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Section 115 contains the following definition of a DPD (with my highlights of specific terms or phrases that the Copyright Office addresses in it NPRM in some detail):

A “digital phonorecord delivery” is each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording, regardless of whether the digital transmission is also a public performance of the sound recording or any nondramatic musical work embodied therein. A digital phonorecord delivery does not result from a real-time, non-interactive subscription transmission of a sound recording where no reproduction of the sound recording or the musical work embodied therein is made from the inception of the transmission through to its receipt by the transmission recipient in order to make the sound recording audible. 
 

From that definition, the Copyright Office in its NPRM goes through a detailed analysis of the meanings of various words and phrases in coming to the conclusion that DPDs encompass not just digital downloads but also on-demand and noninteractive streams (noninteractive streams meaning Internet radio).  The Office first concludes that there is a "delivery" when a person receives a digital transition - seemingly pretty straightforward.

Then it looks at the language that seems to exclude noninteractive streams from the definition of a DPD.  However, the Copyright Office states in its NPRM that it believes that the exclusion only applies where there is no "reproduction" of the sound recording.  The Copyright Office looked at the buffer and RAM copies necessary to make the stream audible, and determined that these were in fact reproductions.  Thus, as the exclusion covered only services that did not make reproductions, Internet radio-type services that stream their music programming to their listeners were not within that exclusion.  .

The Office also looked to determine if these buffer copies were "specifically identifiable."  Essentially, the Office concludes tentatively that the computer being used by the ultimate recipient of the transmission (the listener) can decipher the buffer copies, so those copies must be specifically identifiable.  Essentially, the Office decided that, as the transmission can be heard, the copies must be specifically identifiable.

While the Office claims to be reading the plain language of the statute, one has to wonder if this is what was meant by Congress when the statute was adopted.  Seemingly, the statutory structure of the Copyright Act as amended to cover digital services was trying to equate real time, noninteractive streaming with radio type services, and creating a public performance royalty under Section 114 for the sound recordings and allowing the Performing Rights Organizations (ASCAP, BMI and SESAC) to take care of the composition rights for this real time streaming.  It would seem as if the concept of the DPD was meant to cover the digital equivalent of the pressing of a record or a CD - i.e. a download or similar one-to-one transmission that resulted in a fixed copy that could be used and re-used by the recipient.  To me, the concept of "specifically identifiable" would mean one that can be pointed to and identified, so that a listener can go find the song that they want when they want it, just as I can go to my CD collection, and find a Rolling Stones CD when I want it by looking at the label.  When I want to hear a particular song that is being streamed, I certainly can't go to my buffer copies to find that song (as, even if it played on an Internet radio station an hour before, it is not there now if I want to hear it again).  But certainly these are issues that will be debated. 

We have written about the recent Court decision that determined that ASCAP had no public performance right in connection with a digital download, as it was not a "public" performance.  Only the music publishers would collect for the composition used in the song being downloaded to avoid double-dipping.  Here, applying Section 115 to noninteractive streaming would seem to be the mirror image of the ASCAP case, yet the Office is reaching a decision that is exactly the opposite of the one reached by the Court.  Of course, that ASCAP case may be appealed, so these issues, too, are unresolved. 

The Copyright Office seemed to recognize that this could be very controversial, and states that it takes no position as to the value of the Section 115 right that it finds to exist.  That would be left to the Copyright Royalty Board to determine royalty rates under Section 115  in its current proceeding - and that the Board could well determine that the copies made in the case of noninteractive streaming have no value at all.  However, one wonders if the issue was fully argued in the case as most parties seemed to acknowledge that the Section 115 royalty would not apply to such activities (the Board even citing in a footnote that the publishers supported such an exemption in a Section 115 reform bill that was introduced and passed by the Judiciary Committee but not adopted by the full Congress in the last Congressional session).

Comments in the Copyright Office proceeding are due on August 15, and Replies are due on September 2. This is a very important proceeding in which parties should make their views known. 

The Copyright Office had recently issued a determination that ringtones and digital downloads were covered by this royalty, and could rely on the Section 115 compulsory copyright.  Again, in those contexts, copies were fairly easy to understand, as a copy is made when a ringtone or download is copied onto a phone or a computer, and when that happens, a specific fee is charged for the copy that is made.  The more difficult questions arise in cases of subscription services, limited time downloads, on-demand streaming, and even streaming done by a non-interactive service like an Internet radio station.  When is a "phonorecord" - a specifically identifiable copy of a recording that contains the musical work - made?  In the digital transmission process, multiple copies are made - on the servers of the music services, in transitory copies made by servers and routers on the Internet, and in the RAM and on the hard drive of the listener's computer.  Are these copies "specifically identifiable" such that a royalty should be paid?  In its Public Notice of this Roundtable, the Copyright Office raised many of these issues that formed the basis of the discussion on Friday.

 In 2003, the Recording Industry and the representatives of the music publishers entered into a settlement agreement that concluded that the non-interactive streaming did not involve copies that would give rise to a mechanical royalty, while interactive streaming and conditional downloads did.  However, as discussed at the Roundtable, the Harry Fox agency, the principal collection agent for the music publishing companies, represents less than 70% of the music publishers, so the agreement is not binding on all publishers.  Moreover, the Copyright Office representatives themselves asked at the Roundtable how they could draw a legal distinction between on-demand streaming and non-interactive streaming, when the technology involved was the same.  While the making of a copy in the streaming process may currently have no real value independent from the public performance (for which ASCAP, BMI and SESAC collect royalties for the musical composition), the Copyright Office asked if there should not at least be a recognition that a copy is made.  Questions even arose as to whether specifically identifiable copies are made in other digital transmissions that include buffer copies.

The question arose as to whether any copy made in a streaming process is specifically identifiable, and also whether the payment of such a royalty would be "double-dipping" - paying the composers twice for the use of their music.  In a recent decision in a Federal Court, a decision was rendered that ASCAP (and by implication BMI and SESAC) were not entitled to public performance royalties in connection with downloads, as no public performance was involved.  The question discussed on Friday was whether the reverse shouldn't also be true - that there is no mechanical royalty where there is a clear public performance.

Issues also exist as to the efficient operation of the statutory license.  The license requires notice to the copyright holder before it can be used, and as many of the copyright holders are difficult to find, and as there is no central database where the music publishers are identified, that is difficult.  In addition, as the Harry Fox agency, the one central licensing agency that exits, represents less than 70% of the copyright holders, a company that has a business model that doesn't allow for the per copy statutory royalty (e.g. a subscription service), doesn't have any group or groups with which it can negotiate to get blanket licenses for virtually the entire musical universe.  Thus,  licensing is difficult.

Everyone at the Roundtable agreed that the statutory language was ambiguous and did not cover all of the issues that arise in a digital world.  The Copyright Office itself has asked for legislative reform of the statutory license many times, to clarify these ambiguities.  In fact, at one point, the Register of Copyrights testified that she thought that one agency should collect all royalties for musical compositions, so that there would not be the issue of double dipping, and so that there would be organizations that would represent virtually all of the copyright holders for all purposes.   With the various entrenched stakeholders, that proposal didn't fly, thus we continue to have different groups representing composers for the public performance of music and for the mechanical royalty.  And, while we have had proposals for Section 115 reform floated in Congress for the last several years, the discussion on Friday was that Congressional action did not look imminent.  But all companies providing digital transmissions of musical compositions should continue to monitor these efforts, as the potential for problems arising from interpretations of who needs to get paid for digital services remains very high, and with the potential liabilities for copyright infringement being so great, the stakes are high.