CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

A company (in this case, “Ingenuity 13 LLC”) had gotten its hands on the copyrights for a number of adult movies. The Ingenuity folks then monitored BitTorrent download activity and, when they noted “their” movies being downloaded, they sprang their trap: they filed a lawsuit against “John Doe” defendants, used discovery subpoenas to obtain users’ IDs from the ISPs through which the downloads occurred, and then shook down their victims for about $4K a pop. As Judge Wright observed, the $4,000 price to get the case to go away quietly was “calculated to be just below the cost of a bare-bones defense.” (For more on the wily ways of the copyright troll, check out our previous posts on the subject.)

But wouldn’t you know, one of the John Does decided to fight back with the ferocity of a Klingon wielding a bloody bat’leth. 

He alleged that the Ingenuity crew was engaging in fraud on the court. Among other things, it appears that Ingenuity hadn’t come by its copyrights entirely legally (some identity theft was apparently involved), so their copyright claims were, um, bogus. And it turned out that the lawyers repping Ingenuity owned a piece of Ingenuity (as well as other similar trolling operations), so they presumably knew that everything wasn’t on the up and up. 

With his tricorder reading beyond “suspicious” and well into the “totally guilty” range, Judge Wright engaged tractor beams to drag the lawyers up onto the witness stand so he could probe behind their cloaking devices to get the inside scoop on their operations, relationships, and financial interests behind their cloaking shields.

In response, the lawyers deployed the only shields they had left: they all took the Fifth.

(Litigation tip: When an angry judge asks you questions, your best play is usually to answer honestly and completely. Taking the Fifth is generally not the way to go.) 

Judge Wright responded to the lawyers’ reticence as you might expect: he reset his phasers from “stun” to “kill.”   Drawing every possible adverse interest from Ingenuity’s (and its lawyers’) refusal to testify – which he could do, since this was a civil, not a criminal, case – he found that they had: engaged in identity theft (using a fraudulent signature); attempted to deceive the court in order to engage in early-discovery requests; lied to the Court; and generally used (actually, abused) the Court’s authority to improperly pressure defendants to settle .

As punishment for the Ferengi-like ways of Ingenuity and its counsel, Judge Wright cranked up his doomsday machine. He awarded Ingenuity’s target-turned-nemesis $40+K in attorney’s fees, and then doubled it to north of $80K as a punitive measure.  (Direct hit on forward shields!) He thoughtfully pointed out that the “punitive portion [was] calculated to be just below the cost of an effective appeal.” Ouch! 

But wait, there’s more!

The Judge announced plans to refer all the lawyers to their respective state and federal bars to let those bars know that the lawyers suffer “from a form of moral turpitude unbecoming of an officer of the court” (Shields are failing!). And because their operations resembled RICO-like activities, Ingenuity and its counsel are also going to be referred BOTH to the U.S. Attorney’s office for investigation (Hull breach on deck four! We can’t take another hit!) AND to the Criminal Investigation Division of the IRS for failure to pay taxes on their ill-gotten gains. (Abandon ship! Abandon ship!)

Ingenuity’s lawyers thought that they had boarded the ship bound for Risa at warp speed, but instead they found themselves on the Kobayashi Maru.

For us earth-bound practitioners, Judge Wright’s decision is a breath of fresh air: knowing a scam when he saw one, he was not reluctant to take effective action to get to the bottom of things and then issue stiff sanctions. Those sanctions, ideally, will send a message through the copyright troll universe that fol-de-rol with the courts is a bad idea. We shall see.

And to Judge Wright: Live long and prosper!

And when I refer to “webcasters”, I’m referring not only to my primary target audience, i.e., FCC- licensed radio stations who are webcasting. (See below for more details on the three different categories of broadcaster/webcaster). Beyond that radio-based universe is a larger universe of operators engaging in “non-interactive webcasting”, perhaps more commonly referred to as “streaming”. (These are folks who, in overly simplified terms, don’t allow the user to request and directly hear a song.) The information in this post is generally applicable to all webcasters, radio-based and non-radio-based alike. 

Radio stations who are streaming online (most often consisting of a simulcast of the station’s over-the-air signal, though perhaps offering one or more “side channels” as well) normally fall into one of three categories: commercial broadcaster, noncommercial webcaster, and noncommercial educational webcaster. Remember that the distinction between “commercial” and “noncommercial” is based not on the station’s FCC license, but rather on whether the entity offering the webcasting service is exempt from federal income taxation under Section 501(c) of the Internal Revenue Code. There is a further distinction between “noncommercial webcaster” and “noncommercial educational webcaster”, the latter being affiliated with an accredited educational institution whose students substantially staff the webcasting operations.

There are also sub-categories within each category. For instance, a noncommercial webcaster can self-classify under the “CRB” or “WSA” designations. “CRB” stations are subject to the rules put in place by the Copyright Royalty Board in its Webcasting III decision applicable to the years 2011-2015; “WSA” stations are subject to the relevant Webcaster Settlement Agreement. 

The designations of “commercial broadcaster”, “noncommercial webcaster (WSA)” and “noncommercial educational webcasters” include special categories for smaller entities which come with some benefits. By paying an extra $100 “proxy fee” with its annual minimum payment, a commercial broadcaster who had fewer than 27,777 “aggregate tuning hours” in the previous year and expects to do so again can receive an exemption from the rather onerous monthly “Playlist Report of Use” requirement. Ditto both for a noncommercial webcaster (WSA) who had fewer than 44,000 aggregate tuning hours in the previous year and expects to do so again, and for the noncommercial educational webcaster who had fewer than 55,000 aggregate tuning hours in every month (though you can go over in one month) and expects to do so again. 

You choose your category – or, if applicable, your status as a small broadcaster or microcaster – when you file your Annual Minimum Fee Statement of Account form with SoundExchange. That form is due by January 31, 2013. Note: in prior years, small broadcasters or microcasters had to file a separate “Notice of Election” form; this year that election is incorporated into the Annual Minimum Fee Statement of Account form, which includes a line where the webcaster will indicate its election to pay the $100 “proxy fee”. 

But that’s not all: your obligations continue throughout the year. With the exception of the noncommercial educational microcaster, everyone – whether payment is required or not – must file a Monthly Statement of Account form with SoundExchange within 45 days of the end of the month in question. Full-sized commercial broadcasters, noncommercial webcasters and noncommercial educational webcasters have to file Playlist Reports of Use on a regular basis – generally monthly – as well.

So consider yourself reminded: if you are engaged in “non-interactive webcasting”, you will need to find the proper Annual Minimum Fee Statement of Account Form and send it to SoundExchange along with your payment of $500.00 per channel by January 31, 2013. If you qualify either as a “small broadcaster” or under one of the “microcaster” categories, you may also pay an extra $100 per channel in exchange for an exemption from the requirement that you file Playlist Reports of Use on a monthly or quarterly basis (but you don’t need to use a separate Notice of Election form this year).  However – with one very minor exception for noncommercial microcasters – regardless of your classification or size, your obligations do NOT end on January 31, 2013. You will need to file Statement of Account forms and, possibly, Playlist Reports of Use throughout the year.   

You can get more detailed information about every category via the “How do I Pay” page on the SoundExchange website. We’re here to help as well.

[UPDATE:  This morning, after we had posted this piece, our friends at SoundExchange sent around a note advising webcasters of a new SoundExchange-produced video in which they “break down what your service needs to submit to be compliant with the statutory license for 2013”.  You can find that video at this link.  And, of course, webcasters can also get help from the SoundExchange Licensee Relations group at 202-559-0555.]

The CRB got the ball rolling back in January, 2011, when it opened the proceeding and invited all interested parties to join in.  As the Copyright Act provides, copyright owners and NCE broadcasters and entities (e.g., NPR, PBS) can negotiate deals among themselves and the CRB can then rubberstamp those deals (subject to various procedural niceties designed to protect folks who might object to some or all of the deals’ terms).

Sure enough, essentially all of the relevant parties were able to get together and hammer out mutually agreeable arrangements, as I reported back in April (with respect to Non-PBS and Non-NPR stations) and June (with respect to PBS and NPR stations).  The CRB has now formally accepted those deals, rejecting minimal objections from a few parties who were technically not even eligible to participate before the CRB.

As an overall matter, rates for the next five years will increase over those currently in effect – there’s a surprise – but not by much.  The increase in every category tends to be no more than 2% over the corresponding rate from the previous five-year period.  The precise dollar figures that will apply are set out in a number of tables and rule sections in the Federal Register.  Since there are close to 200 separate data points, I’m not going to lay them all out here.   I will, however, briefly summarize the factors that come into play in determining which of those figures applies to which types of NCE broadcaster. 

Type of Station.  First, as has historically been the case, royalty rate calculations will vary depending on the type of station in question.  For these purposes there are three types of station: (a) NPR/PBS affiliates; (b) non-NPR radio stations affiliated with educational institutions; and (c) other NCE radio stations that are neither NPR affiliates nor licensed to an educational institution. 

NPR/PBS stations.  For NPR and PBS affiliates (including radio stations licensed to educational institutions), royalties will be based on how each individual piece of music is used.  In particular, they will vary depending on whether the broadcast is (a) a network program or (b) the work of an individual affiliated station (with the latter costing less than the former), and also on whether the musical work in question appears (i) in a “featured presentation” or (ii) merely as background or theme music (again, with the latter costing less than the former).  Rates for PBS and its affiliates will be greater than those for NPR and its affiliates.  The same rates will apply regardless of whether the piece of music is licensed by ASCAP, BMI or SESAC.

Non-NPR radio stations affiliated with educational institutions.  The most obvious change for this universe of stations is the elimination of the one-size-fits-all flat fee approach which has historically been used.  Instead, 2013-2017 rates payable to ASCAP and BMI will involve a tiered system that takes into account the size of the educational institution’s student body.  Different rates will apply to schools with (a) fewer than 1,000 full-time students; (b) 1,000-4,999; (c) 5,000-9,999; (d) 10,000-19,999; and (e) 20,000 or more.  Stations with ERP of 100 watts or less will be entitled to the lowest rate (i.e., the rate for schools with fewer than 1,000 full-time students), regardless of the actual size of the school’s student body. 

No such tiering will apply for SESAC music, however.  Instead, this class of station will pay a flat annual fee of $140, with increases each year thereafter based on a cost of living coefficient equivalent to the greater of: (a) the change in the Department of Labor’s Consumer Price Index in the prior year or (b) 2%.

Other NCE radio stations.   NCE stations not fitting into either of the two classes described above will, as expected, pay flat annual rates, but the rates will vary based on: (a) the size of the population within each station’s 60 dBu contour (along with any additional population provided by translators or boosters); (b) the nature of the station’s programming; and (c) whether the music is licensed by ASCAP/BMI, on the one hand, or SESAC, on the other.  

With respect to the first variable, there are eight separate population tiers, the lowest being fewer than 250,000 and the highest topping off at 3,000,000 or more.  

As to the second, there will now be separate grids of royalty rates for (a) music stations and (b) “talk format” stations.  The former category includes all stations which devote at least 20% of their programming to content in which music is the “principal focus of audience attention”.   The latter includes stations whose program content “primarily consists of talk shows, news programs, sports, community affairs or religious sermons (or other non-music-oriented programming)” and who don’t devote at least 20% of their programming to music annually.

And finally, the royalty grids for music and talk NCE stations will be the same for ASCAP and BMI songs.  SESAC content will be subject to a separate set of rates which will be lower than the ASCAP/BMI rates.  The rates will all rise in gradual increments annually over the five-year term.

Recording Rights

Finally, the cost of the recording rates and terms will increase very slightly (by only a few dollars) for every type of noncommercial broadcast station.

The grids laying out all the various rates are set out in the Federal Register notice.  You can use them to find the rates that will apply to your particular station.  And you can always contact me if you have questions finding the rate applicable to you.  That may not be necessary, though, because you can rest assured that ASCAP, BMI and/or SESAC will be contacting broadcasters sooner rather than later, asking them to put pen to paper on their new agreements, with these new rates, for 2013.

So it should be no surprise that one major player – Pandora – has chosen to attack the problem at its root cause.

The result? The Internet Radio Fairness Act, introduced last month simultaneously in the House as HR 6480 by Rep. Jason Chaffetz (R-UT) and Rep. Jared Polis (R-CO) and the Senate as S 3609 by Sen. Ron Wyden (D-OR). 

The good news is that Pandora’s push for fundamental legislative change on the copyright front could have a positive effect on broadcasters, whose webcasting royalty rates could be reduced as a result. But don’t crack the champagne yet, because a counter-measure, championed by Rep. Jerrold Nadler (D-NY), could force compromise on the key issue of performance rights for over-the-air sound recordings.

So exactly why is there a disparity, how big is it and what would the two bills do about it? 

As noted above, the disparity is Congress’s fault. It has instructed the Copyright Royalty Board (CRB) ultimately sets the royalty rate for performance of copyrighted works, the CRB is told to set the royalty rate for the performance of copyrighted works differently according to the type of media involved. 

Historically, copyright royalties for most non-Internet-related uses have been calculated using four criteria set out in Section 801(b) of the Copyright Act. The resulting royalties apply to satellite services like Sirius XM, cable music services (the music-only channels available on your cable system) and even broadcasters’ payments to ASCAP, BMI and SESAC for performance of the underlying musical works (the music and lyrics or composition) in each song.  The four criteria set out by Congress in Section 801(b) are:

• A need to maximize the availability of creative works to the public;
• A desire to insure a fair return for copyright owners and fair income for copyright users;
• A reflection of the relative roles of capital investment, cost, and risk; and
• A need to minimize the disruptive impact on the industries involved.

But webcasting – which includes broadcasters simulcasting one or more signals over the Internet – is subject to a different standard enacted as part of the Digital Millennium Copyright Act in 1998: the “willing buyer/willing seller” standard. Despite its name, this standard is more theoretical than practical, as it doesn’t even allow the CRB to consider the real world effort of the final royalty rate; instead, it relies on theoretical market rates. 

Why the difference? There are plenty of reasons but the easiest explanation (and I acknowledge that some will quibble with this) is that the recording industry was the loudest voice at the table in 1998. Back then, the broadcasting industry didn’t seem to appreciate yet just how big this whole webcasting thing would get, and the stand-alone Internet radio industry wasn’t really a thing. The recording industry stepped up to the plate, took a big swing, made contact and hit a home run.  (To use an extremely timely phrase: they showed some #Natitude – Go Nats!)

The effect? Looking simply at Pandora vs. Sirius XM, it’s pretty big. Pandora (using rates set by the CRB under the willing buyer/willing seller standard, with certain adjustments) claims it paid approximately 50% of its gross revenues in royalties last year and could pay up to 70% in the first quarter of fiscal year 2013. That’s a boatload more than the percentage paid by Sirius XM (i.e., 6% in 2008, 7% in 2010 and 8% in 2012). While Sirius XM is very concerned that its rates will sharply increase to 13% or more as a result of the CRB proceeding now in process, that would still put its royalties well under Pandora’s.

Enter the Chaffetz/Polis/Wyden Internet Radio Fairness Act, which would remove the distinction between the services. Everyone, including Pandora and broadcasters webcasting online, would have their rates set through CRB proceedings subject to the Section 801(b) standard. 

This can only be a good thing for broadcasters, right? Well, probably but not definitely. 

While the 801(b) standard could bring broadcasters’ webcasting rates down , there’s no guarantee. The CRB, even applying the 801(b) standard, could produce a royalty rate that is markedly different in calculation or amount than broadcasters “enjoy” now. Soundexchange, representing the recording industry, has basically had its way in these CRB proceedings – would that necessarily change?

