange royalties that pay the performers of music (currently only in the digital world, but proposed in legislation pending before Congress to be extended to over-the-air broadcasting).   ASCAP and BMI are essentially collection agencies (called Performing Rights Organizations or PROs) for large groups of songwriters.  By signing up and paying royalties to these organizations and to SESAC, a smaller but still significant PRO, broadcasters obtain a "blanket license" to play all the songs covered by songwriters who are members of these organizations - which are essentially all of the songwriters whose songs are likely to be played by radio.  The existence of these organizations save radio stations from having to negotiate independently with the thousands of songwriters and publishing companies that own the copyrights to these compositions - an arduous task that might be almost impossible without the existence of the PROs. 

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Radio broadcasters all over the country have been receiving letters about music royalties – from ASCAP, BMI and the Radio Music Licensing Committee (RMLC).  The ASCAP and BMI letters are asking for the broadcaster to sign a letter committing themselves to some royalty obligation for 2010.  They pose three options to the broadcaster – sign up to pay royalties for 2010, join the RMLC negotiating group, or notify ASCAP and BMI that they will be negotiating their own royalties.  The RMLC letter suggests that the broadcaster join in their negotiating group to help to establish a new royalty structure with these entities.  What does it all mean, and what should a broadcaster do? 

These letters are all triggered because the rates for royalties that commercial radio broadcasters pay to ASCAP and BMI for the musical compositions that they play on the air expire at the end of 2009. (Noncommercial broadcasters have a special rate set under the review of the Copyright Royalty Board, and thus are not subject to these deals)  RMLC represents most radio broadcasters in their dealings with the performing rights organizations (or "PROs" as ASCAP and BMI, and SESAC, are called). We wrote about the many issues that have held up an extension of the current agreements between radio broadcasters and ASCAP and BMI here. If there is no new deal covering these royalties in place by the end of the year, broadcasters who continue to play these compositions (which will be virtually all commercial radio operators) will need to determine how to pay royalties when the current royalty agreements expire.  The current agreements do not have any automatic extensions in them, as the antitrust consent decrees that bind these companies call for royalty deals of no more than 5 years in duration. Thus, as the old agreements are about to expire, and no new agreements are in place, the flurry of letters has followed to put broadcasters on notice of the current situation.  Of course, none of these letters is entirely clear in spelling out all the issues involved.  So we'll try to explain some of those issues below. 

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On September 25, 2009, David Oxenford moderated a panel at the NAB Radio Show in Philadelphia called "The Day the Music Died - Streaming, The Performance Tax and Other Copyright Issues."  In addition to the music royalties involved in webcasting and the possible broadcast performance royalty, the panel discussed other copyright issues, including the state of the current negotiations between the Radio Music Licensing Committee and ASCAP and BMI over composer's royalties for broadcast stations, and issues about licensing music for podcast and mobile applications.  Panelists included Bill Velez, head of the Radio Music Licensing Committee, which is conducting the ASCAP and BMI negotiations, and Jack Donlevie, the General Counsel of Entercom, who was involved in the negotiations of the Broadcaster-SoundExchange settlement on Internet Radio Royalties.

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The question of when a digital music service is “interactive” and therefore requires direct negotiations with a copyright holder in order to secure permission to use a sound recording is a difficult one that has been debated since the Digital Millennium Copyright Act was adopted in 1998. In a decision of the Second Circuit Court of Appeals released today, upholding a jury decision in 2007, the Court concluded that Yahoo’s Launchcast service (now operated by CBS) is not so “interactive” as to take it outside of the statutory royalty despite the fact that the service does customize its music offerings to the tastes of individual listeners. To reach its decision, the Court went through an extensive analysis of both the history of the sound recording copyright and of the details of the criteria used by Launchcast to select music for a stream sent to a specific user. By determining that the service is not interactive, the service need only pay the SoundExchange statutory royalty to secure permission to use all legally recorded and publicly released music.  Had the service been found to be interactive within the meaning of the statute, the service would have to negotiate with each sound recording copyright holder for each and every song that it wanted to use on its service to get specific rights to use each song - potentially resulting in hundreds of negotiations and undoubtedly higher fees than those paid under the statutory license.

The issue in the case turned on an analysis of the DMCA’s definition of an interactive service.  The statute defines an interactive service as one where a user can select a specific song or “receive a transmission of a program specially created for the recipient.” It is clear that Launchcast did not allow a user to request and hear a specific song.  But, by specifying a genre of music, and by specifying favorite artists and songs and rating other songs played by the service, a listener could influence the music that was provided to it.  Was this ability to influence the music sufficient to make it an “interactive service” and thus take it out of the coverage of the statutory royalty?

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The US Court of Appeals for the District of Columbia Circuit today issued a decision basically upholding the royalty rates set by the Copyright Royalty Board due under Section 114 of the Copyright Act by satellite radio operators for the public performance of sound recordings.  The CRB decision, setting royalties for the years of 2007 to 2012, established rates that grew from 6% to 8% over the six year term. As we explained in our post, here, the Board looked at the the public interest factors set out by Section 801(b) of the Copyright Act, factors not applicable to Internet Radio royalties, in reaching the determination these royalties.  Particularly important was the factor which took into account the potential impact of the royalties on the stability of the businesses that would be subject to the royalty, resulting in a reduction of the perceived fair market value of the royalty from what the board determined to be about 13% of gross revenues to the 6-8% final royalty set by the Board.  The Court upheld the Board's reasoning, rejecting SoundExchange's challenge to the decision, though the Court did remand the case to the Board to decide the proper allocation of the royalty to the ephemeral rights covered by Section 112 of the Copyright Act.

What was perhaps most interesting about the Court's decision was the concurring opinion of one of the three Judges, who stated that the fact that the Board's judges were appointed by the Librarian of Congress, and not by the President, "raises a serious constitutional issue."   This was the same issue raised by Royalty Logic in challenging the constitutionality of the CRB in the webcasting proceeding (see our posts here and here).  The Judge concurred in the majority decision as none of the parties to the satellite radio case raised the constitutional issue, but this very question was squarely raised in the webcasting proceeding, and thus may well be resolved in the decision on that appeal.

