Court to Webcasters: “No Stay For You!”

What does this mean? In the immediate short term, it means that the new rates will go into effect on July 15. As outlined in both the Memorandum to Clients article and a more recent blog posting webcasters should be prepared to file royalty payments utilizing new forms available through SoundExchange, Inc. for 2006 and 2007. These forms will allow the webcaster to calculate the difference between the amount owed at the new royalty rate and the amount paid for 2006 and January through May 2007 according to the previous royalty rates.

In the longer term, this likely shifts the focus back to Congress, where the Internet Radio Equality Act is pending in both the House and the Senate. Congress almost certainly will not act before July 15, so webcasters will continue to negotiate with SoundExchange for a more reasonable royalty rate structure that can be agreed to by all parties and sanctioned by the Copyright Royalty Board. Finally, though the United States Court of Appeals for the District of Columbia Circuit denied the Motion for Stay, the underlying appeal remains pending before that Court. The Court of Appeals’ one sentence order denying the Motion for Stay simply stated that the parties seeking the stay hadn’t met the very high burden required of them, so it offers little insight into what the court will do on the merits of the case. Though one factor a court will consider in deciding a Motion to Stay is whether there is a likelihood that the party seeking the stay will win on the merits, it will also consider whether irreparable harm would ensue if the stay were not issued, the harm that would ensue if the stay were issued and the public interest in issuing the stay. The Court of Appeals’ curt decision offered no insight into which of these factors carried the most weight in its decision. There is also no indication as to how quickly the Court will move on this appeal.

The lack of a short term solution and the murkiness of the long term picture will no doubt lead many webcasters to shut down their Internet streams. We hate to see that happen, but understand why it must. But for those who intend to continue streaming, file your Statements of Account and royalty payments with SoundExchange, pay your royalties and call your Senators and Congressmen and ask them to vote for the Internet Radio Equality Act.

The United States Court of Appeals dealt a severe blow to future of Internet radio yesterday when it denied the motion filed by the Digital Media Association and National Public Radio which sought a stay in implementation of the new royalty rates for Internet webcasting. We have previously reported on developments with regard to the new rates in a June 22 posting in this very blog and on page 6 of our most recent Memorandum to Clients.