And then there’s the  proposed Nadler bill. Like the Internet Radio Fairness, Nadler's Interim FIRST Act would not address the broadcasters’ traditional exemption from paying over-the-air royalties as it standardizes the way in which the rates are set. But it is essentially the opposite direction of the Internet Radio Fairness Act in virtually every other way. The biggest difference is that the Nadler proposal would apply the “willing buyer/willing seller” standard across the board (so everyone can be upset about everything?).  

Moreover, the Interim FIRST Act would take a direct shot at broadcasters. Nadler feels that the broadcasters’ exemption from paying for over-the-air performances is unfair. His proposal would address this supposed unfairness not by removing the exemption (because we know the NAB would rise up against that), but by directing the CRB to take the value of those over-the-air performances into account when applying the willing buyer/willing seller standard. The result, according to some reports, could be a doubling or even tripling of the webcasting royalty rates that most broadcasters already feel are too high. 

And even if Nadler’s proposal doesn’t pass, it could still adversely affect broadcasters. With two competing copyright bills on the table – i.e., Nadler’s Interim FIRST Act and the Internet Radio Fairness Act – it’s not hard to imagine the sponsors of each coming up with some compromise measure. One such compromise might, for instance, impose the 801(b) standard for royalty calculation across the board, but also require that broadcasters start paying royalties for over-the-air performances of sound recordings under that standard. (Alternatively, a compromise could include Nadler’s suggestion that over-the-air performance be factored into webcasting royalties.) That would obviously muddy the waters.

Though Congress will probably not take up either bill until early 2013 (addressing this in the post-election “Lame Duck” session is possible but unlikely), interested parties are already throwing their support behind the Internet Radio Fairness Act. Those parties include Pandora (obviously), the Consumer Electronics Association, the Computer and Communications Industry Association (with members including Google, Microsoft, Yahoo! EBay and Pandora) and the Digital Media Association (DiMa).   The Radio and Internet Newsletter (RAIN) reports that the NAB, as well as broadcast companies Salem and Clear Channel, also support the bill.

The last of those – Clear Channel – comes as no surprise and should give broadcasters food for thought. Under the existing sytem, Clear Channel has already reached a direct licensing agreement with one major record label (Big Machine) under which Clear Channel will voluntarily pay royalties for over-the-air performance of sound recordings by Big Machine recording artists in exchange for a set (presumably lower) rate for their webcasting of those same sound recordings. In some regard, given that webcasting listenership – and therefore royalties – are only going to grow in coming years, it makes sense to focus on making sure those royalties are as low as possible.

The Clear Channel example reflects that broadcasters are in a position to take advantage of the devil they know, i.e., the current system. It’s far from clear whether the same would be true in a system forged from some compromise involving the Nadler proposal.

Broadcasters, therefore, might want to think about throwing their full support behind the Internet Radio Fairness Act in the hopes that is quickly enacted. That would, ideally, keep the Nadler Interim FIRST Act from gaining any momentum that could force a compromise, thereby making the devil they don’t know a devil they really don’t want to know.

When one party (i.e., the plaintiff) sues another party (i.e., the defendant), the result is an evidentiary trial (assuming, of course, that the parties don’t settle beforehand, or one of the two parties isn’t able to convince the judge that the issues are so clear that no trial is necessary). Preparing for and then actually trying the case takes months, maybe even years. Because of that, plaintiffs who are attacking defendants’ ongoing conduct often ask the court to put a halt to – or “enjoin” – that conduct pending conclusion of the trial.

When a plaintiff asks for an injunction, the court is called upon to consider a number of factors. Among those factors is the likelihood that the plaintiffs’ substantive charges will ultimately stick at trial. After all, if the plaintiffs’ case on the merits is weak, why should the defendants be ordered to stop what they’re doing? But on the other hand, if the plaintiffs can demonstrate that they’ve got a seriously kick-butt case, why should the defendants be permitted to continue to engage in their alleged misconduct?

So when an injunction is requested, long before the trial itself occurs, the court conducts a hearing (like a mini-trial) to determine whether or not to grant the requested injunction. Judge Nathan’s decision resolves that preliminary question in the Aereo case.

And while a decision on a stay request does not necessarily determine resolve the issues to be addressed in the main trial, in this instance the denial of the stay may indeed resolve the case itself.

The gist of Judge Nathan’s decision is that the broadcasters are unlikely to prevail on their infringement claims. And that’s because the Second Circuit (whose rulings are binding on the U.S. District Courts in New York, including Judge Nathan) has already ruled, in 2008, that use of technology akin to Aereo’s does not constitute copyright infringement. The 2008 ruling – in Cartoon Network LLC, LLLP v. CSC Holdings, Inc. – involved Cablevision’s RS-DVR system. The Second Circuit figured that that system was functionally equivalent to the type of private video cassette recorder that the Supreme Court had blessed way back in 1984, in the Betamax case. 

In the view of the Second Circuit, when a system for delivering video programming involves a “single subscriber using a unique copy produced by that subscriber”, that system is not providing transmissions “to the public”, but rather to that single subscriber. Since transmissions “to the public” are an essential element of “retransmission” for copyright infringement purposes, a “single subscriber” system does not infringe.

It’s pretty clear that the folks who devised the Aereo system used the blue print provided by the Second Circuit as a guide to the design of their system. As presented to Judge Nathan through a number of technical witnesses, the Aereo system looked just like its earlier infringement-free counterparts – technologically distinct, of course, but functionally the same as the RS-DVR and the Betamax, as far as copyright law is concerned. In fact, the judge seemed to conclude that Aereo’s system is even more legal than its precursors. That’s because, as she saw it, Aereo invariably provides only a single data stream to a single user throughout its process, while the RS-DVR system started with multiple data streams from which it then created individual user streams. If the latter didn’t constitute an infringing use, the former certainly didn’t.

Judge Nathan was not unsympathetic to the broadcasters. She agreed that the operation of Aereo could cause the broadcasters irreparable harm, and she seemed to view the relative harms that would be suffered by the broadcasters, on the one hand, and Aereo, on the other, as reasonably equivalent. And, surprisingly, she even said that an injunction “would not disserve the public interest” – which, when you unwind the double negative, seems to say that the public interest would be served by an injunction.

It's worth noting too that Judge Nathan clearly did not intend to open the door to any number of other technical innovations in the future. Broadcasters, who might fear her ruling as a massive expansion of the concept of "public performance", will presumably read her opinion with suspicion in this regard.  But in assessing the public interest considerations, she specifically rejected the exceedingly broad claim advanced by Aereo and Electronic Frontier Foundation (an amicus on Aereo's side), i.e., that free access to and reception of broadcast television by any medium is necessarily in the public interest. 

That claim echoes a theme espoused by new media innovators everywhere. They assert that copyright owners have some obligation to share their works with the public because that’s just the way the electronically interconnected world operates now.  (The corollary: anyone who tries to stifle innovation is a dinosaur (or worse).)  For the record, we're on board with Judge Nathan when she observes that, taken to its logical extension, that notion would lead to the conclusion that the public interest favors no copyright restrictions at all, since "unrestrained piracy" of content would also increase public access to that content.

But none of those points arguably favorable to broadcasters could override the fact that Judge Nathan did not believe that the broadcasters are likely to prevail on the merits.

That doesn't necessarily mean that the broadcasters can’t prevail on the merits. The trial process is a long one, often with lots of unexpected twists and turns. One possible scenario: to support their injunction request, the broadcasters relied on a report from an expert witness who did not personally testify at the hearing (the broadcasters offered his written report instead). In his view, the Aereo system is not the functional equivalent of the RS-DVR approach. But Aereo offered live testimony from its experts to counter that view, and the Judge found Aereo’s witnesses to be “highly credible and persuasive”. It’s at least possible that, if the broadcasters were to put their experts on the witness stand at trial, they might be able to undermine the persuasive showing advanced by Aereo during the injunction hearing. That’s particularly so in view of the fact that the Judge has now explained why she believes that Aereo’s system (at least as she understands it) doesn’t infringe. If the broadcasters’ experts could convince her that her understanding is incorrect in any respect, they might be able to turn things around.

Another possible line of attack to explore: the front end of the Aereo system, in which Aereo first acquires and records the over-the-air programming for later transmission to Aereo’s subscribers. Judge Nathan’s opinion focuses on the back end of the Aereo system, i..e., the process by which the subscriber accesses and retrieves the programming. Since it doesn’t appear to have been fully explored in the injunction hearing, the front end of the Aereo system -- and the transition from the front end to the back end -- may be susceptible to effective challenge at trial.

In her opinion Judge Nathan went to some lengths to emphasize that her conclusions as to the broadcaster’s likelihood of success were intended to be narrow. Nevertheless, her decision doubtless reassures Aereo that its approach is solid: keep yourself well within the wake of the RS-DVR and Betamax precedent and you should be able to avoid copyright problems.

According to the opinion, the broadcasters have signaled that they’re probably going to appeal this interlocutory decision. That appeal would go to the Second Circuit – so if Judge Nathan is reading the Circuit’s Cartoon Network opinion incorrectly, the Circuit can set everybody straight sooner rather than later. But in the meantime, it looks like Aereo will remain up and running for the foreseeable future.

The amount in question varies depending on a number of factors. Rates for PBS and its affiliates would be greater than those for NPR and its affiliates. They would also vary depending on whether the broadcast is a network program or the work of an individual affiliated station (with the latter costing less than the former). Context would also come into play: does the musical work in question appear in a “featured presentation”, or is it background or theme music (the former would be more expensive than the latter)?

The across-the-board increase is relatively small.   Regardless of PBS vs. NPR, network vs. individual affiliate station, feature vs. background/theme, the increase in every category tends to be no more than 2% over the corresponding rate from the previous five-year period. 

The CRB has invited comments on the NPR/PBS proposals. Those comments are due by July 26, 2012. Whether or not CRB receives any comments on this part of the puzzle, we expect it to include these PBS/NPR rates along with the proposed rates for other, non-PBS/non-NPR categories of stations that it announced last April.  

Those earlier proposed rates were not, of course, etched in stone and may be modified somewhat based on the few other comments filed in response to CRB’s April notice, although no major changes are expected. The other comments focused on the possible creation of a separate tier for very, very small noncommercial broadcasters.

We will, of course, keep you posted about any developments. Again, if you are a PBS or NPR affiliate, you’ll want to start figuring out how these rates will affect you and perhaps look closely at the actual proposed royalty rates now that we know what they are.

There were seven such agreements. In its latest notice, the CRB sets forth those proposals in a collection of proposed rules (actually, proposed changes to the rules found in 37 C.F.R. Part 381). They include eight separate grids of rates covering licensees of various types and sizes, in various markets, providing various types of programming. To say that there’s a lot of information to consider and digest here is a gross understatement.

Since the CRB’s notice (with all of its proposed rules, tables, rates and terms) has just been released, we can’t pretend that we’ve studied it carefully. But we will. In the meantime, here's a very early, very quick and dirty review of what we see as the high points: 

It’s unclear what is happening with regard to NPR and PBS stations. The rule that previously applied to this subset of noncommercial broadcasters has been removed and the space held open for future use. No explicit reason was given. It could be that NPR and PBS reached specific licensing agreement; could also be that these stations are just going to be treated as equals to their fellow non-college and university noncomms.

Those general noncommercial broadcasters will pay slightly more for performance of musical works (as would be expected) during the upcoming five-year period, but the change is not drastic. Also as expected, they will pay the same amount to ASCAP that they pay to BMI, with each of those entities receiving more per station than SESAC.   While smaller stations (according to their predicted 60 dBU contours) will pay about the same whether they are playing large amounts of music or not, there are distinct differences among larger stations, depending on whether those stations are music- rather than talk-focused.

There is also a slight increase for noncommercial stations affiliated with a college or university. However, the bigger change on this end is the elimination of a one-size fits all flat fee in favor of a tiered system that takes into account the size of the student body when determining payments to ASCAP and BMI (no such tiering exists for SESAC). However, even within this tiered system, smaller stations (those with an ERP of 100 watts or less) get a break.

Anyone who might be affected by copyright rates to be charged NCE broadcasters until the end of 2017 would also be well advised to dig into the CRB’s notice. With a paltry 30-day comment period, the sooner you get started on figuring out how the proposals could affect you, the better off you’ll be.

Before then, some background on SiriusXM v. SoundExchange.

First, why might folks not like SiriusXM and SoundExchange?

SiriusXM is the spawn of Sirius and XM Radio, the two original satellite radio operators. When they merged to form SiriusXM, many felt the FCC too readily acceded to their promises to refrain from anticompetitive business practices, promises that, also to many, rang hollow and seemed to lack conviction.

And SoundExchange has long been viewed as less than sympathetic, particularly because of the arduous recordkeeping and reporting requirements it imposes on webcasters. And then there are the seemingly ever-increasing royalties it sucks out of webcasters and the less than transparent manner in which it appears to run its business. (On a personal note, I don’t think SoundExchange deserves a bad reputation. I’ve found many of the folks there to be more than helpful and willing to work with broadcasters making a good faith effort to comply with the requirements of the statutory copyright license.)

Second, about that lawsuit.

Webcasters are required to pay copyright royalties for music they transmit. The “easy” way to do that is to send the money to SoundExchange, which serves as the agent of the copyright holders (much like ASCAP, BMI and SESAC do on the broadcast side). The royalty rates SoundExchange charges are set by the Copyright Royalty Board (CRB) periodically.

But motivated parties can sidestep SoundExchange by going straight to the copyright holders to negotiate separate licenses for each piece of music to be transmitted. That approach can be very advantageous. Direct deals can lead to more favorable royalty rates than would be available through the CRB ratemaking process. In its most recent rate ruling, the CRB ordered SiriusXM to pay 8% of gross revenues, and in the next CRB go-round SoundExchange is reportedly ready to ask for an increase up to 13%; by contrast, direct licensing could have tied down a royalty rate in the 5%-7% range.

Being able to negotiate a bunch of direct deals at a substantially lower rate could also be useful in future CRB ratemakings. Such lower rate deals would provide empirical proof of what the actual market for webcasting rights would bear, the standard the CRB is supposed to use in setting rates.  A significant rate reduction across the board through CRB ratemaking would be huge for SiriusXM, which reportedly spent $200 million in royalties in 2011.

Furthermore, direct licensing has practical benefits. The two sides can agree on their own reporting procedures (broadcasters always complain that the standard CRB-mandated, SoundExchange-enforced paperwork regimen is too onerous). They can waive various stringent conditions (such as limitations on the number of songs from one artist within a given time period). Economies of scale can be created across multiple platforms that also allow for better marketing (think interactivity and social media, for example).

A primary downside of direct licensing: it tends to be less convenient to achieve, requiring lots of leg work followed by lots of separate, possibly difficult, negotiations which may or may not result in deals. 

Apparently, SiriusXM tried its best to enter into direct licenses. It says it entered into 80 of them, but claims to have been shut out of many, many more.  Figuring that its lack of success was not just a matter of bad luck, SiriusXM filed suit in the U.S. District Court for the Southern District of New York. It alleged that SoundExchange and A2IM ,“acting in concert with one another and with their individual recording company members, have erected an industry-wide conspiracy to boycott and tortiously interfere with Sirius XM’s efforts to secure through the workings of a competitive market copyright rights critical to the conduct of its business.”

Specifically, SiriusXM claims that SoundExchange, A2IM and others coerced record companies not to do business directly with SiriusXM. The coercion supposedly involved “implicit and explicit threats to enforce compliance” as well as efforts to “misle[a]d record companies as to their economic interests and even encourage[ ] some record companies to terminate license agreements they had already concluded with SiriusXM”. 