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As you may have heard, Facebook is going to allow users to register names in their Facebook URL, replacing the former random ID numbers.  This policy, announced in a Facebook blog post earlier this week will become effective on a first come, first served basis beginning Saturday, June 13 at 12:01 am.  This new policy creates the danger that Facebook users may try to register as their user name words or phrases that could infringe on a company name, trademarked slogan, or even a broadcast station's call signs.  To prevent others from using your company's name, call sign or other trademark, Facebook has created a form allowing rights holders to register their marks ahead of time.  To protect your intellectual property in the easiest manner possible (without the need for costly infringement lawsuits of other actions), companies should take advantage of the procedures outlined by Facebook itself, and register with the company.

A couple of caveats:  

1. User names have to be at least five alphanumeric characters.  This means that four letter call signs cannot be used as user names unless used with a suffix or frequency.  Since periods are the only punctuation allowed, acceptable user names might be WXYZ.FM, or FM98.1, for example. 
2. In order to prevent someone from using your trademark in advance, it appears that it must be a registered mark.  However, a separate form appears to allow intellectual property rights holders to reclaim a user name, even if it is not a registered trademark.  Thus, if your company name, mark or call sign is unregistered, you can either register it as your own Facebook user name or wait until someone else does that and complain after the fact.  You do not need to be a Facebook user to submit the intellectual property rights forms described above.

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In the last 5 days, the US Court of Appeals in Washington, DC has held two oral arguments on appeals from decisions of the Copyright Royalty Board - one from the Board's decision on Internet Radio Royalties and the other on the royalties applicable to satellite radio.  The decisions were different in that, in the Internet Radio decision, the appellants (including the group known as the "Small Commercial Webcasters" that I represented in the case) challenged the Board's decision, arguing that the rates that were arrived at were too high.  In contrast, at the second argument, SoundExchange was the appellant, arguing that the Board's decision set royalties for satellite radio  that were too low.  But, in both arguments, an overriding question was whether the Judges on the CRB were constitutionally appointed and thus whether any decisions of the Board had any validity.  While the question was expected and specifically raised in the webcasting proceeding (see our post here when that issue was first raised), the discussion at the satellite radio argument was somewhat of a surprise, as the issue had not been raised by either party, and the Appeals Court judges were not even the same judges who had heard the Internet radio argument.  Yet one of the Judges raised the issue, unprompted by any party, by asking if the Copyright Royalty Judges were properly appointed and indirectly asking if their decision would have any validity if the constitutional issue was found to exist.

Will the Court decide the constitutionality issue, and what would it mean?  No one knows for sure.  One of the issues raised by the Court in the Internet radio case was whether the issue had been raised in a timely fashion.  In both cases, the possibility of requiring additional briefing on the issue was also raised by the Court, though no such briefing has been ordered - yet.  Even if the Court was to find that the Board was not properly appointed, there are questions as to whether the existing decisions should nevertheless be allowed to stand, while blocking new decisions until a new appointment scheme is found.  Alternatively, Congress might have to intervene to resolve the whole issue and, if it was to do that, would Congress simply ratify the current decision, or would there be new considerations that would affect any Congressional resolution?  The issue raises many questions, and we'll just have to wait to see what the resolution will be.

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The term "Super Bowl" is a trademark owned by the National Football League, and it is protected very aggressively. What does that mean?  The biggest no-no of all is to use the term "Super Bowl" in any advertising or promotional announcements that are not sanctioned by the NFL.  This prohibition includes sweepstakes and contests as well.  Advertisers pay high licensing fees to the NFL for the right to use the term "Super Bowl" in their advertising.  You will almost certainly hear from the NFL's attorneys if you use the term in advertising without explicit authorization from the NFL.  So no "Super Bowl sales" in your ads - and don't refer to your station as the "Super Bowl Authority" in your promotional statements.  These restrictions explain why you often hear it referred to as "The Big Game."  But this restriction does not mean you cannot utter the words on air under any circumstances. 

There is a court-created trademark concept known as "nominative fair use."  Under this concept, trademarks can be used when necessary under certain conditions.  First, the mark must not be readily identifiable in any other way.  For example, you do not have to refer to the Pittsburgh Steelers as "the professional football team from Pittsburgh."  Secondly, you can only use the mark to the extent necessary to identify it.  Repeated gratuitous use would cross the line - for instance if you repeatedly state that your station is "the place to hear everything about the Super Bowl."  And third, you cannot do anything to suggest a false connection or sponsorship arrangement.   What does this really mean?  It means that DJs can use the term "Super Bowl" editorially in discussing the game on air (but not in a way to imply that the station has a connection to the game, or not in a repeated way analogous to a station slogan or positioning statement).  It means that news stories about the game can refer to the "Super Bowl."  The NFL will not consider such uses to be trademark infringement so long as the use is reasonable.  In fact, from an editorial perspective, the NFL appreciates some hype about the game to attract viewers and general consumer interest in the game.

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On October 3, 2008, David Oxenford moderated a panel at the Digital Music Forum West in Los Angeles.  The panel, titled Digital Rights and Clearances, discussed what rights were necessary for the use of music by online digital services, in movie and video production, and for other purposes.  Panelist included,  Kevin Arnold, CEO, IODA; Richard Conlon, VP, New Media & Strategic Development, BMI; Maurice Russell, VP, Bus. & Licensing, Harry Fox Agency; Patrick Sullivan, President & CEO, RightsFlow LLC; Les Watkins, SVP, Business Affairs, Music Reports; Bob Kohn, Co-Founder, Chairman & CEO, RoyaltyShare, Inc.
 

A video of this panel can be viewed here.

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There's a new top-level domain name ("TLD") on the block, and broadcasters and other media companies will want to protect URLs that include their call signs, unique slogans and positioning statements or other registered marks or names.  The new TLD will be ".tel."  Unlike .com, .net, .org, and other current TLDs that link to websites, the new .tel TLD is designed specifically for access by mobile devices such as the Blackberry and iPhone and will access to the contact information of the holder of the .tel URL without the need for a standard website.  The theory behind the .tel TLD is to allow instant access to contact information without having to access a registrant's website.  When contact information is accessed via mobile devices, the telephone numbers will appear as "hot links" that will dial those numbers upon touch or selection.  Of course, links to websites may also be provided, but the primary purpose of the TLD is to provide a global contact directory without the need for the user to have Outlook or other address books or for the registrant to have a website.

