[Blogmeister’s Note: The following article by Frank Montero appeared in Bloomberg BNA’s Telecommunications Law Resource Center. The folks at Bloomberg BNA have kindly given us permission to reprint it here.]
It seems like copyright law is always trying to catch up with new technology. That’s not a new phenomenon. Take the player piano and the 1908 Supreme Court case of White-Smith Music Publishing Co. v. Apollo Co., in which the high court ruled that manufacturers of music rolls for player pianos did not have to pay royalties to the composers.
The composers were understandably worried that the player piano – then a burgeoning new technology – would make sheet music (and, more importantly, the copyright royalties they earned from the sale of sheet music) obsolete. In response, Congress, in the Copyright Act of 1909, created the compulsory license, allowing anyone to copy a composer’s work without permission as long as they paid a predetermined license fee.
The same scenario is playing out today: New technological developments are outstripping decades-old copyright law, forcing changes in the law, challenging old models, and blurring long-established lines. The traditional “silo” mentality that addressed TV, radio, publishing, recording, cable – and now, the Internet – as separate and distinct areas cabined off from one another is eroding. Record companies are battling radio broadcasters. TV broadcasters are battling cable and satellite companies. Internet audio streamers are battling publishers. Publishers are battling record labels. Internet video streamers are battling Internet service providers.
A principal source of these issues: the Copyright Act’s definition of the “public performance” of copyrighted work.
The Copyright Act gives a copyright holder the exclusive right “to perform the copyrighted work publicly.” In response to a couple Supreme Court decisions applying that provision to the then burgeoning new technology of cable television (shades of the player piano situation) Congress amended the Act in 1976. To ensure that cable retransmission of over-the-air television broadcasts were treated as “public performances,” Congress expanded the definition of “[t]o perform . . . publicly.” As a result, that definition now includes the transmission “to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”
That provision underpins the right of TV broadcasters to negotiate retransmission consent agreements to receive payments from cable systems and other multichannel providers that distribute the station’s programming to paying subscribers, a system that has worked reasonably well for more than 20 years.
But new technology won’t be denied. In the past two years a venture called Aereo Inc. has challenged that model by retransmitting to subscribers TV programming without paying copyright royalties. Aereo’s technology involves small individual broadcast antennas (one for each subscriber) which pick up free broadcast TV signals over the air.
Are Aereo’s Streams “Public Performances”?
According to Aereo (and the U.S. Court of Appeals for the Second Circuit, which sided with Aereo in a challenge by TV broadcasters), the company is not engaging in a public performance of copyrighted material because it sends each of its subscribers an individualized transmission of a performance from a unique copy of each copyrighted program. As a result (so the argument goes), it is not transmitting performances “to the public.” Rather, Aereo says that it is essentially renting its subscribers an “antenna farm” service that allows each subscriber to access a “private” performance much like they would if the antenna were on their roof and connected directly to their TV – only in this case, the antenna and the “roof” are off-site and owned by Aereo. (In an effort to bolster its claim – or maintain the illusion – that it is not a cable system, Aereo cuts off reception of its service beyond the perimeter within which a residential TV roof antenna could pick up over-the-air signals from TV stations.)
TV broadcasters, of course, disagree. In their view, Aereo is engaged in a public performance of copyrighted material just like any multichannel video programming distributor (MVPD) and, therefore, Aereo should pay copyright royalties like any MVPD, whether the statutory amount associated with must-carry carriage or a privately negotiated amount, as with retransmission consent deals.
Last month, the TV broadcasters and Aereo went head to head at the Supreme Court in Am. Broad. Cos. v. Aereo. Among the questions to be decided: Is Aereo a cable company essentially engaged in retransmission of copyrighted programming? Or it is really just an equipment supplier providing subscribers with the equivalent of a new-fangled antenna on each subscriber’s “roof”? During oral argument, Chief Justice Roberts questioned the motives underlying the design of Aereo’s system: “There’s no reason for you to have 10,000 dime-sized antennas except to get around copyright laws. . .”