According to SiriusXM, a conspiracy involving SoundExchange, A2IM and others was designed to ensure that webcasting royalties would have to be set by CRB decision, and that the CRB decision would have to be based on essentially speculative testimony. No direct licenses, no negotiated settlement and no real evidence of what actual market participants actually want.  

In filing its lawsuit, SiriusXM did not need to prove its case in its entirety. Rather, it just needed to advance enough factual claims that, if proven at trial, would establish its entitlement to the relief it’s seeking. In its complaint, SiriusXM refers to various communications from the defendants – mailings to their members, public statements, etc. – all allegedly designed to spread the word loud and clear that

direct licensing is harmful to the Defendant’s scheme to establish and maintain super-competitive royalty rates. Hold the line and don’t sign up [for direct licensing with SiriusXM].

And sure enough, SiriusXM quotes a bunch of such communications, all of which seem to support its claims. (Here’s a link to a copy of SiriusXM’s complaint, so you can see for yourself what it’s alleging.)

SiriusXM also alleges that several artists and music labels refused to enter into licenses with SiriusXM because those artists and labels were supposedly scared that (a) SoundExchange would reduce the royalties to which they were entitled and (b) they would end up as pariahs in the music industry, blackballed from board memberships or other leadership positions.

Whether or not SiriusXM will be able to prove all its allegations to the satisfaction of a trier of fact in a court of law remains to be seen. 

Still, we can speculate about how all this might affect some key players not directly involved in the suit.

First, those we’ll call “winners”: 

Broadcasters. Broadcasters don’t have a dog in this fight, per se. In fact, that’s the beauty of this lawsuit from the broadcasters' perspective.   If SiriusXM wins, broadcasters will reap the benefits without any effort. 

What benefits? The possible dismantling of SoundExchange, or the imposition of some limiting consent decree against SoundExchange, or the forced introduction of a competitor receiving agent.  A SiriusXM win would certainly help establish actual market values that would serve as a “willing buyer/willing seller” standard in future SiriusXM ratemaking proceedings. Although such numbers would technically have no direct bearing on the broadcasters’ next CRB ratemaking proceeding (i.e., Webcasting IV, due to begin in 2014 to set rates for 2016-2020), those numbers would provide important concrete data – possibly the only such data – regarding the value of a digitally transmitted sound recording. Moving further out toward the edges, there’s also the simple hope that a SiriusXM victory might embolden more smaller, so-called “independent” labels to license their copyrighted material directly to radio stations as well as SiriusXM. 

This would be especially important if the broadcasters’ own worst case scenario – enactment of the Performance Rights Act – were to occur. We’ve thankfully heard little about this legislation for a couple of years, but imagine if (a) it were too pass and (b) SoundExchange were given the right to administer those royalties as well. Broadcasters would then be in virtually the same position SiriusXM is in right now: paying royalties on two fronts and completely bound by the rules and procedures set by the CRB and SoundExchange. In this scenario, any relaxation of the SoundExchange grip that SiriusXM might achieve through its lawsuit would ultimately benefit broadcasters. 

SiriusXM. If nothing else, SiriusXM gets some street cred from the broadcasters?  SiriusXM is taking up this fight with SoundExchange on its own. By contrast, when broadcasters took on SoundExchange and the Webcasting II decision, they did so en masse, with the bulk of the broadcasting industry marching in lock step.

But more than that, SiriusXM made the right play. Not necessarily the winning play – we won’t know that for a while – but the right play. Litigation is expensive, but not as expensive as the $200 million in royalties that SiriusXM claims to have paid last year. Add in the fact that a victory would not only reduce that expense, but also afford SiriusXM more flexibility in future negotiations and the ability to innovate.  

And even if it loses, SiriusXM is likely to be able to add a few more direct licenses to the 80 it already has (out of 500 or so that it sought). That should give it a little more bargaining power in future ratemaking proceedings by fully demonstrating the value of a sound recording under the “willing buyer/willing seller” standard applicable to satellite radio.  And regardless of whether that pans out, well, as one commentator (The Motley Fool) put it: “SiriusXM is part of a legal complaint where it really doesn’t have much to lose beyond legal fees. If its complaint doesn’t hold up, SiriusXM is back to where it is now.  If it has merit, SiriusXM should be able to strike better licensing terms with labels that value the promotional power of being broadcast to the provider’s 21.9 million subscribers.”

Smaller Independent Recording Artists.   Unlike major artists represented by major labels, these artists are more likely to be at the mercy of the bigger players. SiriusXM’s lawsuit, successful or not, is likely to give these artists and their labels a more prominent voice. There’s also a little leverage that might lead to a chance to work out the deals they really want, deals that aren’t just about money but about creating future opportunities for themselves.

Royalty Logic. You’ve probably never heard of this company. It’s the scrappy underdog to SoundExchange, a wannabe designated receiving agent that has repeatedly been turned away by the CRB. Much like BMI got its start after ASCAP encountered legal troubles, could Royalty Logic position itself as the answer to SoundExchange’s anti-competitive behavior – a ready-made competitor?

And now the “losers”:

SoundExchange. SoundExchange may well win this lawsuit, but I doubt that will happen quickly or inexpensively. At a minimum, I predict that the lawsuit will survive a motion to dismiss. To be sure, the evidence alleged by SiriusXM in support of the alleged conspiracy is largely circumstantial. But the Federal Rules of Civil Procedure say that a court, when considering a motion to dismiss, must view all factual claims in SiriusXM’s favor. I think there’s enough in SiriusXM’s complaint to get it past a motion to dismiss and into the discovery phase. Once it gets that far, any number of possible resolutions would be available, most favorable (at least in some ways) to SiriusXM and unfavorable to SoundExchange. 

Furthermore, where SiriusXM has little to lose because its situation can’t get worse, SoundExchange has everything to lose, because its situation can’t get much better than it is right now, at least in terms of market share. 

The CRB. The CRB is a bigger part of the practical problems here than it is the solution to those problems. From allowing SoundExchange to exist without competition to siding with SoundExchange on virtually every contested fact in the 2007 Webcasting II decision (and many other ratemaking proceedings), the CRB may have created the environment that allowed questionable, if not illegal, activity to flourish. It’s legal authority and constitutionality has already been questioned. This might be enough to rethink the entire regime. 

We won’t know how the litigation will shake out for some time But the ultimate result in the case may be beside the point. The mere initiation of the case may represent an early tremor signaling the onset of a seismic event, an event that would likely, one way or another, fundamentally affect all the players. Check back here for updates.

That will be up to each cable system when the time comes for it to fill out its routine Statement of Account and tender its royalty payments. If a cable system thinks that a distant signal doesn’t qualify as a specialty station, the system should pay the higher rate. If it thinks that the station does qualify, it should pay the lower “specialty station” rate. If MPAA or anyone else disagrees with the position any cable system takes, they have to challenge the Statement of Account filed by each such system, and a CO License Examiner will have to resolve the dispute.

What are the chances that the challenge might be successful? Hard to say, but get this: according to the CO, the examiners 

will look at these stations [i.e., ones whose “specialty station” status has been challenged] in the same way they have done in the past. That is, if a cable operator claims specialty station status for a contested station on the list, the examiner will inform the operator by letter that a particular party objects to the ‘‘specialty station characterization.’’ See 54 FR 38461, 38464 (September 18, 1989). The cable operator may then file an amended Statement of Account and recalculate royalties, if the operator so chooses.

Call us crazy, but that deck doesn’t look like it’s stacked in favor of the challenger. And while, sure, any operator might voluntarily “choose” to recalculate its royalties upward, we’re guessing that most, if not all, probably won’t.

Of course, the FCC could get the CO and its License Examiners off the hook by jumping back into the business of officially identifying “specialty stations”. But the Commission took itself out of that particular line of work more than 30 years ago, and it probably isn't inclined to get back into it in 2012. After all, “specialty stations” don’t involve “broadband”, do they?

Not really, at least according to a cadre of broadcasters who have claimed, in two separate suits, that Aereo’s system infringes on their copyrights by illegally reproducing and publicly performing copyrighted programs.  (Read the complaints here and here.) The broadcasters also argue that Aereo’s operation would violate New York unfair competition law. Their theory is that Aereo is commercially exploiting the programming and the broadcast infrastructure without authorization in a way that “undermines [the broadcasters’] substantial creative and financial investment in their audiovisual works” as well as the broadcasters’ "efforts and labor". (If we may paraphrase that latter claim, it seems to us to be something like: “Look, there’s a system in place that allows broadcasters to be paid by cable and satellite systems in exchange for carriage of their signals. It’s existed for many, many years. You, Aereo, are unilaterally threatening that system”.)

As the broadcasters see things, Aereo is engaging -- or, more accurately, will engage in , since Aereo's system isn't slated to launch until March 14 -- in the “retransmission” of OTA broadcast signals. Under the copyright laws, of course, the “retransmitter” ordinarily needs to get permission from the copyright owner of the “retransmitted” material before any “retransmission” can lawfully occur. Aereo doesn’t have such permission, so it’s infringing – hence the lawsuits.

Hold on there, says Aereo. Aereo doesn’t “retransmit” the signal in a way that violates the law. Rather, they’re simply a company that rents antennas to subscribers. Those antennas pick up a broadcast signal within the local area; the fact that the antenna doesn’t happen to be in the subscriber’s home isn’t legally significant. I think everyone would agree that, at least up to this point in the analysis, what Aereo has done is completely legal.

But Aereo’s service doesn’t just deliver the OTA signals from an antenna to a TV set. It makes them available on the Internet. Does that constitute a direct retransmission of content that was lawfully received at each individual antenna? Or does it just make it easier for consumers to do what they are otherwise entitled to do anyway?

That, of course, is the $20 million dollar question for Aereo ($20 million being the approximate level of financing it’s rounded up). 

The problem is that there are two lines of precedent potentially at work here – and they lead to different results.

On the one hand, you have the Betamax/Cablevision model. Old-timers will recall the 1984 Betamax case, in which the Supreme Court concluded that use of a VCR by individual consumers for the purpose of “time-shifting” the viewing of programming did not constitute copyright infringement. (All you kids, “VCR” stands for “videocassette recorder” – ask your parents.)

That theory was expanded somewhat in 2008, when the U.S. Court of Appeals for the Second Circuit concluded that Cablevision’s “remote storage” DVR system similarly did not infringe on copyrights. Under that system, Cablevision subscribers no longer had a separate VCR or DVR recording unit in their homes; instead, Cablevision took care of the recording – at the subscriber’s request – within its own system. The subscriber could then access the recorded programming by using its remote control device, just as if the subscriber was using a set-top recording unit. The Second Circuit held that this did not constitute infringing retransmission. The court focused in particular on the fact that each playback transmission went to a “single subscriber using a unique copy produced by that subscriber” – and, therefore, such transmissions were not made “to the public”, an essential element of “retransmission”.

On the other hand, you have the ivi TV and FilmOn.com cases. Those involved companies claiming that they were entitled to retransmit OTA broadcast signals to subscribers over the Internet. As our readers should recall, that claim ran into a brick wall – actually, a couple of brick walls. At least two courts weren’t willing to buy into the notion that an on-line operation should be entitled to compulsory carriage rights under the copyright laws.

Aereo is probably planning to rely on the reasoning in the Cablevision case: Aereo is, after all, providing its service to one subscriber at a time through one antenna at a time. As a result, so the argument goes, any transmission of programming that occurs is not “to the public”, but rather to the individual subscriber. No copyright infringement there, right?

But what of the fact that each retransmission occurs over the Internet, providing access to the programming not just in the comfort of the subscriber’s living room, but anywhere? The Cablevision case did not involve that Internet component; the ivi TV and FilmOn.com cases did. Does that make a difference? Should it?

Which brings us back to the $20 million question. I really have no clue how this is likely to end up, and I will be as interested as anyone to see how the courts will react. Interestingly, the broadcasters have sued Aereo in the U.S. District Court for the Southern District of New York, the court which dealt Filmon.com and ivi TV major setbacks. Bad news for Aereo? Maybe, maybe not: decisions from that court get appealed to the Second Circuit, source of the Cablevision decision. 

Should we read something, then, into the fact that Aereo is launching in the New York market first?  Perhaps, because if Aereo can convince either the District Court or, failing that, the Second Circuit court that it is like Cablevision, it should win. But what about the planned launches elsewhere? I can see further lawsuits, one in each city until a “circuit split” is created on this issue. From there, it could be on to the Supreme Court, source of the Betamax case. There may be some method to Aereo’s madness. This could get interesting.  

But, even if the Supreme Court doesn’t resolve the issue, I know one thing and I’m going to sound like a broken record saying it (Problem understanding that metaphor? Ask your parents, again): there needs to be a significant overhaul of all Copyright Laws, or at least some form of compulsory license to allow on-line transmission of broadcast programming so that the many innovators who actually want to save broadcast television programming can do just that.

This year my post will be more streamlined than in previous years. That’s because, for the first time in about five years, there is some semblance of stability in the webcasting world. In previous years we’ve had intervening court decisions, actions by the Copyright Royalty Board (CRB), proposed legislation, settlement agreements and other factors that contributed a sense that the system was constantly in flux. Not this year. The only substantive changes from last year are: (1) an increase in the royalty rate that is applied to each service category and (2) slight changes to the particular forms to reflect that increase. (And even the increase in royalty rate is no surprise – it’s just what was provided in the five-year plan adopted by the CRB in 2010.)

In addition, the SoundExchange website has really improved since I started these reminders, as has SoundExchange’s outreach to the industry. Most registered webcasters (those who have filed the Notice of Use of Sound Recording Under Statutory License form and made payments/filed Playlist Reports of Use in the past) have probably received a reminder from SoundExchange already. So it’s easier to get clear information about an already simplified process with which many radio stations are already pretty familiar. I've heard from a number of folks that SoundExchange’s responsiveness to individual inquiries has improved as well.

Another reason for this year’s more streamlined approach: we aren’t in the business of just giving it away. If you’re still not clear on the obligations, you’re reaching out to us – or another law firm – seeking to utilize our specialized expertise. We’re happy to help, but bear in mind that there may not be a one-size-fits-all solution available for your particular circumstances.  I, for one, would prefer to provide clients with individualized guidance to ensure that they are fully compliant and can remain that way with the minimum cost and effort.

With that behind us, the 2012 SoundExchange basics come down to a simple “who”, “what”, and “when” – as in, “who am I”, “what must I file” and “when do I have to file it by”.

Who: Any radio station almost certainly falls into one of three basic service categories: commercial, noncommercial (determined by the webcasters’ 501(c)(3) status, not its FCC-licensure) or noncommercial educational (a noncommercial webcaster affiliated with an educational institution whose operations are also substantially staffed by students). Within each service category, there are sub-categories for small broadcasters or microcasters that offer relief if the webcaster stays under a certain aggregate tuning hour threshold (27,777 ATH/yr for commercial broadcasters, 44,000 ATH/yr for noncommercial and 55,000 ATH/month for noncommercial educational). Note that some service categories and, especially, small broadcaster or microcaster sub-classifications may require you to also file a Notice of Election by January 31. (Failure to opt into service categories subject to this deadline could bar you from the category for the rest of the year.)

What: Regardless of the category, each webcaster is required to make payments to SoundExchange. The amount due is tied to the royalty rate for the webcaster’s particular service category:

• commercial broadcasters pay $0.0020 per performance;
• noncommercial webcasters of all stripes get the first 159,140 ATH per month free and pay on a per performance basis after that (noncommercial webcasters following the CRB decision for 2011-2015 pay $0.0021 per performance; noncommercial webcasters opting into the general noncommercial webcasting settlement agreement pay $0.00067 per performance)
• noncommercial educational pay $0.0020 per performance

Of course, all webcasters must also pay a $500.00 per station annual minimum fee.