Beginning December 3, 2008, anyone with a registered trademark or service mark can register a .tel domain name using that mark for a cost estimated to be in the $500 range.  This so-called "sunrise" period will last for two months.  Beginning February 3, 2009, there will be a so-called "landrush" period allowing anyone to register any unregistered .tel domain names, including generic or descriptive marks or names, such as radio.tel or cable.tel, on a first-come, first-served basis.  (Bad faith use of a third party's trademark will be subject to cancellation under existing domain name dispute procedures.)  The "landrush" period will last until March 23, 2009, after which the .tel TLD will be generally available to anyone at a much reduced fee, currently estimated to be as low as $1.25 per month.

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The Stephen Colbert Christmas Special begins with Colbert sitting at the piano, writing new Christmas songs.  Why?  He explains that, while he likes all of the old Christmas songs well enough, he'd only get royalties if he wrote the songs, so he's writing his own.  In a few sentences, Colbert explains the system of broadcast royalties in the United States, and the source of the dispute over the broadcast performance royalty that took up much committee time in the last Congress, and is bound to return in the next Congress in 2009.  As Colbert explains, in the US, the composers get paid when their music is played on a broadcast station. These payments come from the the royalties that broadcast stations pay to ASCAP, BMI and SESAC, the performing rights organizations or "PROs" that represent the composers or the music publishing companies that hold the copyrights to those songs.   But, as Colbert points out, the performers do not get paid when they sing the song on the air.

We've written about the controversy about whether or not performers should get a royalty when a song that they perform but did not write, is played on the air.  But Colbert seems to have solved the problem about the performer not getting royalties when their songs are played on the air - simply by writing his own songs. And maybe we'll be singing these songs at future Christmas parties, paying Colbert royalties, and at the same time explaining broadcast performance royalties to future generations.

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We’ve previously written about the value of music in connection with the royalties to be paid by Internet Radio and the performance royalty (or "performance tax" as it's labeled by the NAB) proposed for broadcasters. One of the questions that has always been raised in any debate about royalties, and one often dismissed by the record industry, is to what extent is there a promotional value of having music played on the radio or streamed by a webcaster.  In discussions of the broadcast performance royalty, record company representatives have suggested that, whether or not there is promotional value of the broadcast of music, that should have no impact on whether the royalty is paid. Instead, argue the record companies, the creator of music deserves to be paid whether or not there is some promotional value. The analogy is often made to sports teams – that the teams get promotional value by having their games broadcast but are nevertheless paid by stations for the rights to such games. The argument is that music should be no different. That contention, that the artist deserves to be paid whether or not there is promotional value may be tested in connection with what was once thought to be an unlikely source of promotional value for music – the video game Guitar Hero.

Guitar Hero, in its various versions released over the last few years, has proven to be a very effective tool for the promotion of music – with various classic rock bands experiencing significant sales growth whenever their songs are featured on a new version of the game. The use of a sound recording in a video game is not subject to any sort of statutory royalty – the game maker must receive a license negotiated with the copyright holder of the recording – usually the record company.  In previous editions of the game, Guitar Hero has paid for music rights. However, now that the game has proved its value in promoting the sale of music, the head of Activision, the company that owns the game, has suggested in a Wall Street Journal interview that it should be the record companies that are paying him to include the music in the game – and no doubt many artists would gladly do so for the promotional value they realize from the game. 

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Today, the National Music Publishers Association ("NMPA"), DiMA, the RIAA and other music publishing groups issued a press release announcing a settlement of certain aspects of the current Copyright Royalty Board proceeding to determine the royalties due under Section 115 of the Copyright Act for the mechanical royalty for the reproduction and distribution of the musical work (i.e. the composition - the words and music of a song).  According to the Press Release issued by the parties, this agreement covers interactive streaming and limited-time downloads, setting a royalty of 10.5% of revenue, less any amounts due for performance royalties (to ASCAP, BMI and SESAC, which also reimburse composers of music).  While many press reports (at least some of which have already been pulled) have concluded that this is a settlement of the Internet Radio royalties proceeding - that is wrong.  The Internet radio royalty proceeding involves Section 114, not Section 115, of the Copyright Act.  Section 114 deals with a royalty paid to the performers, not the composers.  Section 114 compensates performers and the copyright holders in the performance for the public performance of their works, not for the mechanical royalty for reproduction and distribution covered by Section 115.  And Section 114 covers non-interactive streaming - where users cannot dictate the songs that they want to hear - unlike the services, on-demand streams and limited time downloads, involved in this settlement which allow users to select the songs that they want to hear.  So don't believe what you read - the Internet radio royalties are still very much a subject of dispute, and services like Pandora are not yet saved by any sort of settlement. 

According to the press release, the one benefit to Internet radio under this agreement is that the parties conclude that there is no royalty due to the music publishers for any copies made in the transmission of non-interactive streaming.  The Copyright Office recently began a proceeding to ask if such royalties were due (about which we wrote here).  So, even  were the Copyright Office to determine that there was a Digital Phonorecord Delivery (a "DPD") made during the Internet radio streaming process, at least for the length of this agreement (assuming that it is approved by the Copyright Royalty Board), no royalty will be assessed.  We will write more about this settlement once we have seen the full terms - but wanted to post this notice to alert readers that, contrary to press reports, the Internet Radio proceeding has not been settled. 

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The Copyright Office today issued an Order extending the dates for comments on the Notice of Proposed Rulemaking to determine if, in addition to royalties to ASCAP, BMI and SESAC for the public performance of a musical composition, a royalty is also be due for reproductions of the composition made by real-time webcasting such as Internet radio.  Comments are now due on Thursday, August 28, and Replies on Monday, September 15.  This proceeding, about which we wrote here, is to determine if the statutory royalty of Section 115, dealing with the creation of Digital Phonographic Deliveries ("DPD") is implicated by the RAM and buffer copies made by real-time streaming.  The Order also announces that the Copyright Office will hold a hearing on the issue on September 19.

The Order states that the principal reason for the extension was the very recent decision of the US Court of Appeals for the Second Circuit in the case Cartoon Network v. CSC Holdings, finding that Cablevision's proposal for a "remote DVR," providing the same services as a DVR but located at the cable headend, did not infringe on the program producers' copyrights.  That decision addressed many of the same issues raised by the Copyright Office in its NPRM as to whether "copies" are made, for purposes of Copyright Laws, by RAM and buffer copies.  The Second Circuit essentially determined that no copies are made as there is no "fixation" of copies in the RAM and buffers, essentially the opposite conclusion reached by the Copyright Office in its NPRM in this proceeding.  If fixed copies are made, then a Copyright holder has the right to receive royalties for the reproduction of its copyrighted work.  The seemingly contradictory conclusions of the Second Circuit and the Copyright Office demonstrate the complexity of issues in Copyright law, and we will no doubt see many further proceedings before this issue is finally resolved.

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Broadcasters and other digital media companies have recently been focused on the royalties that are to be charged by the record labels for public performance of a sound recording in a digital transmission (under the Section 114 compulsory license administered by SoundExchange).  In a Notice of Proposed Rulemaking issued this week, the Copyright Office tentatively concludes that there could be yet another royalty due for streaming - a royalty to be paid to music publishers for the reproductions of the musical compositions being made in the streaming process under Section 115 of the Copyright Act.  This notice was released just as the Copyright Royalty Board is concluding its proceeding to determine the rates that are to be paid for the Section 115 royalty.  While there have been reports of a settlement of some portions of that proceeding, the details of any settlement is not public, so whether it even contemplated noninteractive streaming as part of the agreement is unknown.

How did the Copyright Office reach its tentative conclusion?  First, some background.  The Office for years has been struggling with the question of just what the section 115 royalty covered.  Traditionally, the royalty was paid by record companies to the music publishers for rights to use the compositions in the pressing of records.  This was referred to as the "mechanical royalty" paid for the rights to reproduce and distribute the composition used in a making copies of a sound recording (a record, tape or CD).  These copies were referred to as "phonorecords."  However, in the digital world, things get more complicated, as there is not necessarily a tangible copy being made when there is a reproduction of a sound recording.  Thus, Congress came up with the concept of a Digital Phonorecord Delivery (a "DPD") as essentially the equivalent of the tangible phonorecord.  But just what is a DPD?

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Once again, the extension of the sound recording performance royalty to broadcasters has become a hot topic in Washington. The subcommittee on Courts, the Internet and Intellectual Property of the  House Judiciary Committee yesterday approved the bill introduced by Congressman Berman (about which we first reported here).  That bill would include broadcasters in the Section 114 sound recoding royalty currently applicable to digital music users including Internet radio, satellite radio and cable radio. Under the bill, the Copyright Royalty Board would be charged with the responsibility of determining what a royalty would be using the "willing buyer, willing seller" standard. Following this subcommittee approval, the bill would next be considered by the full committee. To become law, the Committee and the full House of Representatives would have to approve it, and similar legislation would need to be enacted by the Senate. As the NAB has garnered the support of a majority of the members of the House on a non-binding resolution opposing the imposition of the royalty on broadcasters, and as there is not much time remaining in the legislative session before the election and the end of this Congress, the whole process may well have to start fresh in 2009 (bills have to be reintroduced after the end of each two-year Congressional session). Yet, with all of the controversy over the issue in recent weeks, it appears certain that the issue will arise again, so it is important to look at some of the recent action.

Two weeks ago, the House subcommittee held a hearing on the issue. Prior to the hearing, the MusicFirst Coalition (principally supported by the RIAA and the affiliated record companies as 50% of any royalty goes to the copyright holders who are usually the labels) had Nancy Sinatra and the Nitty Gritty Dirt Band making the rounds on Capitol Hill in support of the royalty. These appearances follow the precedent set in earlier Capitol Hill proceedings, where the Coalition has brought in niche or oldies artists to address Congress - not major popular current acts. The artists who have testified (who have included Judy Collins, Sam Moore, Lyle Lovett, and Alice Peacock) have argued that the additional income that they would receive from a performance royalty would supplement their incomes which, in some cases, has either never been great or has declined as the demand or ability to tour has declined. The argument is always made that the royalty will encourage musicians to produce their music – though it is rarely if ever claimed that music wouldn’t be made if the royalty is not adopted, as songs have been written and sung for time immemorial, well before any royalty existed, merely for the pleasure or to fulfill the need for self-expression. The question is not one of ensuring the availability of music, but instead it is one about who should get how much of whatever money is made, directly or indirectly, from the use of that music. 

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A decision by a US District Court in New York was just released, setting the rates to be paid to ASCAP for the use of their composers' music by Yahoo!, AOL and Real Networks.  The decision set the ASCAP rates at 2.5% of the revenues that were received by these services in connection with the music portions of their websites.  These rates were set by the Court, acting as a rate court under the antitrust consent decree that was originally imposed on ASCAP in 1941.  Under the Consent Decree, if a new service and ASCAP cannot voluntarily agree to a rate for the use of the compositions represented by ASCAP, the rates will be set by the rate court.  The Court explained that they used a "willing buyer, willing seller" model to determine the rates that parties would have negotiated in a marketplace transaction  - essentially the same standard used by the Copyright Royalty Board in setting the rates to be paid to SoundExchange for the use of sound recordings by non-interactive webcasters (see our post here for details of the CRB decision).  The ASCAP decision, if nothing else, is interesting for the contrasts between many of the underlying assumptions of the Court in this rate-setting proceeding and the assumptions used by the Copyright Royalty Board in setting sound recording royalty rates.

First, some basics on this decision.  ASCAP represents the composers of music (as do BMI and SESAC) in connection with the public performance of any composition.  This decision covered all performances of music by these services - not just Internet radio type services.  Thus, on-demand streams (where a listener can pick the music that he or she wants to hear), music videos, music in user-generated content, karaoke type uses, and music in the background of news or other video programming, are all covered by the rate set in this decision.  Note that the decision does not cover downloads, presumably based on a prior court decision that concluded that downloads do not involve a public performance (see our post here).  In contrast, the CRB decision covered the use of the "sound recording" - the song as actually recorded by a particular artist - and covers only "non-interactive services," essentially Internet radio services where users cannot pick the music that they will be hearing.

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The Senate Commerce Committee held a hearing this week on the Future of the Internet, dealing principally with the issue of net neutrality - whether Internet Service Providers treat all content carried through their facilities equally.  This issue principally involves questions of whether ISPs can charge big bandwidth users for their content to be transmitted through the ISPs facilities, or to be transmitted at preferred speeds.  The testimony of Chairman Martin at the hearing raised several issues - issues both about what he said and what some reports perceived him to say.  Some reports had him saying that the FCC did not need to regulate indecency on the Internet - though I never heard that question asked. But he did say that he did not have trouble with ISPs blocking illegal content such as child pornography and illegal file-sharing, which raises the question of whether some might look to ISPs to become copyright police - blocking access to material that does not have copyright clearances.  And, with the hearing being held on the same day as a media company purchased a company that can identify copyrighted material by reviewing that content when transmitted on the Internet - is that possibility coming closer to being a reality?