Most stations must also file Playlist Reports of Use with SoundExchange, listing key information about every song played during the relevant reporting period. The self-classification process becomes especially important here, as noncommercial webcasters operating under the settlement agreements have relaxed reporting requirements, while small broadcasters and noncommercial and noncommercial educational microcasters may be able to pay a $100 “proxy fee” to be exempted from the Playlist Report of Use requirement entirely.

When: Notices of Election, if applicable, and Annual Minimum Payment Statements of Account are due on January 31.Monthly Statements of Account are due every month thereafter, within 45 days of the end of the month to which they pertain (i.e., by March 16 for January, April 14 for February, etc.). These filings must occur, for most service categories, even if you do not have a payment to make for that month (whether because you didn’t reach the required noncommercial threshold or because your accumulated royalties haven’t exceeded $500.00 for the year to date). You must also file your Playlist Reports of Use on this same schedule (subject to certain relaxations for qualifying noncommercial webcasters who might only file quarterly or the small broadcasters or noncommercial/noncommercial educational microcasters who might not file at all). 

That’s the basic structure – same as last year. Clients of the firm should already have received a specialized e-mail as well that outlines the choices you must make and the factors that will influence your decision; our e-mail also provides links to the specific forms you will need. Otherwise, SoundExchange has accumulated all the information and link to the relevant form on one convenient page (Internet-only, non-FCC licensed webcasters will find their information here as well). You should feel free to contact us if you have further questions.

Under the CO’s rules, a cable system carrying a distant “specialty station” is obligated to pay only the “base [copyright] rate” for such carriage, rather than the higher 3.75% rate that would otherwise apply (a discouraging 3.75% of gross revenue from the entire cable tier on which the station is carried). So “specialty” designation is desirable from the point of view of a cable system that carries such a station: the cable system has to pay less in copyright royalties, and that factor in turn makes it easier for cable operators to carry such distant “specialty stations”.

But with the FCC out of the business of keeping a “specialty station” list, the CO has no ready source to consult when it needs to know which stations qualified as “specialty”. Accordingly, since 1989 the CO has used a kind of honor system. Stations which believe that they would have qualified for “specialty status” under the FCC’s definition last in effect in 1981 can so certify in an affidavit to the CO. The CO will put each such self-certifying station on the CO’s “specialty station” list – but not before (a) other potentially interested parties are invited to comment on the claim and (b) the claiming station has a chance to respond to such comments.

What happens when that barrage of pleadings and counter-pleadings has ended? The CO simply adds all claimant stations to the list. If objections have been raised about any particular station, a notation of the objection(s) is included in the listing. The CO does not itself try to resolve any disagreements: its position for more than 20 years has been, and remains, that the CO “should not itself verify the specialty station status of particular stations”. 

This seems like an odd bureaucratic exercise all around. Why, after all, maintain a list which seems to carry no official imprimatur? According to the CO, the goal of the list is to “establish a set of facts so that cable systems can make an informed decision as to whether copyright owners might continue to contest the carriage of a particular station on a specialty basis.” It’s not clear how much the list might really contribute such an “informed decision”.

And how useful is such a list when the CO’s updating efforts are lethargic at best. Since 1989, the CO has issued a total of five versions of the list (in 1990, 1991, 1995, 1998 and 2007). The version currently out for comment would be Number Six (although the CO itself seems to have lost count: a notice it issued last January listed only four previous versions). Note that a lot has happened in the television industry since 1990.

Whatever may be the case, the CO’s most recent public notice apprises us all that the Motion Picture Association of America has objected to a number of stations’ claims of “specialty” status. MPAA’s members benefit from a smaller list if “specialty stations”, since exemptions from distant signal copyright royalties reduce the pool of revenue available to be distributed to program producers.  (MPAA questions that status for: stations broadcasting all syndicated programs; translators for PBS affiliates; home shopping stations; silent stations; English language stations in Puerto Rico; LPTV stations on Channel 6 broadcasting audio targeted at FM radios; and stations that made no supporting showing.)   

Also, a number of additional claims to that status have arrived at the CO’s door since it initially started this latest update process last January. It’s all open for comment. If you’ve got something to tell the CO about it, you’ve got until January 9, 2012.

Meanwhile, if your cable carriage is being restricted now because you do not want to reimburse cable operators for the distant signal copyright fees they would incur and you believe that your station is entitled to specialty status – but you have not filed with the Copyright Office – it’s time to start thinking about the next round of revisions to the list.  Let us know if you would like our help in exploring your options.

We’ve described the SOP of copyright trolls before (here and here). Judge Howell’s latest additions to the troll jurisprudence confirm her commitment to the view that troll-plaintiffs using that SOP are pretty much entitled to the identities of the folks associated with the IP addresses relied on to get the litigation started. In other words, when a troll-plaintiff subpoenas ISPs looking for defendants’ identities, challenges to those subpoenas don’t stand much chance, whether the challenges are based on personal jurisdiction, joinder or First Amendment arguments. Instead, such challenges can be made only after the defendant’s identity has been coughed up. But since the revelation of their identities is precisely what many defendants hope to avoid in such cases – to keep their names from being associated with downloading seemingly racy fare (like “Stripper Academy”, or worse) – Judge Howell’s position gives the troll-plaintiffs considerable leverage for settlement purposes.

(Note, though, that not all John Doe infringement suits involve seemingly sleazy movies. One of Judge Howell’s latest decisions involves allegedly infringing downloads of the critically-acclaimed Oscar® winner, The Hurt Locker.)

In her decisions, Judge Howell rejects arguments presented by slews of defendants seeking to keep the lid on their identities in the face of plaintiffs’ subpoenas. The defendants claimed variously that: they never downloaded anything; they didn’t do anything illegal; they’re entitled to remain anonymous; the court lacks personal jurisdiction over the defendants; etc., etc. – the same arguments the Judge rejected in her decision last March.

While her rationale on the joinder and jurisdiction issues tracks her earlier order, her latest opinions break some new ground on other issues. In response to defendants’ claims that they have not engaged in any infringement and thus need not be identified, Judge Howell says, in effect, “so what?” As she sees it, whether or not any defendant infringed the work is an issue for later, after the defendant had been identified (and, presumably, deposed). A “general denial of liability” is not a basis for “preventing the plaintiff from obtaining the putative defendants’ identifying information”.

Similarly, claims of protected privacy are immaterial because “whatever asserted First Amendment right to anonymity the putative defendants may have in this context does not shield them from allegations of copyright infringement.” Judge Howell also opines (in rejecting a request for a protective order) that any right to anonymity in the context of BitTorrent activity is minimal and outweighed by the plaintiff’s need to get the defendant’s identifying information in order to protect its copyrights.  

Finally, as Judge Howell sees it, any claims of “undue burden” would apply only to the ISP – which would have to do the heavy lifting of matching up IP addresses with names and street addresses – not to the individual defendant, who essentially doesn’t have to do anything to “respond” to the subpoena.  

These cases aggravate the unevenness of the already uneven playing field in this kind of John Doe copyright infringement litigation. Reiterating that I hold no love for copyright infringers, I do believe in strong Due Process protections, especially when those protections are invoked in furtherance of First Amendment values. Even if a BitTorrent user’s First Amendment rights may seem minimal to some, those rights do not evaporate entirely. An important component of traditional First Amendment protection lies in procedural measures that require plaintiffs to clear certain hurdles before a suit can go forward. 

For my money, Judge Howell’s rulings have written these hurdles out of the law as far as John Doe copyright cases go. In Judge Howell’s view, a plaintiff will apparently be allowed to bring a single suit to be heard in a single court against thousands of people who have only the barest connection to each other or to that court’s jurisdiction. Those thousands of defendants will then be effectively forced, regardless of their claimed innocence, to opt for a de facto admission of guilt through settlement simply because that’s cheaper than paying the costs – attorney’s fees, travel, etc. – required to defend themselves in court. The approach that pervades Judge Howell’s decisions reflects a reversal of traditional presumptions, a “guilty of infringement until proven innocent” mindset that absolutely horrifies me. 

So in case any troll-plaintiffs looking for a place to sue thousands of John Doe defendants missed Judge Howell’s March order, she has now reinforced the message in spades: the U.S. District Court in D.C. will welcome your business. But let’s hope that none of those cases go to trial, since the available courtrooms aren’t set up to accommodate 5,000+ litigants at a time.

[One final note: This blogger is aware of claims advanced elsewhere (and referenced by at least one person who commented on my post about Judge Howell’s March decision) that the Judge may hold a longstanding bias in favor of the copyright holders. I want to state emphatically that I do not endorse such claims and have seen no conclusive evidence to support them.]

S.978 would expand the current definition of “criminal infringement” to include streaming (which the bill refers to as “public performance”). Anyone who engages in the unauthorized public performance of a copyrighted work could be criminally charged, as long as (a) the “public performance” involves making the work available on a publicly-accessible computer network and (b) the work was intended for commercial distribution. 

Previously, the statutory definition of “criminal infringement” included only reproduction (i.e., copying) or distribution (i.e., actually transfer or sale of a copy for permanent retention) of a copyrighted work.  The expansion to include streaming is seen by the bill’s sponsors as necessary because prosecutors, concerned that the current law arguably doesn’t criminalize unauthorized streaming, have hesitated to try to prosecute streamers.

The penalty for streaming (set out in 18 U.S.C. §2319) would start with three years in prison and fines. Jail time could go as high as ten years if the infringer is a repeat offender. 

S. 978 would also insert a new penalty provision into Section 2319 aimed at criminal streaming intended to result in commercial advantage or private financial gain for the infringer. Such infringement would warrant a minimum five-year sentence (plus fine), but only if (a) the offense consists of ten or more “public performances by electronic means” in any 180-day period and (b) either the total retail value of the performances exceeds $2,500 or the fair market value of the license required to offer the performance exceeds $5,000. 

Copyrighted works protected here include audio-only works (musical works and sound recordings), audiovisual works (motion pictures, television programs, etc.), and computer programs. So if the bill is enacted, anyone engaged in webcasting without a license would appear to be subject to criminal penalties. While we still believe the focus is firmly on the illegal streaming of audiovisual content (like movies, live sporting events, other television programs), it is clear that the law could be used against anyone who is webcasting without the required licenses.  One more reason to come into compliance with the statutory license applicable to webcasting.

This bill has some serious muscle behind it. All three original co-sponsors are members of the Senate Judiciary Committee, which has jurisdiction over I/P-related legislation. The Chairman of that Committee, Patrick Leahy (D-VT), has expressed support for vigorous enforcement of copyright infringement (including re-introducing a bill to allow websites engaged in repeated and egregious offenses to be shut down entirely). It’s also supported by some serious lobbying interests in the U.S. Chamber of Commerce, RIAA, MPAA, Independent Film and Television Association, Directors Guild of America, International Alliance of Theatrical Stage Employees, Screen Actors Guild, American Federation of Television and Radio Artists, National Association of Theater Owners, and, if that’s not scary enough: the Ultimate Fighting Championship (so, oppose at your own risk). 

So all in all, we’d say this will get some attention and movement.

Bottom line: it is clearly “game on” with regard to any unauthorized uses of copyrighted content. All broadcasters should be certain they are in compliance with ASCAP, BMI, SESAC and SoundExchange (the last relating to the online streaming or “webcasting” of music) and that they fully understand the extremely complex nature of copyright law as it applies to the performance, reproduction or other uses of others’ content. Of course, we are here to help you learn all about it.

As you might guess from, say, the case title which identifies a gazillion defendants only as “John Does”, this case (actually, Howell’s decision involves three separate consolidated cases) was brought by copyright trolls. I described the general troll MO in a blog we posted last fall. 

As I described there, the drill starts when the copyright holder of, say, a movie determines that the work has been shared on-line (through a service like BitTorrent). Normally, all that is known about the sharers is their IP addresses. But that’s enough to file a complaint, identifying the defendants as John Does. Once the complaint has been filed, the plaintiff (a/k/a copyright troll) asks the court for a subpoena directed to all the Internet Service Providers (ISPs) associated with the known IP addresses. The purpose of the subpoena is to get the ISPs to cough up the names and addresses associated with the IPs. Once the troll can thus identify individual defendants, it can start to pressure them into settling in order to avoid the time, hassle and potential embarrassment of a trial.

The ISP can move to quash the subpoena. More often than not, however, the ISP will simply notify its subscribers (i.e., the ones associated with the IP addresses listed in the complaint) that he or she will be identified to the plaintiffs unless the subscriber notifies the ISP that he or she has filed a motion to quash the subpoena. (Time Warner is a notable exception, having fought back in several cases). At this point, many subscribers surrender. They contact the plaintiff's attorneys seeking simply to make the matter go away, in return, of course, for an appropriate payment to the plaintiff.  This plays right into the entire business model of the trolls – use the efficiency of mass litigation to grab as much low-hanging fruit as you can.

My knowledge of this issue has grown exponentially in recent months. At first, I noted (and tracked) the troll trend as an interesting, if irritating, development affecting two interests in my wheelhouse: First Amendment and intellectual property. But the troll lawsuits began to replicate like a virus. And I found myself in the middle of the fray, moving from interested observer to active counselor. I have advised some ISP clients on dealing with trolls’ subpoenas (move to quash? respond?). And I have represented individuals who were notified (by their ISPs) of subpoenas the individuals would need to move to quash. You could say we are now fully engaged in the copyright troll wars.

So I’m thankful to groups like the Electronic Frontier Foundation, Public Citizen and the American Civil Liberties Union. They have filed amicus briefs in many troll cases, arguing (among other things):

• jurisdictional issues (with many John Doe defendants scattered around the country, it’s effectively impossible to determine that any particular court has personal jurisdiction over any of the defendants);
• joinder issues (is it legally permissible to combine all defendants in a single action?)
• First Amendment issues that should be resolved before the identification of John Does can be compelled.

The efforts of these groups have rebuffed many of the trolls. (We recently pointed out on our Twitter account (@CommLawBlog) that EFF was reporting that over 40,000 John Doe defendants were dismissed in a span of just a few weeks from cases brought in California, D.C., Illinois, Texas and West Virginia. Such victories are immensely helpful – any disruption in the smooth progression from mass filing to large scale settlement deters future litigation.

That brings us back to Judge Howell's order, which does defendants no favors and, thus, should encourage the trolls. 

The case itself isn’t unusual. The plaintiffs are movie studios whose works were downloaded and shared via BitTorrent programs. Per the usual drill, subpoenas were issued to various ISPs. Time Warner moved to quash the subpoenas, arguing that having to turn over all the requested identifying information would impose an undue burden and expense; alternatively, Time Warner asked for up to three years to respond. EFF, Public Citizen, the ACLU Foundation and the ACLU of the Nation's Capitol filed an amicus brief in support of the defendants, arguing the jurisdiction, joinder and First Amendment issues.

Addressing Time Warner’s arguments, Judge Howell found that the subpoenas aren’t unspecific, undefined or unduly broad. While there are a large number (1,028 total) of subpoenas, they all seek basic information, which Time Warner appears to be able to provide, if slowly. (Time Warner contends it can produce only 28 IP addresses a month, which seems somewhat low when compared to the lookup/production rates of other ISPs that were entered into the record.)  In addition, plaintiffs offered to pay for extra staff to assist in the process.  In view of these and other factors, Judge Howell simply wasn’t convinced that Time Warner would be unduly burdened if forced to comply with the subpoena.