In recent weeks, there have been several trade press reports about government regulation of indecency on the Internet.  I've seen at least two trade press reports on Chairman Martin's testimony before the Commerce Committee, claiming that he said that no government regulation of indecency on the Internet was necessary.  I did not hear any reference to indecency regulation in his testimony (a written version of his statement is available here, and you can watch the entire testimony, here).  Instead, that testimony was about whether Congress needed to pass laws to allow the Commission to enforce its net neutrality principles.  Nonetheless, the press seems to believe that Internet indecency is an issue which might be targeted by regulation.  A recent study finding that the majority of Americans think that FCC regulation of indecency should be extended to the Internet has also been cited in several reports.  However, despite the seeming interest in regulation of the Internet, there are serious constitutional concerns about any such regulation.  In fact, as we wrote here, numerous attempts to regulate indecency on the Internet have been overturned by the Courts on constitutional grounds, as the government could make no showing that the regulations were the least restrictive means for restricting access to adult content.

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Last week, the Copyright Royalty Board published an order seeking comments on a proposed settlement establishing the royalties for "Business Establishment Services."  Essentially, this is the royalty paid by a service which digitally delivers music to businesses to be played in stores, restaurants, retail establishments, offices and similar establishments (sometimes referred to as "background" or "elevator" music, though it comes in many formats and flavors, and may sometime include the rebroadcast of programming produced for other digital services).  The proposed settlement would essentially carry the current rates forward for the period 2009-2013.  These rates require the payment of 10% of a services revenue (essentially what they are paid by the businesses for the delivery of the music) with a minimum annual payment of $10,000.

Some might wonder how a royalty of 10% royalty can be justified - and why it shouldn't set some sort of precedent for the Internet radio services about which we have written so much here.  Once again, as we've written before, the Digital Millennium Copyright Act sets different standards for different kinds of music use.  For many consumer-oriented services (like satellite radio, digital cable radio and Internet radio), there are different standards used to determine the royalty rate.  For Business Establishment Services, it's not the standard that is different - it's the royalty itself.  Under the DMCA, there is no performance royalty paid either by the business or the service provider.  Instead, under the statute, the royalty is paid only for the "ephemeral copies" - those transitory copies made in the digital transmission process.  That is different than the royalty for all of the other digital services, where fees are paid for both the performance (under Section 114 of the Copyright Act) and the ephemeral copies (under Section 112).

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This week, the Copyright Royalty Board issued an Order denying a request by SoundExchange for rehearing of certain aspects of the decision released last month setting the royalties for satellite radio - XM and Sirius.  These are the royalties for the use of sound recordings by these services on their digital systems.  The decision, which set royalties at 6 to 8% of revenues of these services, and the denial of the rehearing motion, provide examples of how the CRB applies the 801(b) standard of the Copyright Act.  In setting royalties, that standard assesses not only the economic value of the sound recording, but also the public interest in the wide dissemination of the copyrighted material and the impact of the royalty on the service using the music.  The satellite radio decision sets a royalty far lower than that assessed on Internet radio - where the royalty is set using a "willing buyer, willing seller" standard looking only at the perceived economic value of the sound recording.  That willing buyer, willing seller standard is also proposed for broadcast radio in the recently introduced performance royalty bills now pending before Congress (see our summary here) - so it could be expected that any royalty set using that standard would be higher than that set for satellite radio. 

The initial Copyright Royalty Board decision, the full text of which is available here, first made a determination of how to compute the royalty.  While both the satellite radio companies and SoundExchange initially suggested a percentage of revenue royalty given that satellite radio can't count specific listeners, the parties later amended their proposals (after the Internet radio decision) to include a computation based on the frequency of a song's play, to try to more closely approximate the Internet radio performance-based model (about which we wrote here).  In addition to the suggestion that this metric more closely approximated that used in the Internet radio decision, the satellite radio companies suggested that a metric based on the songs played would give them the opportunity to adjust their use of music to reduce their royalty obligation.  The satellite companies suggested that, if the royalty was too high, they could reduce the number of different songs that they played.  While not specifically referenced in the decision, it is possible that they also considered the possibility of getting waivers from artists to encourage playing particular songs, which could further reduce a royalty based on a per song computation.  The Board declined to provide that option, finding that the percentage of revenue option best took into account the business of the companies.  The Board also suggested that it doubted that satellite radio really had the ability to lessen the use of music in reaction to a high royalty rate.  (The Board does not discuss the possibility of royalty waivers, which are essentially worth nothing in a situation where the royalties are based on a percentage of a service's entire revenue). 

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The Copyright Royalty Board today announced that it is taking comments on a settlement to establish royalties for the use of sound recordings to be paid by companies that are planning to provide audio services to be delivered with satellite and cable programming.  In contrast to the "preexisting subscription services" who were in existence at the time of the adoption of the Digital Millennium Copyright Act in 1998, who recently reached a settlement agreeing to pay 7 to 7.5% of gross revenues for royalties (see our post, here), this settlement is with "New Subscription Services" which did not offer these kinds of subscription services in 1998.  This settlement does not apply to subscription services provided through the Internet.  The covered "new subscription services" have agreed to pay the greater of 15% of revenue or a per subscriber fee that will escalate over the 5 years that the agreement is in effect.  Given that these new services will be providing essentially the same service as the Preexisting Services, why the difference in rate?  Perhaps, it is because the difference in the law.

As we wrote earlier this week, the Preexisting Satellite Service pay royalties set based on the standards of Section 801(b) of the Copyright Act, which takes into account a number of factors including the interest of the public in getting access to copyrighted material, the relative contributions and financial risks of the parties in distributing the copyrighted material, the stability of the industry, and the right of the copyright holder to get a fair return on their intellectual property.  By contrast, the new subscription services who entered into the settlement just announced, who weren't around at the time of the drafting of the DMCA, use the "willing buyer, willing seller" standard also used for Internet radio.  And, because of the applicability of the willing buyer willing seller standard and the apparent uncertainties of the litigation process using it, these new services apparently decided to agree to a royalty double that of the preexisting services, even though they provide essentially the same service.

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The Copyright Royalty Board has asked for comments on proposed royalty rates for the use of sound recordings by "Preexisting Subscription Services."  In adopting the Digital Millennium Copyright Act, Congress divided digital music services into various categories, each of which are assessed different royalties for the use of sound recordings. Preexisting subscription services were those digital subscription music services in existence as of the date of the adoption of the DMCA. Basically, these were the digital cable music services that were in operation in 1997.  In the proceeding now being resolved by a settlement between Music Choice (the one remaining service that was in existence in 1997) and SoundExchange, the companies propose a royalty of 7.25% of gross revenues of the service for the period 2008-2011, and 7.5% of gross revenues for 2012. A $100,000 minimum payment is due at the beginning of each year.  Comments on the settlement are due on November 30.  As set forth below, this settlement sets the stage for the upcoming decision on satellite radio royalty rates - as these two services are both governed by a royalty-setting standard that is different than that used for Internet radio.

The Copyright Royalty Board announced the proceeding to set the royalties for Preexisting Subscription Services at the same time as they initiated the proceeding to set new royalties for Satellite Radio Services - which were also considered to be preexisting services at the time of the adoption of the DMCA - not because they were actually operating, but as their services had been announced and construction permits to construct the satellites had been issued by the FCC.  No settlement has been reached with the satellite radio services (except as to limited "new subscription service" that XM and Sirius provide in conjunction with cable and satellite television packages where, according to the CRB website, a settlement has been reached), and a hearing was held earlier this year to take evidence on what the rates for those services should be.  As we've written before, SoundExchange has requested royalties that would reach 23% of a satellite radio operator's gross revenues.  The satellite radio case has been completed, briefs filed, and oral arguments were held in October.  A decision in the case is expected before the end of the year.

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On Friday, in a number of publications, a story was carried questioning the claims made by the NAB that the broadcast performance royalty being sought by the music industry could amount to 10-35% of the revenue of the radio industry.  A post on the Wired Listening Post blog seemed to have started the story.  This is the royalty which would be paid to the copyright holders in the sound recording - and would be in addition to the royalties paid to ASCAP, BMI and SESAC for the composers of music (see our post on the topic, here and here) .  Wired quoted a spokesman for the Music First Coalition (the music industry coalition seeking the performance royalty) claiming that the NAB's claims are overstated - and that any broadcast royalty to be paid to sound recording copyright holders would be similar to those paid in Europe for the use of sound recordings, and similar to the amounts currently paid to ASCAP, BMI and SESAC for the use of the musical compositions, in the range of 3-5% of revenues. Only the Radio and Internet Newsletter seemed to question this statement.  From looking at the history of SoundExchange's claims made in other royalty proceedings, the questions raised by RAIN seem entirely justified.  SoundExchange has consistently argued in connection with all of the other on-going royalty proceedings that the sound recording royalty is far more valuable than the composition royalty - asking for a royalty over 6 times the amount of the composition royalty - 30% of gross revenues.  How can Music First now contend that the royalty will be only a few percent of revenue, when their representaives have consistently requested royalties many multiples of that amount?

At the House Judiciary Committee hearing on the broadcast performance royalty (see our post, here), when committee members asked how much the royalty would be, Marybeth Peters, the Register of Copyrights, suggested that it could a simple matter of applying the "willing buyer, willing seller" criteria of Section 114 of the Copyright Act to broadcasting.  That standard is exactly the same one that led to the current Internet radio royalties which have been so controversial (see our coverage here).  In that proceeding, SoundExchange had asked for royalties of the greater of the per performance royalty that the Copyright Royalty Board imposed or 30% of gross revenue.  While the Copyright Royalty Board did not adopt a percentage of revenue royalty because they feared that it was too difficult to compute for services that had multiple revenue streams, most observers have estimated that the pe performance royalty exceeds 100% of revenue of the small commercial webcasters, and are close to 100% of revenue even for the Internet radio services provided by the major Internet content companies.  In making their offer of a "special deal" to Small Commercial Webcasters on May 23, with royalties between 10 and 12% of gross revenue, SoundExchange specifically stated that it thought that the 10-12% rate was "a below-market rate to subsidize small webcasters ... to help small operators get a stronger foothold" in developing their businesses.  While 10% is suggested to be a "below market" rate in an immature industry still struggling to find a business model, the Music First Coalition now suggests that a royalty less than half that amount is what they would request for broadcast radio.

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If you are a broadcaster, you know that it's not going to be a good day when you walk into a hearing on the possible extension of the performance royalty in sound recordings to over-the-air broadcasters and see buttons saying "I Support a Performance Right NOW" on the lapels of every other witness on the panel - including the Register of Copyrights, Marybeth Peters.  But that was the scene in Washington, as the House Judiciary Committee's subcommittee on Courts, the Internet and Intellectual Property held a hearing as to whether the right to collect a royalty for the public performance of a sound recording (the actual song as sung by a particular artist, as opposed to the underlying musical composition) should be paid by broadcasters.  Broadcasters in the United States have paid only a royalty on the public performance of the composition (to ASCAP, BMI and SESAC), and have never paid a royalty for the public performance of the sound recording.  The lack of a sound recording royalty has always been justified in the past on the theory that the artists and copyright holders in the sound recording benefit more than composers through the airplay of the sound recording, as they receive the bulk of the proceeds from CD sales, and the performers benefit from the promotion of live performances.  As they benefit from the promotion provided by the airplay of the song, there is no need for any sort of performance royalty.  As the music and radio businesses have both thrived in the United States - more so than anywhere else in the world - it seemed that this arrangement was mutually beneficial.

But, in recent years, the consensus over this mutually beneficial arrangement seems to have broken down.  Starting in 1995, a performance right in sound recordings has been imposed on digital services, including the royalty on Internet radio which has recently been so controversial (and about which we have written so much, here).  And, with the recent downturn in the record companies' business, additional sources of revenue are being sought - thus the RIAA and SoundExchange, the collective that receives sound recording performance royalties, have started a Congressional push to require the collection of royalties from over-the-air radio.  And that push was reflected in the hearing held on Tuesday before a House Committee that seemed clearly to favor the imposition of this royalty on broadcasters.

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As reported in Digital Music News and other publications on Friday, Clear Channel Communications dropped its waiver of music royalties from its on-line agreement signed by musicians submitting songs to the Company in hopes that their music would be played on the Company's radio stations.  In writing about this decision, most publications attribute the decision to the petition filed with the FCC by the Future of Music Coalition and other public interest groups arguing that the waiver requests constituted a form of payola - the giving of something of value (the waiver of the right to receive a royalty) in exchange for the playing of music.  However, on close inspection, that would appear to be a misunderstanding of the royalty, as there would seem to be no royalty that would be affected by the waiver in connection with the playing of this music by radio stations, and therefore there would be no payola over which the FCC has any jurisdiction.