Unfortunately, the Judge similarly had no problems rejecting the amici’s arguments:

Joinder: Claims against a number of separate and distinct defendants can generally be joined if either (a) the claims arise from the same transaction or occurrence (or series of transactions or occurrences), or (b) a question of law or fact exists that is common to all the claims. The amici argued that the 1,000+ defendants were engaged in similar, but technically separate, conduct: they were at separate locations, using separate computers and not always interacting with each others. 

Judge Howell disagreed. The nature of BitTorrent necessarily requires that every defendant is interacting with every other defendant. (Later users are really pulling little pieces from every prior user to speed up the download process – that’s my attempt at oversimplifying a BitTorrent explanation.)  In addition, the plaintiff must establish the same legal claims against every defendant. Judge Howell ruled that there would be no prejudice to any individual defendant because, at least at this point in the litigation, they will only be identified; they will not be required to respond or assert a defense until later (if at all). By contrast, this identification is essential to the plaintiffs’ ability to move their case forward.

Jurisdiction: The amici argued that each defendant must be sued in the jurisdiction in which he or she resides, as due process principles require. Judge Howell didn’t disagree, but instead held that this concern is better raised later in the process: each defendant will have ample opportunity to assert jurisdictional defects down the line. 

First Amendment: The amici argued that the defendants’ use of BitTorrent constituted conduct protected by the First Amendment, assuring the defendants anonymity. Judge Howell acknowledged that BitTorrent users’ conduct is protected “expressive activity”. But she also found it entitled only to minimal protection because “the [defendants’] ultimate aim ‘is not to communicate a thought or convey an idea’ but to obtain movies and music for free”. The plaintiffs were able to overcome this minimal protection for a number of reasons: plaintiffs had made a prima facie claim of copyright infringement; they are (at this point in the litigation) making requests for specific information they can’t obtain otherwise; there is an overriding need for the information to resolve the case; and the defendants do not have a significant privacy interest, since Time Warner’s terms of service specifically preclude illegal infringing activity.  

While other courts have declined to be completely persuaded by similar joinder/jurisdiction/First Amendment arguments, most have at least questioned the plaintiffs’ need for widespread discovery leading to the identification of these defendants. Judge Howell’s order is probably the strongest I’ve seen in favor of keeping all defendants as part of the same case through discovery. 

Judge Howell’s decision has a number of important implications:

First, it plays right into the copyright trolls’ hands. Their business model is built upon efficiency and designed to force quick settlement. The sooner the troll can tie a particular, identified defendant to a particular instance of alleged infringement, the quicker the troll can squeeze that defendant for a pre-trial deal. (Selling points: avoid litigation hassles/costs, avoid embarrassment from having your name connected, rightly or wrongly, with unlawful downloading – especially if the material allegedly downloaded is (how do we say this politely?) unseemly.) 

Any bump in the litigation road costs money and devalues the lawsuit, as far as the troll is concerned. Requiring the plaintiffs to sue individual defendants, or at least file lawsuits involving the same movie in every jurisdiction where a defendant is located, is a serious disincentive to these mass lawsuits. 

I want to be clear on one thing: if an individual actually engages in copyright infringement, he or she needs to be held accountable.  Copyright infringement is not a “victimless crime”. It is a real, and increasingly common, violation of law that has a considerable economic impact.   But there is no reason to allow the legal process – and especially First Amendment and Due Process values – to be hijacked to redress these injuries.

But that’s what’s happening when Judge Howell says the amicis’ arguments can be deferred.   The result will be nearly irresistible pressure on a significant number of defendants to settle their cases before they are formally identified in court – even though they may have legitimate defenses to raise, including complete innocence.

Want an example? Imagine that you’re accused of downloading a pornographic title. You know you did not download this movie.  You have a wireless router that may not have been properly secured, or maybe it was hacked while you were out of the country. You can prove all of this. So you’re as sympathetic a defendant as possible. Prior to Judge Howell’s ruling, you would ordinarily not be subject to identification through ISP-directed subpoenas unless you were sued in your home court. But now you’re stripped of any of the pre-identification procedural defenses. Under no circumstance do you want your name publicly associated with a pornographic movie, even if the allegation can eventually be disproven – particularly because disproving it will require expensive and time-consuming litigation.  

Given those circumstances, a defendant could easily conclude that the only acceptable alternative would be to settle (even if the plaintiff’s cash demand were inflated as a result of Judge Howell’s ruling). Again, I don’t want to exonerate the guilty, but I also don’t want to allow the threat of a kind of “outing” to serve as an undue pressure point on innocent people. Yet that’s what is really occurring here.

The second result of Judge Howell’s decision?  She and her colleagues will likely feel the full brunt of this decision in their own workloads. As noted earlier, tens of thousands of John Doe defendants have already been dismissed on procedural grounds in jurisdictions other than D.C.   I’m guessing that all of those cases, and lots more, will be funneled to the District Court here in the Nation's Capital from here on out. Indeed, we’ve already seen one current case apparently involving a pornographic film (West Coast Productions v. Does 1-5,829) that followed that arc: initially a large portion of the defendants were severed from the case when it was filed in West Virginia because the defendants didn’t live there; the plaintiffs refiled against all non-West Virginia defendants in D.C., without regard to whether the remaining defendants all live in D.C. If that’s not evidence future plaintiffs will forum-shop to D.C., what is?

So Judge Howell (and her D.C. colleagues) may soon reap what she has sown.

It is perhaps easy to lose sight of the fact that the must-carry system arose from, and is designed primarily to address, copyright concerns. When an MVPD operator retransmits programming which it obtains from, say, an over-the-air broadcaster, the MVPD operator engages in a “use” of that material for which the programming’s copyright holder is entitled to royalties. Absent compulsory licenses, the MVPD operator wishing to retransmit broadcast signals would have to negotiate separately with each broadcaster (and, possibly, others holding the rights to the broadcaster’s programming). That would be an extraordinarily cumbersome process.

The compulsory license approach takes care of that. That approach requires that MVPDs pay royalties into a governmentally-administered fund which is then doled out (by a governmental tribunal) to program suppliers entitled to payment from the fund. There are quids and quos on both sides. MVPDs get access to programming without the burden in individualized negotiations, but they have to carry (hence “must-carry”) local stations; broadcasters are entitled to carriage, but they have to accept the governmentally-determined royalties. (This over-simplifies the system somewhat, but you get the idea.)

For anyone wishing to read the statutory provisions establishing the various compulsory licenses, check out Sections 111 (the Cable Compulsory License, covering cable TV carriage of local and distant broadcast signals), 119 (the Satellite Home View Act, allowing satellite operators to carry distant broadcast signals) and 122 (the Satellite Home Viewer Improvements Act, permitting satellite carriage of local TV signals).

STELA addressed aspects of each of the three. And, as noted above, it included a requirement that the Copyright Office produce, within 18 months of enactment, a “Report on Market Based Alternatives to Statutory Licensing”. The law was enacted on May 27, 2010. That means the report is due around the end of 2011.  The Copyright Office (after procrastinating slightly, it seems) is now starting that process. 

The Copyright Office isn’t necessarily advocating for extinguishing the compulsory licenses (and, lest there be any question about this, neither are we). It’s just trying to get a better idea of the current legal and business landscape, “exploring marketplace alternatives that would permit cable operators and satellite carriers to retransmit the entire broadcast signal just as they would have been allowed to do under the statutory [i.e., compulsory] licenses.”

The alternatives suggested by the Copyright Office include:

Sublicensing – Instead of a compulsory license allowing an MVPD operator to carry a broadcast signal in its entirety, this approach would move the rights clearance process further down the chain. Broadcasters would have to clear all rights in the programs they carry for ultimate performance by third party distributors. This clearly has an eye toward incorporating online streaming, as it provides more flexibility than the somewhat rigid and confining licenses currently in place. The FCC suggested this as a viable alternative as far back as 1989, as did the Copyright Office in 1997. Both pointed to the fact that sublicensing has been utilized in connection with carriage of nonbroadcast programming on more than 500 channels MVPD channels. But sublicensing is a market-driven process that is (to use the Copyright Office’s language) “impeded” by the availability of compulsory licenses.  The validity of the analogy between nonbroadcast and broadcast programming which the Copyright Office draws is not clear: the NAB, for example, has noted that at least some broadcasters lack the core financial incentive to engage in sublicensing.

Among the more interesting questions the Copyright Office asks are:

Would sublicensing be an effective alternative to both the local and distant signal statutory licenses? (On the point, the Copyright Office specifically solicits comments about the current state of sublicensing of television programming in the United States)

Are broadcast stations truly different from cable networks, as the NAB suggests?

What percentage of the public views broadcast stations through their cable and satellite subscriptions rather than directly over the air?

Are there sublicensing examples from other countries that may be used as models in this regard?

Private Licensing – This allows a cable system or satellite carrier to negotiate with the copyright owner of a specific program for the right to perform the work. Of course, this market-driven process would appear to benefit the program producers to the detriment of the actual stations (and, we think, would pose a danger to local network affiliates, as we’d figure that cable systems and satellite carriers would try to negotiate with the most popular shows, especially network shows, to provide them as part of an “on demand” package). This alternative is also held back somewhat by the fact that the copyright owners of each individual program may be hard to identify.

Among the questions asked here are:

Would privately negotiated copyright licenses afford a plausible and effective marketplace alternative to the three existing statutory licenses?

How many private copyright licenses currently exist and how do they function”

Are there any successful private licensing models currently in operation outside the United States that the Office may study?

Collective Licensing – This involves copyright owners getting one or more third party organizations to represent them en masse. It is already employed on the radio side, with ASCAP, BMI and SESAC setting the rates and terms for performance of musical works. There is no equivalent on the television side. 

Among the questions here are:

With respect to the development of a collective licensing body for audiovisual works, are there lessons to be learned from the experience with strictly audio works?

Are there collective licensing models around the world that may be relevant to this study?

In addition, the Copyright Office welcomes other ideas which might be successful. It also asks how it might transition from the compulsory licenses to another method. For example, would it be preferable to transition using: (a) a station-by-station basis; (b) a staggered approach which would phase compulsory licenses out in stages; or (c) a sunset approach (sunsetting to occur some years in the future) which would provide ample time for all parties to prepare for the transition)?

Again, this is a very preliminary, Congressionally-mandated proceeding.  And, since the elimination of compulsory licenses would eventually require Congressional action, it’s clear that the Copyright Office does not have the last word here. But it’s also clear that the continued availability of compulsory licenses is at least on the table for the moment – and, as a result, so is must-carry. Broadcasters who depend on must-carry (because, for example, they believe they lack sufficient bargaining power to make retransmission consent workable) in particular should be aware of this.   We expect that there will be further opportunities to comment on more specific proposals should the elimination of compulsory licenses move forward. But if you think you have information, insights or opinions to offer, you need to file comments with the Copyright Office by April 17, 2011 or reply comments by May 17, 2011.

A.        Noncommercial webcasters who have NOT elected to participate in any major webcaster settlement agreement

There is absolutely no distinction on the noncommercial side between a webcaster that operates a broadcast station and one that does not. But there is a distinction between an entity that elects to participate in the general noncommercial webcasters settlement agreement (the “General Agreement”) and one that does not.  (Note: Participation in that agreement offers significantly better terms, in my view.) Fortunately, you can elect that status even if you have not done so before. (Helpful reminder: even if you have previously elected that status, you must “re-up” every year.) For reasons discussed in Section C below, I strongly recommend that the General Agreement option be chosen, if at all possible.

However, if you cannot or decide not to participate in the General Agreement or any other webcaster settlement agreement, your obligations are:

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station. 

Monthly Statement of Account Form and Fee – File any fees incurred for exceeding the 159,140 aggregate tuning hour maximum, along with the 2011 Noncommercial Webcaster Monthly Usage Statement of Account form found here.  You must file this form even if no fees have been incurred, marking “zero” in the "excess performances" column.  Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you exceed 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on monthly basis. Also note that you may be able to opt out of this requirement if you qualify as a Noncommercial Microcaster (see Section D below for details).

Notice of Election – No notice of election is required. 

B.        Noncommercial webcasters who HAVE elected to participate in the webcaster settlement agreement between CPB (on behalf of PUBLIC RADIO STATIONS) and SoundExchange

As in previous years, some noncommercial stations do not have to file forms with SoundExchange. Entities subject to this exemption include station that are: CPB-supported; NPR members; National Federation of Community Broadcasters members; or part of American Public Media, the Public Radio Exchange or Public Radio International. Under the terms of the separate CPB/SoundExchange settlement agreement, NPR’s Public Radio Interactive is making those payments. Stations participating in the CPB/SoundExchange agreement will be contacted by Public Radio Interactive with regard to their obligations.

C.       Noncommercial webcasters who HAVE elected to participate in the General Agreement and are NOT considered Microcasters because they have an average of at least 44,000 aggregate tuning hours per year 

While a decision (“Webcasting III”) by the Copyright Royalty Board last December sets the default royalty rates and related terms for non-interactive webcasters, those rates and terms vary somewhat from rates and terms specified in the General Agreement. If you are a party to the General Agreement (and I recommend that all eligible entities take this option), you are still subject to certain obligations. (As mentioned in Section A, above, you must renew this classification each year.) Those obligations include:

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Noncommercial Webcasters Form found here. 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station.

Monthly Statement of Account Form and Fee – File any fees incurred for exceeding the 159,140 aggregate tuning hour (ATH) maximum, along with the 2011 Noncommercial Webcaster Monthly Usage Statement of Account form found here. You must file this form even if no fees have been incurred, and you must calculate and insert your total ATH in the appropriate columns even if you do not exceed the maximum. Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you:

exceed 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on monthly basis; and

do not exceed 44,000 aggregate tuning hours in the entire year 2010, in which case you can pay $ 100 for the right to be exempted from this requirement altogether, as per section D, below. 

D.        Noncommercial Webcasters who HAVE elected to participate in the GENERAL AGREEMENT and ARE considered Microcasters because they had fewer 44,000 aggregate tuning hours last year.

This section applies to extremely small noncommercial webcasters who have signed onto the General Agreement. As we have explained in years past, these webcasters can be exempted from the playlist reporting requirement and, by definition, will not be paying royalties because they will never exceed 159,140 aggregate tuning hours in any given month.  Again, to be eligible, you must have elected to participate in the General Agreement in previous years and renew that election this year.

If you choose this category, your obligations are:

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Noncommercial Microcaster Form found here. If you wish to avoid filing Playlist Reports of Use, you must file a $100 proxy fee with this form.

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Noncommercial Microcaster Minimum Fee Statement of Account form found here. A separate statement of account must be filed for each channel or station.

Monthly Statement of Account Form and Fee – By definition, a station in this classification will not exceed 159,140 aggregate tuning hours, so no monthly statement of account is required.  

Playlist Reports of Use – Of course, the benefit of this classification is that you can opt out of filing Playlist Reports of Use. If you do not choose this option, the reports must be filed on a monthly basis; SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

Again, the requirements described in all of the above sections do not apply to "noncommercial educational" webcasters, i.e., noncomm stations whose operations are not substantially staffed by students. If you are a noncommercial educational webcaster, you should review our post relating to your particular situation.

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

Annual Minimum Statement of Account Form and Fee - You must file an annual minimum fee of $500 per channel by January 31, 2011 (or within 45 days of commencing webcasting). The fee must be filed along with the 2011 Noncommercial Educational Webcaster Minimum Fee Statement of Account form found here. A separate form must be filed for each channel or station. 

Monthly Statement of Account Form and Fee – You must also file the 2011 Noncommercial Educational Webcaster Excess Monthly Liability Statement of Account form found here. If you exceeded the 159,140 aggregate tuning hour maximum, you must submit any resulting fees along with the form.  You must file this form even if no fees have been incurred, and you must calculate and insert your total ATH in the appropriate columns even if you do not exceed the maximum. Again, a separate form must be filed for each channel or station.

Playlist Reports of Use – Playlist Reports of Use must be filed on a quarterly basis using the template report for filing (in Excel format) found here, unless you:

exceeded 159,140 aggregate tuning hours in a given month during 2010 or 2011, in which case you file on a monthly basis; or

did not exceed 55,000 aggregate tuning hours in any given month in 2010 and do not expect to exceed that level in the year 2011 – in which case you can file the proper Notice of Election form (see below) and pay $100 for the right to be exempted from this requirement altogether.

Notice of Election – There is no need to file a Notice of Election unless you qualify for exemption from filing of Playlist Reports of Use. If you never exceeded 55,000 aggregate tuning hours in any month in 2010 and choose to pay a $100 “proxy fee” in lieu of filing reports, you may elect to do so by filing a Notice of Election. You do that by filing the 2011 Noncommercial Educational Webcaster Notice of Election form found here. If you do not meet the eligibility standards, or if you choose not to seek an exemption, you need not file the form.

Again, these forms apply to stations that are noncommercial educational webcasters. If you are not a noncommercial educational webcaster, please check our posts describing the requirements for commercial webcasters or noncommercial (but not educational) webcasters.

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

A.        Commercial broadcasters, whether or not participating in the Webcaster Settlement Agreement between the NAB and SoundExchange:

There used to be a distinction between those broadcasters who had chosen to participate in the settlement agreement (NAB/SoundExchange Agreement) between the National Association of Broadcasters and SoundExchange and those who had not signed onto that agreement. However, the recent Webcasting III decision of the Copyright Royalty Board (CRB) has eliminated any such distinction on the commercial side. As a result, all Commercial Webcasters who are (a) FCC licensees of an AM or FM radio station and (b) simulcasting at least one channel on the Internet, have these obligations in 2011:

Notice of Election – There is no requirement to file a notice of election unless you are not currently participating in the NAB/SoundExchange Agreement and wish to do so (although as far as I can see there is absolutely no benefit to joining that agreement now). 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Broadcaster Minimum Fee Statement of Account form found here. (Note: The form refers to the NAB/SoundExchange Agreement but that is of no consequence because the Webcasting III decision eliminated all distinctions between the rates and terms specified by the CRB and those laid out in the NAB/SoundExchange Agreement. As a result, all commercial webcasters who are also broadcasters are now created equal for copyright royalty purposes.) 

Monthly Statement of Account Form and Fee – File any fees incurred beyond the $500 annual minimum already paid by using the 2011 Broadcaster Monthly Liability Statement of Account form found here. You must file this form even if you’re not actually paying because your cumulative fees for the year have not yet exceeded $500.  Each Statement of Account is due within 45 days of the end of the month to which it pertains. 

Playlist Reports of Use – Playlist Reports of Use must be filed on a monthly basis. SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

B.        SMALL commercial broadcasters who HAVE elected to participate in the Webcaster Settlement Agreement between the NAB and SoundExchange:  

A select few broadcasters who are simulcasting on the web also qualify as “Small Commercial Broadcasters” and are treated differently, mainly because they can be exempted from filing Playlist Reports of Use. 

This distinct classification applies only to those broadcasters who: (1) elected to participate in the NAB/SoundExchange Agreement; and (2) had fewer than 27,777 aggregate tuning hours in the previous year.  These Small Commercial Broadcasters have one additional step to complete before January 31, but they will save a lot of time in the future because they do not have to file playlist reports of use on a monthly basis.  Operators qualifying as “Small Broadcasters” have these obligations in 2011: 

Notice of Election – File a Notice of Election by January 31, 2011 on the 2011 Notice of Election for Rates and Terms for Small Broadcasters Form found here. This Notice of Election must be accompanied by your $100 “proxy fee”. 

Annual Minimum Statement of Account Form and Fee – File an annual minimum fee of $500 per channel by January 31, 2011 using the 2011 Small Broadcaster Minimum Fee Statement of Account form found here. 

Monthly Statement of Account Form and Fee – File any fees incurred beyond the $500 annual minimum already paid by using the 2011 Small Broadcaster Monthly Liability Statement of Account form found here. While it is extremely unlikely that a small broadcaster’s cumulative fees for the year would exceed $500, you must file this form every month whether or not any payment is due. Each Statement of Account is due within 45 days of the end of the month to which it pertains. 

Playlist Reports of Use – Of course, the benefit of this classification is that you can opt out of filing Playlist Reports of Use. If you do not choose this option, the reports must be filed on a monthly basis.  SoundExchange prefers that you adhere to the template report for filing (in Excel format) found here. Each Playlist Report of Use is also due within 45 days of the end of the month to which it pertains. 

Remember, your annual minimum statement of account forms and payments (and Notice of Election, if applicable) are due by January 31, 2011.  You cannot file these forms electronically, and there is a penalty for late payment (or worse consequences, for late-filing a Notice of Election), so if you haven’t gotten started yet, now would be a good time.

That’s why we weren’t surprised to see the CRB use those settlement agreements as its starting point in Webcasting III. And we’re certainly not surprised that the CRB was able to quickly dispose of the attempts from each side to move the needle by a couple points. It doesn’t appear that either the webcasters or SoundExchange (representing the recording artists) is utterly dissatisfied with the final result – we’re certainly not hearing the outcry that greeted Webcasting II. 

For now that’s all we’re going to say about the proceedings themselves. If you really want to know more, you can take the time to pore over the 137 page decision. But we suspect you won’t because, like most people, you don’t really want to know how the sausage is made; you just want it on the plate in front of you. So we’ve compiled this handy chart comparing the royalty rates for the various webcaster classifications for 2011-2015. Two important notes: (1) as in previous years, there is a $500 annual minimum fee per channel which functions similar to a non-refundable deposit against payment obligations incurred under these rate structures; and (2) noncommercial rates only apply if station exceeds 159,140 ATH/month. 

 If you’re paying attention, two things jump out here. First, the CRB has taken the royalty rates found in the major WSAs and more or less applied them across the board to webcasters meeting the definition for the relevant class, whether or not the webcaster originally opted into an available WSA. (For webcasters who opted into a WSA, the WSA still takes precedence.). And second, there are fewer and fewer differences between the various classes of broadcasters.  

When you think about it, this makes sense, since the ultimate goal here is to figure out the going market rate for a performance – which suggests that there should be little to no difference across each class, although it still seems appropriate to offer a benefit (in the form of the first 159,140 ATH free) for noncommercial webcasters.

Of course, that’s not the end of the meal. A heaping helping of mandatory playlist reports still sits on your plate and, frankly, many webcasters find them pretty hard to swallow.  But you don’t have to worry about them right now. We figure you’re just about full after everything you’ve already digested, so we’ll put those away and reheat them in the very near future when we offer a refresher course on the required filings you’ll need to make throughout 2011. 

Check back here in January, in advance of the first deadline of 2011, which would be January 31, the deadline for the filing of notices of elections and annual minimum payments.

While there are a number of different species of the Troll, they all tend to prey on folks who aren’t taking basic steps to avoid exposure to liability. We have previously written about the need to shore up defenses against potential liability from your use – and your employees’ use – of social media on the job. If you haven’t acted on our suggestions yet, the increasing Troll population gives you one more incentive to do so.

The Troll is opportunistic, like a virus. It obsessively seeks out apparent copyright violations and when it finds what appears to be an infringement – possibly the unauthorized post of copyrighted text, possibly the P2P transfer of unauthorized copies of files (like music or movies) – the Troll zeroes in. 

One Troll species has tended to focus on printed content taken from online news sites that finds its way onto somebody else’s site (such as a chat room, discussion board or blog). Others are able to detect particular films or videos being downloaded to IP addresses through such file-sharing programs as BitTorrent. Once such seeming infringements pop up on the radar screen, the Troll goes to work.

Its first order of business appears to be to file a lawsuit alleging copyright infringement.  (Intentionally unnerving factoid: In 2010 alone, more than 14,000 such suits have already been filed.) In many if not most instances, the Troll knows only the IP addresses – not the names – of the alleged infringers, but that’s not a problem: the defendants are all listed as “John Doe” (along with the various IP addresses) in the initial court papers. (Hence the name “John Doe lawsuits” often given to such litigation.) The Troll isn’t really concerned with relatively minor details; it can always sort those out later, when it’s got your attention. 

That comes next: once the suit is filed, the Troll obtains a subpoena addressed to any and all ISPs or other such services used in the alleged infringement. The subpoena seeks the identifying names and addresses associated with the IP addresses. When those are in hand, the stunned individual defendants are besieged with offers of quick and quiet settlement, for a price. Since U.S. law provides for hefty statutory damages – that is, the plaintiff doesn’t need to prove that it has actually suffered any monetary damages in order to score big – and since the cost of litigation can be similarly hefty, there is considerable incentive to pay the nuisance price even if the defendant plainly did not infringe anything. There is even more incentive if the defendant is, or could be, liable for infringement.

Want a more detailed glimpse into the nitty-gritty? Check out reports from the EFF, or Wired, or Ars Technica. It’s pretty scary. (Sadly, the core of the Troll operation is reportedly populated primarily by lawyers. Please don’t hold that against the rest of us.)

In general, there are three ways that a media entity might get cross-wise with a Troll. Fortunately, we may be able to help you no matter which situation applies. 

First, the infringement may occur from content posted on your website – maybe on a discussion board or chat room that allows your listeners, viewers or others to interact. Or maybe you provide the opportunity for visitors to post their own comments on your site. All it takes is somebody, anybody, posting copyrighted content somewhere on your site. Yoo-hoo, Copyright Trolls – Come and get it!!! 

(A likely source of such content: reports taken from online news sites, particularly during highly partisan discussions of hot button issues. Perhaps the most famous such Troll operating in this area: Righthaven, LLC, a company that has made a business of purchasing copyrighted news content from the content’s creators and then aggressively suing those who post that content without permission. Check out EFF’s description of Righthaven’s MO here.) 

The good news is that you can get yourself absolute immunity from this kind of infringement claim by taking a few simple steps to obtain the protection of Section 512 of the Digital Millennium Copyright Act. With a few tweaks to the Terms of Service of your website, the filing of a form with the United States Copyright Office and a minimal amount of vigilance on your part – enough to respond to the occasional Takedown Notice sent to your Designated Agent – you should be good to go. Sure, there’s a $105 filing fee for that Copyright Office form, but that’s peanuts compared to the potential statutory damages that are in play for copyright infringement. (If this sounds familiar, it’s because we’ve written about it here before; so have the folks at Wired.)

Another target of the Trolls: illegal downloaded/sharing of movies and the like. If somebody on your staff does this using your equipment, your IP address will likely show up in the Trolls’ search and, bingo, here comes the infringement claim against you. Once this happens, it may be Too Late to apply any easy fixes, so the trick is not to let it happen in the first place. We’ve spoken before about adopting guidelines for use of social media in the workplace. This is one situation that those guidelines would address. 

Yet another Troll trick: If you’re an Internet service provider (or a cable or telephone company bundling or reselling service), you might receive a subpoena asking you to identify the subscriber found at a particular IP address. In some of these cases, you might have a responsibility to forward the subpoena to the subscriber so that he/she can challenge the subpoena himself.  We can walk you through the process of notifying a subscriber, challenging a subpoena or responding to the subpoena with the required information.

If you do happen to get sucked into any kind of Troll-initiated infringement action, first take a deep breath, then take heart. The EFF has already identified a few arguments that might counter the Trolls in some cases. For example:

• Trolls often join all the defendants in a given case in a single lawsuit filed in a single District Court, which may entail constitutional due process problems.
• Trolls often sue based on the IP address of the computer used to download/share the copyrighted work. But the owner of that computer might not be the same person who actually committed the copyright infringement at issue.
• There is a First Amendment right to anonymous speech which might outweigh the need identify the speaker/defendant. 

In fact, if there’s one upside to the increase in Copyright Trolls, it’s that that increase has spawned a pretty solid body of materials aimed at countering such suits – so filing the required motion to quash isn’t nearly as difficult or expensive as it used to be. 

Still, an ounce of prevention is worth a pound of cure – so tighten up your social media policies and, if nothing else, act now to GET YOURSELF UNDER THE SECTION 512 UMBRELLA!!!

The most recent royalty term expired on December 31, 2009 without any agreement or court order setting the rates for 2010 and beyond. Past practice teaches that it takes a while to set the permanent rates. So preliminary agreements were reached to cover the period until new rates can be established by the U.S. District Court for the Southern District of New York. (That’s the court that must approve all ASCAP/BMI rates, thanks to a consent decree imposed a few years back to end anticompetitive practices of ASCAP and BMI. SESAC isn’t subject to that consent decree).  As we reported last January, those preliminary agreements set the “old” interim rates, which amounted to a 7% reduction from 2009 rates. 

Those initial preliminary agreements were really just short-term “bridge” measures designed to assure the continued flow of at least some royalty payments in the absence of any other payment arrangement. Those measures weren’t meant to last, and they didn’t.

Meanwhile, the RMLC continued working with the Court, ASCAP and BMI on two separate fronts. 

First, looking toward the long haul, the parties negotiated – and continue to negotiate – final royalty rates for the next full five-year period running until December 31, 2014. 

Second, they were also working on determining an appropriate rate for the interim period lasting from December 31, 2009 (i.e., when the last five-year term ended) until the rates covering the next period are set (i.e., when the negotiation mentioned in the preceding paragraph are concluded). As noted above, the initial 7% reduction announced last January was understood to be a bridge rate to keep money flowing into the ASCAP and BMI coffers until the parties had had a chance to come up with interim rates. (Got it? If not, check our blog from last January where we introduced this topic.)

As we reported back in May, the District Court established the interim rate to be paid by broadcasters to ASCAP. While broadcasters had initially agreed to pay $217 million industry-wide for short-term “bridge” purposes, the District Court decreed that the interim number should actually be $192 million. 

Lo and behold, BMI reached an agreement in late June that will reduce the interim royalties paid by the broadcast industry to BMI from $217 million (the initial “bridge” rate as of January) to . . . $192 million (the now-operative interim rate which will remain in effect at least through 2010).  Where they got this number isn’t too hard to figure out; we're not entirely sure why it took six weeks to get there.  

Here’s a joint statement issued by RMLC and BMI:

The Radio Music License Committee and BMI have reached an interim fee agreement in the radio industry’s rate making proceeding which began earlier this year. The interim fee agreement takes effect August 1, 2010, and calls for an industry fee reduction from $217 million to $192 million. (This follows BMI’s voluntarily agreeing to provisionally lower fees paid by the industry from $233 million to $217 million as of January 1, 2010).

The parties agreed to these terms in order to expedite court determination of an appropriate final fee retroactive to January 1, 2010. The agreement was reached by the parties without prejudice as to final fee consideration.

We’re also happy to provide you with a potential timetable for implementation. Broadcasters should have begun seeing a 10.8% average decrease in monthly billings in June, 2010 (over and above the prior 7% decrease instituted at the beginning of the year). The agreement with BMI is effective August 1; the exact decrease has not been set, but it is expected to begin with the August 2010 billing and be about 10% (again, over and above the prior 7% decrease).

ASCAP and BMI appear to be digging into their positions that they should be getting more money in the long haul – a position which is likely to prolong the negotiations relative to establishment of final rates for the 2010-2014 term. As a result, broadcasters may want to get acquainted with these current interim rates because, “interim” or not, those rates could be with us for some time to come.