According to the Future of Music petition, Clear Channel's promise to play new music was made in connection with the payola settlement that it and other companies entered into with the FCC, and was apparently contained in a side letter filed with the FCC, as it was not spelled out in the settlement agreements themselves. See our analysis of the settlement agreements, here.  The side letter promised that the Company would dedicate a certain amount of radio airplay on the Company's radio stations to new local music.  However, such play would not implicate any music royalties - so a waiver of royalties would not confer any benefit on the Company.  Broadcast stations pay no royalty for the use of a sound recording - thus the waiver that Clear Channel requested was without any value as there was no royalty to waive.  While broadcast stations do pay a royalty for the composition (the underlying words and music of a song), stations play flat fees to ASCAP and BMI that are a function of the station's market size and power - not a function of how many songs are played.  Thus, as there is no sound recording royalty and a flat fee for the composition royalty unaffected by any waivers, the waiver did not confer any benefit to the Company in connection with its broadcast operations.  Thus, there where would appear to be no payola issue over which the FCC would have any jurisdiction.

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Should artists waive their rights to performance royalties in order to get airplay on broadcast or Internet radio stations? That questions has come to the fore based on a click-through agreement that Clear Channel included on a website set up to allow independent bands to upload their music for consideration for airplay by its stations. While artist groups, including the Future of Music Coalition, condemned that action, there are always two sides to the story, as was made clear in a segment broadcast on NPR’s Morning Edition, in which I offered some comments. As set forth in that segment, artists may be perfectly willing to allow unrestricted use of a song or two in order to secure the promotional value that may result from the airplay that might be received. For the broadcaster or Internet site seeking such permission, getting all rights upfront may well be an important consideration in deciding whether or not to feature a song – especially in the digital media.

Critics of the waiver made much of the fact that the site was set up at least partially to meet Clear Channel’s informal commitment made as part of the FCC payola settlement to feature more independent music, even though that commitment was not a formal part of the settlement agreement.  (See our summary of the payola settlement, here).  Even to the extent that the informal commitments made by the big broadcasters encompassed making time available to more independent musicians, the critics ignore the fact that the companies do not need any waiver of any sound recording performance royalty in connection with the over-the-air broadcast of those songs, as there currently is no public performance right in a sound recording for over the air broadcasting (though artists and record lables are now pushing for such a royalty, see our story here). Thus, the use of the waiver was only for the digital world – which was not covered by the FCC's jurisdiction over payola promises or the promises to increase the use of independent music. So, effectively, the company is being chastised for trying to minimize their costs on giving the music even greater circulation through their digital platforms than they initially promised.

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This article is no longer available. For more information on this topic, see In Less Than 3 Weeks, Let's Provide Detailed Analysis on Fundamentally Changing the Television Industry - Comments Sought on Encouraging Internet Video in Addition to Repurposing TV Spectrum

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The battle over performance royalties for broadcast stations seems to have been officially joined. We wrote last week about the rumors of a coalition of record companies and musicians that was reportedly forming to lobby Congress to enact a performance royalty on broadcast radio for the use of sound recordings, and the NAB’s immediate reaction, writing a letter to Congress to oppose the new royalty. Now, the press reports that the pro-royalty group has responded with their own letter to every Congressman, asking that immediate action take place to impose the royalty. Two letters in one week indicate that this summer may be a hot one for broadcasters on Capitol Hill.

The royalty being discussed would be one new to broadcast radio in the United States, but one well known to non-broadcast digital music providers such as Internet radio – as it is the same royalty that has been the subject of so much controversy since the Copyright Royalty Board released its Internet radio royalty decision in early March, more than doubling between 2005 and 2010 the royalty that those stations pay for the use of sound recordings. The royalty on the use of sound recordings (the song as recorded by a particular artist) is in addition to the royalties that are paid to ASCAP, BMI and SESAC for the underlying musical composition. So, if imposed, this would be a new royalty for US terrestrial broadcasters.

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In recent years, patent issues have arisen in many areas affecting online media.  In a recent decision, the Supreme Court decided that lower Courts have more discretion to review whether a patent should be rejected for "obviousness."  To be valid, a patent must cover some degree of innovation, and should not be simply an idea that would be obvious to the normal person when looking at a particular situation.  If the claimed invention would be "obvious" to a person looking at the particular circumstances and using common sense, the Court found that a patent could be rejected.  A memo from our law firm on the details of the decision can be found, here.

As set forth in the memo, the extent to which this decision will affect existing patents and pending disputes remains to be seen.  In the on-line media world, patent issues have been arisen for many companies.  For instance, there have been patents claims asserted against companies providing on-demand digital media, pop-up billing screens, ad insertion technologies and even on-line contests.  This decision may not affect these patent claims or any of the hundreds of others that have been the subject of dispute among digital media companies.  But continuing litigation in this area should be monitored to see if developments affect any patent claims that may be asserted against technologies that your company may be employing.

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A story in the Hollywood Reporter indicates that a coalition of record companies and associations representing performing artists are preparing to initiate a Congressional lobbying effort to push for a royalty for performance rights in sound recordings that would apply to broadcasters' over-the-air transmissions, not just their Internet streams.  Broadcasters currently pay performance royalties  to ASCAP, BMI and SESAC for their over-the-air music programming - royalties that are paid to composers (or music publishing companies) for the use of the underlying musical composition.  Digital operators (satellite radio, Internet radio, digital cable radio) pay royalties for the composition and also pay royalties for the sound recording, i.e. the actual performance as recorded on a record, CD, or digital download.  The copyright for the sound recording is usually held by a record company.  The performance right in a sound recording did not exist in the United States until 1995, and still applies only to digital transmissions.  Obviously, if extended to broadcasting, this could result in huge expenses to broadcasters - amounts for which they probably have not planned.

This is not the first time that such a royalty has been mentioned.  In introducing the PERFORM Act earlier this year, Senator Feinstein of California suggested that this legislation, which makes certain changes in the digital royalty standards that apply to various services as well as to other copyright license provisions, was only a first step in clarifying royalty issues.  In statements made at the time, there were indications that she favored further legislation to adopt a sound recording performance right for broadcasters.  At last week's Future of Music Conference, David Carson, General Counsel of the Copyright Office, also spoke in favor of such a right - suggesting that if SoundExchange collected money from broadcasters they might not need to seek so much from Internet Radio companies (see our coverage of the Internet radio royalty issues, here).