The actual details – including when the reduction will be implemented and how it will be allocated on a per-station basis – should be announced in the near future. Check back regularly for our update. But here’s what we know now (thanks mainly to an update on the Radio Music License Committee website):

• Individual stations will pay less to ASCAP during this interim period than they paid in 2009;
• Though the now-discarded interim rate was imposed as of January 1, 2010, stations won’t get any money back for any “overpayment” so far in 2010 – that is, even though Judge Cote’s bottomline number is less than the previously-announced/now-superseded interim rate, and RMLC members will thus have technically overpaid some since January, anyone who overpaid should NOT expect a rebate check in the mail; instead the interim fee adjustments will be worked into your bill starting in June or July bill – so keep an eye out for that;
• This is temporary, applicable only until the permanent rate-making decision is issued by the District Court – and it’s subject to retroactive adjustment once that permanent rate is set.

Here’s what we don’t know:

• Just how much of a reduction any individual broadcaster will see in its individual bill from ASCAP and when it’ll first see that reduction;
• Whether broadcasters will see a similar reduction – or any reduction at all – from BMI (similar court proceedings are pending relative to BMI, so we may expect some decision on that point shortly);
• How long the interim rate will be in effect (it could be years before the permanent rate is set).

As we said, we’ll tell you more when we know more.

The CRB is now effectively proposing to adopt the terms of two of the 2009 agreements as the official rules governing the 2011-2015 term after parties to those agreements suggested that their agreed-to terms might usefully be applied them to all similarly-situated webcasters.  The main difference: where the 2009 settlement agreements were elective (i.e., parties could choose to be subject to the agreements or not), the agreed-to terms will now govern all webcasters in the relevant category.  

The particular agreements relate to (a) participating commercial broadcasters and (b) noncommercial educational broadcasters streaming on the web. (Commercial broadcasters and noncommercial webcasters remain free to enter into their own individual, private, and voluntary agreements in lieu of the regulations but, of course, the entire purpose of a statutory licensing scheme is to relieve copyright users of that burdensome task.) 

The full terms proposed by the CRB may be found in the notice of proposed rulemaking published in the Federal Register. You can also find summaries of the agreements on which those terms appear to be based here (i.e., the settlement between SoundExchange and the NAB regard commercial broadcasters) and here (i.e., the settlement between SoundExchange and noncommercial educational webcasters). 

Note that these are still just proposed rules. The CRB will take comments on the proposals until April 22, 2010. It will then review any comments it receives and will decide whether to make these proposed rules final and official.

While we do not expect many individual broadcasters to file comments on these rates and terms – after all, the rates and terms have already been negotiated out and agreed to by many, if not most, of the affected parties – we are available to discuss this in more detail and assist you in filing comments if you desire.

We will also notify you with regard to any further developments with regard to the 2011-2015 terms and conditions for these commercial broadcasters, noncommercial educational webcasters, as well as any developments in the other proceedings of interest to the webcasting community (primarily the noncommercial, but not educational, webcasters).

As we’ve discussed in the past, primarily in relation to webcasting, there exist two copyrights in any publicly-performed song.  One is the copyright in the underlying “musical work”, i.e., the song itself (consisting of the music and lyrics). That copyright is generally owned by the songwriter (although it may be transferred to, e.g., a publishing company).  The other – which is not at issue here – is the copyright in the “sound recording”, i.e., the particular version, or performance, being transmitted at any particular time. That copyright, which is sometimes referred to as the “performance right”, is generally owned by the recording artist performing that particular version (although, again, ownership of the copyright may be transferred to, e.g., the record company). 

Songwriters – the folks who own the rights in the underlying “musical work” – are for the most part represented by agencies which collect and distribute royalties for the broadcast (or webcast) of their works. These agencies include ASCAP, BMI and SESAC (the Society of European Stage Authors & Composers).

Because of prior antitrust actions taken against them, ASCAP and BMI are covered by a “consent decree” administered by a United States District Court. Every few years, RMLC – a voluntary organization of individuals representing a broad range of the radio industry – renegotiates a new rate structure for payment of royalties by radio broadcasters to ASCAP and BMI.  (SESAC was not a part of the earlier antitrust action and, therefore, has separate negotiations with RMLC). The current rate structure applicable to the ASCAP- and BMI-administered copyrights expires on December 31, 2009. It is not certain that a new rate agreement will be reached and approved by the federal court prior to that expiration date.

Stations that have already given authorization to RMLC to negotiate on their behalf are automatically covered by any rate agreement that is reached for January 1, 2010 and beyond, as well as the rate agreed upon to “bridge” the period between December 31, 2009 and the commencement of that new term. 

Any radio broadcaster that has not yet given such authorization to the RMLC can still do so, in which case any agreements will automatically apply to that broadcaster as well. Broadcasters who, for whatever reason, would prefer not to authorize RMLC to negotiate on their behalf may also sign a direct agreement with ASCAP and/or BMI in which the broadcasters agree to be bound by any new, post-January 1, 2010 terms and the terms of the “bridge period”. 

The letters which many broadcasters have been receiving in recent weeks are intended to make it easy for anyone still interested in signing up (whether with RMLC or ASCAP or BMI) to do so.  

We cannot provide general advice via this blog, but radio broadcasters who receive such a letter from RMLC, ASCAP or BMI should feel free to contact us if you have any questions.

No problem. The Copyright Act allows for recovery of “statutory damages” in the amount of $750.00- $30,000 per work (and this can increase to up to $ 150,000 per work if willful infringement can be proven). Now we’re talking – a higher amount, no need for extended expert testimony from accountants or economists as to the illicit profits gained (by the infringer) or legitimate profits lost (by the copyright owner), straight cash-money, and free lawyering to boot.  What’s not to like?

There's just one catch.  Statutory damages and attorney fees can be recovered only if the work at issue was “registered” with the Copyright Office prior to first publication/broadcast or within three months of publication/broadcast.   If the work was not registered within that time frame (but was registered prior to the filing of the lawsuit), the victorious copyright owner can recover only actual damages, which the owner has the burden of proving in court.

[Copyright 101 lesson of the day: The creator of a work technically gets his/her copyright interest in that work the moment it is created. That is, you get the copyright by coming up with the creation – no separate governmental blessing is required. But if you want the government to help you protect that copyright – that is, if you want to be able to make infringers pay for their misdeeds through litigation in the federal courts – you have to “register” your copyright with the U.S. Copyright Office. As indicated above, the extent of governmental protection available depends on when you register: your potential is greatest if you register within three months of first publication/broadcast.]

Well, you can see where this is headed:  most of the plaintiffs in the YouTube case had not registered their works within three months of first publication/broadcast.  BUT, in most instances, they had a reason: as it turns out, the Copyright Act (Section 411(c), if you're keeping score) exempts non-U.S. works from the registration-prior-to-filing-suit requirement. So foreign copyright owners have tended not to bother registering their works in the United States on the assumption that the potential downside would normally be minimal. 

That assumption was wrong.  The judge in the YouTube case agreed that the Copyright Act (consistently with the "Berne Convention") exempts owner of a foreign copyright from having to register the work prior to filing an infringement lawsuit.  However, no similar exemption exists from the requirement to register the work prior to or within three months of first publication or broadcast in order to obtain the benefit of recovering statutory damages and attorney fees. 

In other words, the owner of a foreign copyright does not have to register its work with the United States Copyright Office, but it will be limited to recovery of actual damages and an injunction if it fails to do so within the time frame applicable to U.S. copyright owners.  The judge therefore dismissed the claims for statutory damages and attorney fees brought by all copyright owners, foreign and domestic, who had not registered their works in a timely fashion. As a result, they could recover nothing more than actual damages (although they could also get an injunction preventing further publication or broadcast).

But wait, there's yet another twist!  The Copyright Act provides separate treatment for live broadcasts (sporting events, concerts, theatrical presentations and news and public affairs programs, among others) by foreign copyright owners. In such cases, the foreign copyright may be entitled to the full range of possible damages (statutory, actual, attorney fees) as long as it has provided notice to the infringer at least 48 hours before broadcast. (Domestic U.S. copyright owners must provide such a notice, but must also register their copyrights within three months of the broadcast; foreign owners are exempt from that latter gotcha.) The notice – dubbed an "Advance Notice of Potential Infringement" – must include:

• the title and copyright owner of each work;
   
• the specific date,  time, expected duration,  and source of the first transmission;
   
• a description of the relevant activities of the potential infringer which would, if carried out, result in an infringement of the copyright; and
   
• a statement of intention to eventually secure copyright registration for the work.

Because there was evidence that at least some of the plaintiffs had served the required notice on YouTube/Google, the judge allowed the claim for statutory damages and attorney fees to go forward with regard to the live broadcasts. 

So, to recap:

• The owner of a U.S. copyright who has never registered the work with the United States Copyright Office cannot recover damages in an infringement action.
   
• The owner of a U.S. or foreign copyright who registers the work with the United States Copyright Office prior to or within three months of first publication or broadcast can obtain an injunction, recover attorney fees and choose between actual damages or statutory damages.
   
• The owner of a U.S. copyright who registers the work with the Copyright Office prior to filing a lawsuit but not within three months of first broadcast or publication can obtain an injunction and actual damages only.
   
• The owner of a foreign copyright who does not register the work at all or does not register the work prior to or within three months of first publication/broadcast can obtain an injunction and actual damages only – NO attorney fees or statutory damages UNLESS the work is a live broadcast and a timely and proper "Advance Notice of Potential Infringement" was sent to the infringer. 

It costs very little ($35) to register a copyright.  It does not take much time.  We realize you may never, ever find yourself filing a copyright infringement lawsuit.  But doesn't the high benefit justify the low cost and effort of registration?  We think so.  Consider it . . . infringement insurance.

For the proper disposition of this case, should the Court overrule either or both Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), and the part of McConnell v. Federal Election Comm’n, 540 U.S. 93 (2003), which addresses the facial validity of Section 203 of the Bipartisan Campaign Reform Act of 2002, 2 U.S.C. §441b?

For readers unaccustomed to the patois of high-falutin’ constitutional litigators, a “facial” challenge is the classic blunt instrument, a broadside attack in which an entire statutory scheme is targeted. The alternative to a “facial” attack is an “as applied” attack, in which the party challenges not the entire statute, but rather just that portion of the statute that has been applied to the challenger. To analogize to the surgical arena, an “as applied” attack is akin to delicate laparoscopic surgery involving cute little incisions leaving minimal scars; a “facial” challenge is akin to Civil War battlefield amputations (think the hospital scene in Gone with the Wind).

Not surprisingly, courts tend to prefer the “as applied” approach – so it’s a big deal when the Supreme Court itself announces that it’s prepared to consider arguments about the facial validity of a statute.

When we discussed the Court's most recent pronouncement on BCRA (Federal Election Commission v. Wisconsin Right to Life, Inc.), we took particular note that  Justice Scalia, joined by Justices Thomas and Kennedy, would have declared BCRA unconstitutional, and that Justice Alito was moving in that direction.  With its order in the Citizens United, the Court could be indicating that another Justice or two may be ready to toss all, or at least a major chunk, of BCRA. (Note that the oral argument has been set for September 9, which in itself is highly unusual. Ordinarily, the Court recesses from the end of June until the first Monday in October.)

Betamax 2009

The Court's next big statement consisting of few words was the simple denial of certiorari in a case (Cable News Network v. CSC Holdings, No. 08-448) brought by several television networks and Hollywood studios against Cablevision. The nets and studios claimed that Cablevision's remote storage DVR (RS-DVR) system violates their copyrights by making an unauthorized copy at the cable system’s headend. Of course, the alternative to an RS-DVR system entails making the recordings on about a gazillion separate set-top DVR boxes located in the cable subscribers’ homes. The RS-DVR approach merely shifts the locus of the mechanical recording to a more efficient, centrally-located facility, while providing the end-user precisely the same end-result – the ability to view video content of the viewer’s choosing at a time and place convenient to the viewer.

The networks and studios initially won their case in United States District Court, convincing that court that Cablevision's system constituted a copyright violation.  Cablevision countered that there was no effective difference between (a) this cheaper method of storing content and (b) the use of multiple set-top DVR units. Since the latter approach was directly analogous to reliance on separate VCRs, and since individualized, private-use VCR recording had been held not to constitute copyright infringement, Cablevision prevailed on appeal to the U.S. Court of Appeals for the Second Circuit.  The nets and studios asked the Supremes to review the Second Circuit’s decision, and the Supremes have now declined the opportunity with the standard, brutally unilluminating, nine-sentence order (“The petition for a writ of certiorari is denied.”). That leaves the Second Circuit decision in place and Cablevision’s RS-DVR system alive and kicking.

This becomes the latest in a long line of cases, dating back to the Court's 1984 decision in Sony Corp. of America v. Universal City Studios, Inc. (the "Betamax" case), that allow for "time shifting" of television programs by a viewer for his or her later viewing in his or her own home.  It is expected to increase the use of cable set-top boxes with DVRs, which will, in turn, impact the advertising revenues collected by television networks.

• The House of Representatives passed the Free Flow of Information Act by a voice vote late Tuesday night, less than a week after we reported to you that the House Judiciary Committee had done the same.  The fight for a federal shield law now moves to the Senate.  Unclear whether the Senate will take up HR 985  (introduced by Rep. Rick Boucher (D-VA)) or  focus on its own version, S 448, and try to reconcile the differences later.
   
• Senator Blanche Lincoln (D-AR) introduced the "Local Radio Freedom Act" in the Senate on March 30.  This is a nonbinding resolution which serves as formal opposition to the Performance Rights Act (HR 848 and S 379) legislation that would require over-the-air broadcasters to pay royalties for performance of sound recordings for the first time ever.  The introduction of the Local Radio Freedom Act comes in the midst of a flurry of activitiy in this area.  As we earlier reported, the House Judiciary Committee held a hearing on the Performance Rights Act on March 10. That legislation now has 36 co-sponsors in the House and 6 in the Senate supporting the institution of a  performance right for over-the-air broadcasting.  
  
  A key Congressman, Rep. Rick Boucher (D-VA), Chair of the Subcommittee on Communications, Technology and the Internet of the House Energy and Commerce Committee, has called broadcasters to the negotiating table.  He's quoted in the April 1 edition of Communications Daily as saying: "My advice:  It's time to start talking."   The Communications Daily piece notes that this particular quote was part  of a more general statement opining that broadcasters should enter into negotiations regaridng royalty rates across all platforms, not just the over-the-air performance right.  
  
  We're not sure how quickly broadcasters will respond, as they appear to have the upper hand for now:  the House version of the Local Radio Freedom Act (again -- the opposition to a Performance Right), H. Con. Res. 49, now has 158 co-sponsors.  The new Senate resolution, numbered S. Con. Res 14,  boasts Senator Sam Brownback (R-KS) and Senator John Barrasso (R-WY) as co-sponsors to Senator Lincoln.
   
• Finally, the United States Supreme Court decided not to review the constitutionality of Virginia's overly broad Anti-Spam law, which was declared unconstitutional on September 12, 2008 by the State Supreme Court.  Virginia's lawmakers are now likely to take up the matter during their next session. 

We’re not trying to cast aspersions on the fairness of the legislative process.  We don’t know anything else about the hearing.  As you can see for yourselves, there isn't even a witness list posted yet.  But our guess is that there will be more witnesses testifying in favor of H.R. 848 than against it.  That’s only natural when the Committee Chairman, John Conyers (D-MI), is the bill’s sponsor.   This is the first House hearing for the Performance Rights Act in the 111th Congress. The bill is gaining some momentum, with 22 House Members now signed on as co-sponsors. The Senate companion measure, S. 379, introduced by the Chairman of the Senate Judiciary Committee (Patrick Leah (D-VT)), has five co-sponsors.