 

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As we wrote on Friday, the Copyright Royalty Board released to the parties their decision setting the sound recording music royalties for Internet radio for the years 2006-2010 - and the rates will be increasing significantly (absent success on appeal or in settlement discussions). The rates and appeal process are set out in our post on Friday.  The parties have until Monday, March 5 at noon, to request that the Board keep portions of the decision that contain confidential proprietary information out of the public record. Thus, the text of the decision is not yet public. Nevertheless, many parties are asking for more specific information about the decision and its impact. Certainly, when the decision is public, everyone will want to make their own judgments. But, until that time (which should be soon as the Board was careful to avoid using any significant amount of confidential information), I offer some observations about the decision (from my vantage point as a party who represented some of the webcasters involved in the proceeding), as well as thoughts on some of the questions that I have seen posted on various discussion boards this weekend.

First, it is essential to understand exactly what this decision covers. The Board’s decision covers only non-interactive webcasters operating pursuant to the statutory license. Our memo, here, discusses the statutory licensing scheme, and what a webcasting service must do to qualify to pay the royalties due under this statutory license. Essentially, a webcaster covered by this decision is one which operates like a radio station – where no listener can dictate which artists or songs he or she will hear (some limited degree of consumer influence is permitted, but a webcaster must comply with the restrictions set out in our memo).  Also, the webcaster cannot notify their listeners when any specific song will play. The decision does cover the Internet transmissions of the over-the-air content of most broadcast stations. 

The royalties are paid to SoundExchange – a nonprofit corporation with a Board made up of representatives of artists and the record companies. The royalties go to the copyright holders in Sound Recordings and the performers on those recordings ( the copyright holder is usually the record label. Royalties are split 50/50 – and the artist royalties are further divided 45% to the featured artist and 5% to any background musicians featured on the recording). 

The decision by the Board was the result of a long proceeding – which began in 2005. A summary of the proceeding can be found in our posting, here. Satellite radio also has to pay similar royalties, as do services that provide background music to businesses ("business establishment services"). Separate proceedings are underway to determine rates for these services.

With that background – here are some more thoughts on the decision – obviously in very summary form. The Board is charged with determining the royalty rates that would be determined by a willing buyer and a willing seller in a marketplace transaction. The Board was clear in the decision that it would look simply for evidence of what such a deal would be – it would not look at policy reasons why certain groups of webcasters (including small commercial webcasters or noncommercial webcasters) should get some special rate.

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I've just returned from this year's Radio Advertising Bureau convention in Dallas.  In reflecting on the convention, and in discussing it with many who were in attendance, the consensus was that this was not your Father's RAB convention.  I was surprised by how little discussion there was of traditional radio at the conference.  The sessions weren't the typical ones about how to make the most money from selling your cluster of radio stations in combination, or how to compete against the newspaper or the Yellow Pages, or how to get the most out of your sales staff.  Instead, virtually every session talked about leveraging your digital assets.  There were discussions of using your website, streaming, podcasts, text messaging, and  audio on cell phones to increase the financial performance of broadcast stations.  There were discussions of HD Radio and some of the opportunities that service might offer if and when it starts getting consumer acceptance.  All in all, it seemed as if radio (or at least those planning the convention sessions) had received the message that the industry needs to take advantage of its ability to drive traffic to new technologies, and drive that traffic to new media sources that stations themselves create. 

In the past, there seemed to be a fear about discussing these new technologies.  It was almost as if the technologies weren't discussed, they'd go away.  But at the RAB, and at many of the conventions of the state broadcast associations that I have attended over the last year, broadcasters seemed to have decided that they need to embrace the new media.  While the old fear had been that these new media sources would cannibalize the current broadcast audience, everyone seems to now recognize that the audience is going to use these technologies no matter what - so the broadcaster might as well be the one cannibalizing its own audience.

While legal and regulatory issues do not tend to be the primary topic of discussion at the RAB Conference, as in almost any broadcast discussion, they do come up.  Here too, the discussion was digital.  For instance, in the speech by NAB President David Rehr outlining the priorities of the NAB for the year, only the effort to authorize FM translators for AM stations (which we wrote about here), was not a "digital" topic.  The other issues discussed by Mr. Rehr included pushing the FCC for final rules for digital radio, monitoring the actions of satellite radio companies XM and Sirius, and finally, the issues that arise out of the Perform Act.  The Perform Act is a copyright bill introduced in the Senate last month that would affect digital royalties for music used on the Internet, place restrictions on services promoting the promotion and sale by digital music providers of devices that disaggregate songs contained in a digital stream, and require copy protection technologies to be employed by digital music providers.  Hardly the exciting stuff that makes for an applause line in a convention speech.  While we will write more about the Perform Act in a separate posting, the major concern for broadcasters is that the sponsor, California Senator Diane Feinstein, suggested in her remarks that the performance royalty on sound recordings which now applies to satellite radio and webcasting (which we have written about many times including here), should also apply to broadcast radio.  And that is a big enough issue - one that could hit broadcasters directly in the pocketbook - that it demands the industry's attention in every forum. 

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In a recent article from the Boston Globe, an interview with the new manger of WBZ-TV in Boston stressed the importance of the stations call letters.  The article talks about the connection that the local audience had to the well-known station call letters , and how the station had suffered to some degree by de-emphasizing those call letters while using other station branding.  That story, to me, raises the question of whether stations have taken the necessary steps to protect their brand by protecting the use of their call letters.

Since 1983, the FCC has left disputes about the use of confusingly similar call letters to local courts.  Thus, if a competitor picks a set of call letters that could confuse the public about the relationship of their station to yours, you may need to sue to stop that use.  And now, when stations often keep alive formats that have been dropped by moving the formats onto Internet Radio Stations or to HD Radio subchannels, the call sign may well live on even after it has been dropped from a primary on-air station.  Thus, it needs protections other than those provided by the FCC.

In 1983, the FCC stated that stations had a sufficient interest in call letters to obtain a service mark.  A service mark gives the call letters the protection of Federal law, and may impose penalties on a competitor who tries to infringe on those call letters.  To protect that brand, the investment of a few hundred dollars to file a service mark application may well be worth it, and something that more stations should consider.

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