Those interested in the issue should also be keeping tabs on the Local Radio Freedom Act, (H. Con. Res 49), a resolution sponsored by Rep. Gene Green (R-TX). Green’s resolution is, in effect, the Anti-Performance Rights alternative, opposing imposition of a performance royalty.  It has the support of 125 House Members. The magic number is 218 – that’s the number of House votes necessary for either side to claim victory).

Readers of this blog may recall that similar legislation was introduced in late 2007 (during the 110th Congress) as HR 4789 and S 2500. HR 4789 passed the House Judiciary Committee before time ran out on the bill; the Senate version did not advance. 

The current version of the PRA differs slightly from the 2007 flavors. Introduced in identical House and Senate bills on February 4, 2009, this year’s model must be taken seriously simply because it has the backing of key members of each chamber.  The primary co-sponsors of   S 379 are Senate Judiciary Committee Chairman Patrick Leahy D-VT) and the Ranking Member of that Committee, Orrin Hatch (R-UT), with Senators Dianne Feinstein (D-CA), Bob Corker (R-TN) and Barbara Boxer (D-CA) claiming original co-sponsorship.  HR 848 was introduced by House Judiciary Committee Chairman John Conyers (D-MI) and Darrell Issa (R-CA); other original co-sponsors are Howard Berman (D-CA), Marsha Blackburn (R-TN), Jane Harman (D-CA), John Shadegg (R-AZ), and Paul Hodes (D-NH). 

According to Senator Leahy’s Statement on Introduction, the PRA is intended to remedy two disparities: 

• “When webcasters, satellite radio companies, or cable companies play music, and profit from its use, they compensate the performing artists.  Terrestrial broadcast radio is the only platform that still does not pay for the use of sound recordings.”
   
• “[The United States] is the only Nation that is a member of the Organization for Economic Cooperation and Development but still does not compensate artists.  An unfortunate result of the lack of a performance right in the United States is that American artists are not compensated when their recordings are played abroad.”

A brief primer on copyright law as it applies to the music you hear on the radio may be in order here.  Every song heard on the radio or via an Internet stream consists of two copyrighted works.  There is the copyright in the “musical work”, which is the written music and lyrics (sometimes known as the “composition”).  Think sheet music – the notes and words in their unperformed state.  This copyright is most often owned by the songwriter (or his or her music publishing company, if the rights have been transferred). 

There is also a separate and distinct copyright in the “sound recording”, which is that version of the song you’re actually hearing.  This copyright vests in the actual performer (or his or her record label, if the rights have been transferred). 

Here’s an example that might assist the uninitiated in understanding the difference between the two:

The song “Yesterday”, according to the Guinness Book of World Records, has the most registered cover versions of any song in history (over 3,000 exist).  The copyright in the original musical work (before that right was later sold) was owned by the publishing company set up by its credited songwriters, John Lennon and Paul McCartney.  They, along with the rest of the Beatles, separately owned a copyright in the sound recording of “Yesterday” that we’re all familiar with. When Ray Charles recorded a version of “Yesterday” in 1967, he had to pay royalties (to the Lennon/McCartney publishing company) for use of the musical work, but he obtained his own copyright in his cover version.  Anyone who uses the Ray Charles version of “Yesterday” has to pay royalties to both Lennon/McCartney (for the underlying musical work) and to Ray Charles (for his particular performance as captured in that sound recording).

A crucial question at this point in the discussion is: what is a “use” of a copyrighted work? That is, what do you have to do with a musical work in order to subject yourself to the obligation to pay royalties? With some limited exceptions, any public performance of a musical work triggers that obligation: juke boxes, stadium PA systems, Internet streaming, satellite radio, Muzak services, etc., etc. They’re all public performances. And so, too, is broadcasting – with one major difference.

As noted above, public performance of a particular recording of a song involves two separate and distinct copyright interests, one in the underlying musical work, the other in the particular recorded performance. A single playing of a recording may constitute multiple “performances” or “uses” for copyright purposes. For example, if a radio station is simultaneously streaming its over-the-air programming onto the Internet, it would have to pay royalties:

            to ASCAP, BMI or SESAC, for performing the musical work over-the-air; and

            to ASCAP, BMI, or SESAC, for performing the musical work by streaming it; and

            to SoundExchange, Inc., for performing that particular recording by streaming it.

Note that the broadcast of the sound recording would NOT trigger any obligation for the radio station to pay for the “performance” copyright under current law. That’s because broadcast stations have always been exempt from paying royalties for performing sound recordings over the air. The theory is that the broadcast of the work provides advertising to the performer. The exemption recognizes the essentially symbiotic relationship between recorded music and radio.  As discussed above, there exists no equivalent exemption from performance of sound recordings in digital format (via the Internet, digital download, on satellite radio, etc).  

Efforts to impose a performance right obligation on broadcasters have been made, and rejected, at least three times in the past (in 1971, 1976, and 1995).  The PRA tries again, proposing:

• Application of the performance right in sound recordings for all audio transmissions, including over-the-air broadcasting.  This new performance right can have no adverse impact on the right of songwriters to recoup royalties for performance of their musical works. 
• Broadcasters will not be subject to the “sound performance complements” applicable to digital performances (which include prohibitions on certain pre-announcing of songs, on the consecutive playing of songs by the same artist or from the same compact disc or the repeating of programs)
• Broadcasters will be forced to pay performance right royalties at a rate set by the Copyright Royalty Board, with the following exceptions: 
  • Incidental performance of a sound recording (less than 30 seconds of music coming in or out of commercial or in the background of talk or news programming or during a commercial of less than 60 seconds’ duration) or performance of a sound recording during a religious service will not trigger payment of royalties for the performance. 
  • Small Commercial Broadcasters – defined as broadcasters with less than $1.25 million in gross annual revenues – can elect to pay a flat performance royalty fee of $ 5,000.00 per year.
  • Noncommercial broadcasters – defined as public, educational or religious broadcasters under Section 118 of the Copyright Act – can elect to pay a flat performance royalty fee of $ 1,000.00 per year.

Of course, the NAB and various State Broadcast Associations are already mounting a defensive effort.  NAB CEO David Rehr drafted this letter that has already been circulated to all Senators urging them to vote against S. 379 because it is nothing more than a “performance tax” that will put “at least half of” all royalties “directly into the pockets of the big record labels, funneling billions of dollars to companies based overseas.”  Mr. Rehr argues that “For more than 80 years, a symbiotic relationship has existed between local radio stations and the recording industry” that has resulted in “85 percent of listeners of all audio services [identifying] radio as the place where they first heard music that they purchased”.

Several State Broadcast Associations have jointly signed a resolution asking Congress to refrain from imposing “any new performance fee, tax, royalty or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings.”  In support of the resolution, the Associations argue, among other things, that: 

• “Local radio stations already contribute more than $2.4 billion in value to the record labels and their performers by promoting their recorded music, concerts, merchandise and careers to an average of 235 million listeners per week.”
   
• The imposition of a performance tax will harm local broadcasters’ abilities to serve the public interest by imposing additional financial obligations on an already financially weakened broadcast industry.  (They estimate that more radio stations – in addition to the 235 stations which have already gone dark – would be forced to go off the air, to change formats from music to talk, or to refrain from programming niche music formats.) 
   
• The PRA is nothing more than a “bailout” of record labels and performers. 
   
• There are key differences (a) between over-the-air radio and digital radio and (b) between the United States and foreign countries, in terms of the radio business and regulatory schemes. Those differences justify continued disparate treatment under copyright laws. 

While we do not agree that the PRA constitutes a “tax” (since a tax is generally charged by the government to serve the needs of the public, while these royalties would be paid in exchange for the use of another’s copyrighted materials), we do not believe that the PRA is the “right” answer, either.  Record labels and artists are compensated for the performance of their works in the form of the free advertising they receive each time a song is played.  This leads to purchase of CDs and, more importantly, sales of concert tickets and merchandise (the latter two benefitting  the performer, not the songwriter, if they are not one on the same).  Requiring payment of these royalties would provide a double benefit – and in many cases, it wouldn’t even be the performer that receives this double benefit, but the record label that often gets the lion’s share of the revenues.  Imposing this royalty at this time does not benefit anyone – well, certainly not those for whom the benefit is intended.  Indeed, it is most likely to victimize all when there is less overall music played on fewer radio stations in the end. And as the amount of music played plummets toward zero, so too will the royalties that artists could expect to be paid.

What’s fifty percent of zero again?  Oh yeah: zero.

SoundExchange and the Corporation for Public Broadcasting have announced that a settlement has been reached that will alter the way in which these stations pay royalties and report webcasting performances through 2010. 

The current royalty rates have been the subject of significant discussion in the broadcasting community, including  several  informative  articles  in  this  very blog.  The sharp increase in rates for the period 2006-2010 was especially feared by noncommercial stations with a large web audience, as those noncommercial stations would pay at commercial rates anytime their internet listenership exceeded 159,140 "aggregate tuning hours" in a given month, as opposed to the flat fee these stations (and small webcasters) had paid prior to the institution of new rates.

Pursuant to the Webcaster Settlement Act of 2008, this settlement agreement can go into effect immediately, with the following applicable terms: 

• Any eligible radio station which chooses to participate will not have to make any further royalty payments until December 31, 2010, as CPB will make a single, up front payment of $ 1.85 million to SoundExchange on behalf of public radio staitons. 
   
• SoundExchange will also create a consolidated playlist reporting system for use by all stations which choose to become a part of this program; those stations will be responsible for providing playlist information to CPB.
   
• Stations wishing to participate must register their intent with CPB on a designted website; CPB will provide details regarding that registration website in the near future.
   
• This agreement does not affect the "sound performance complement" portion of the statutory license (the restrictions on the number of songs that can be played from a certain CD or by a certain artist within a given time frame, the length of time for which a program can be archived, etc), meaning even participating stations must follow those rules.
   
• As a condition of the settlement, NPR will withdraw its appeal of the Copyright Royalty Board decision (we see this as an indication that more settlement discussions continue between SoundExchange and those segments of the webcasting community that are part of the pending court appeal).

No station is required to participate in this settlement. Thus, a station that is certain it will never exceed the aggregate tuning hour limitation in any given month may simply decide to ride out the next two years until the new rates are determined for 2011 and beyond in a proceeding that will commence in the near future (more on that soon).  Still, if you believe you may be eligible and wish to participate, keep an eye out for further communications from CPB or contact a Fletcher, Heald & Hildreth attorney.

That article focused on the desirability -- actually, in our minds, need -- for website operators to conform to Section 512 of the Digital Millennium Copyright Act and designate an agent to receive removal notices from copyright holders and follow the proper procedure to its legal end. This effectively provides immunity from copyright infringement lawsuits based upon the postings of third party posters on the website. 

That recommendation remains unchanged by the recent decision of the United States District Court for the District of Northern California to deny the Motion to Dismiss filed by Universal in this case. In fact, the District Court's decision to let the case go forward to trial underscores the benefit of engaging in full Section 512 compliance, as YouTube is the ONLY party involved in the controversy that is now not readying for a full blown, time consuming, money draining federal court trial. Your choice: $ 85 filing fee or lawyering up at $ 350+ an hour for a few months.  In fact, we are often shocked to find out how many websites not only neglect the DMCA and its required language, but fail to have ANY "Terms of Service" governing site usage and participation. We highly recommend that every website -- but especially those allowing third parties to post content -- have strongly worded Terms of Service (often referred to as "Terms and Conditions") that reserve a broad right to edit or delete content and remove site users who do not follow those rules. We can help you draft such language if necessary.

But two new lessons emerge:

First, for those of you copyright owners (including many of our broadcast friends) about to send a Notice and Takedown request to have your copyrighted material removed from a website, you must now explicitly stop, take a breath and consider whether the poster of that copyrighted material has any Fair Use rights. This was the central issue of the case: whether "Fair Use" is a use authorized by law which prevents a takedown from occurring. The District Court decided that Fair Use, by virtue of its place in Title 17 of the US Code, is authorized by law (even though it is not specifically mentioned in the DMCA, the applicable statute under consideration in a Notice and Takedown Request). The District Court noted that the copyright owner's views will be subjective and its inquiry not overly-intensive, but it must consider such rights just the same. That opens the door, as it did in this case, to a full-blown factual inquiry into whether there is in fact a Fair Use occurring. 

Second, it reminds us of the uncertain nature of the Fair Use defense by highlighting that this is (a) a fact-specific inquiry that often requires a court proceeding to resolve and (b) usually is not resolved by the court until well into the trial process, given that it is a defense to action. Our general advice to the common man is that you never rely exclusively on Fair Use for the reasons discussed above and for the separate reason that it is one of the most misquoted legal doctrines known to man, with the average user believing that any minimal use of content is a "fair" one when, in fact, the defense consists of four separate factors, only one of which takes into account the amount of material used (and also balances the substantiality of the content against the amount). Fair use is not for beginners -- please leave this inquiry to the professionals!

Ultimately, while the Notice and Takedown procedure is relatively simply to commence, the twin effects of this decision discussed above are likely to benefit the average Internet surfer. Many copyright owners are likely to decide that the potential for litigation is not worth protecting a thirty second audio or video clip (that is also likely to lead to more material of real interest being posted to the Internet; don’t believe me -- go search on YouTube for clips from your favorite sporting event and you'll often find some rather paltry results:

There are so many questions to be asked, including: 

Why "Bridge over Troubled Water"? Isn't "Wake Up Little Suzie" more appropriate? or a series of choices based on particular theme that might include: 

"Wednesday Morning, 3 AM" (for those early risers)

"Bye, Bye Love" (for those who might need to rush out on a partner)

"Fifty Ways to Leave Your Lover" (for those that might need to rush out on a partner he/she just met the night before)

"The Sound of Silence" (that which most of us really want to hear instead of the alarm at that time of day).

In the traditional DVR-sitting-on-the-customer's-TV approach, inventory, delivery, installation and setup of individual DVR boxes are all costly factors.  By contrast, network DVR services, once available, can be remotely installed without a home visit, and without the need for keeping stacks of DVRs on the shelves.

But for program providers - whether cable channels or over-the-air broadcasters - increased DVR use could mean more commercials get zapped.  DVR services make it very easy to fast forward through unwanted content, like commercials, in seconds or even split-seconds.   This means even more downward economic pressure on the traditional sponsorship model for broadcasters and many conventional cablecasters.

No word yet whether network DVR opponents involved in this case, including the four major broadcast nets and CNN, plan any further appeals.  Ultimately, the entire matter rests on a Supreme Court ruling from the early days of consumer video cassettes.  That decades-old decision held that "time shifting" by TV viewers recording on VCRs constituted "fair use" of copyrighted materials.  (Under copyright law, a "fair use" does not give rise to additional copyright royalty liability.)   A successful appeal would have to convince the court that there is a legally meaningful distinction between (a) speedy digital time-shifting by DVR and (b) the more cumbersome mechanical time-shifting via video tape.

The Second Circuit decision finds in effect that time-shifting is time-shifting is time-shifting.  Broadcasters and cablecasters are now confronted with essentially two choices:  find ways to maintain revenue streams despite increased commercial-zapping, or mount a persuasive, last-ditch attack in the courts showing that, for copyright law purposes, time-shifting on a DVR is not a "fair use".  If solid distinctions between digital and old-fashioned cassette recording technologies can't be established, the appellants would likely have to get the VCR precedent overruled.  That would not be a small task.