Meanwhile, radio broadcasters are waging their own battle over copyright royalties and Internet distribution. Although radio stations pay royalties to publishers and songwriters through ASCAP, BMI and SESAC licensing fees, they have long been exempt from having to pay performance royalties for over-the-air broadcasts of recorded music. The theory underlying the exemption: Record companies reap a benefit from having their recordings played over the airwaves.
The recording industry has been trying to reverse this in recent years by urging Congress to act on their behalf (shades of player pianos and cable TV), but the broadcasting lobby has been able to thwart those efforts. Still, radio stations are required to pay royalties to the recording industry for simulcasts they stream over the Internet. That’s the result of the 1998 Digital Millennium Copyright Act (DCMA). Back in the 1990s, when Internet access was shifting from dial-up to broadband, the volume of video and audio content streamed on the Internet increased. In the DCMA, Congress adopted a digital performance royalty for sound recordings.
The DCMA exempted over-the-air broadcast transmissions from that royalty, and it also exempted retransmissions of over-the-air broadcast transmission within a 150-mile limit. While broadcasters argued that streaming their own signals over the Internet should not be subject to the DCMA’s digital performance royalty, the Copyright Office disagreed.
But, again, technology won’t be denied. A new technology known as Geofencing now makes it possible to geographically limit the reach of an Internet webcast to a particular geographic area – say, 150 miles. So a Virginia broadcaster has sued, claiming that by limiting its Internet stream to within 150 miles using Geofencing, it should not have to pay DCMA performance royalties for those Internet simulcasts. This argument, of course, has faint echoes of Aereo’s deliberate efforts to artificially limit subscriber reception to an area equal to the reach of residential TV roof antennas (even though Aereo is accessible via Internet). In both cases, Internet distribution is being limited to reach audiences within an area comparable to a broadcast station’s over-the-air signals.
The goal in both cases is obvious: To use new technology to fit into traditional industry “silos” and thereby take advantage of laws based on that “silo” approach. And there is a further intersection. If the Supreme Court were to hold that Aereo’s use of small antennas to retransmit over-the-air signals over the Internet does not violate the copyright of TV broadcasters, then you could arguably use small antennas to receive and simulcast a radio station’s over-the-air signal over an Internet stream (in an Aereo-like model) to listeners without having to pay royalties to the recording industry. Bye, bye 150-mile limit.
In short, Aereo is trying to blur the line with TV broadcasting and radio broadcasters are trying to blur the line with pure Internet content providers like Pandora.
Is Pandora a Broadcaster?
Meanwhile, Pandora wants to be treated like a broadcaster. Last year the pure play music provider purchased an FM radio station in South Dakota in order to blur the line with broadcasters for copyright purposes. Pandora currently pays royalties to composers and publishers to use songs for its service through license fees it pays to organizations like ASCAP and BMI. But similar online services offered by broadcasters, such as Clear Channel’s iHeart Radio, pay lower ASCAP and BMI rates than Pandora. The difference between broadcasters and Pandora? Radio stations benefit from a January 2012 agreement between the Radio Music License Committee (which negotiates royalty rates for the radio industry) and ASCAP and BMI. So to bring itself under the terms of that agreement – and thereby relieve itself of considerable royalty obligations – Pandora bought a radio station and declared that it was now a radio broadcaster entitled to the benefits of the January 2012 agreement.
Finally, we come full circle to the licensing industries themselves. As mentioned earlier, radio stations currently pay copyright licensing fees to songwriters and publishing companies (primarily through payments to ASCAP, BMI and SESAC), but they are not required to pay recording companies (usually collected by SoundExchange) for over-the-air broadcasts of recorded performances.
Enter the Songwriter Equity Act recently introduced in the Senate, which aims to level the playing field between record labels and songwriters who claim they are not getting a fair piece of the pie. The legislation would broaden the pool of evidence that federal rate courts like the Copyright Royalty Board (CRB) could examine when setting songwriter compensation. The CRB would be able to set the fair market value of digital performance rates for composers. In so doing, it could also correct perceived inequities in the royalties received by songwriters and publishers on the one hand and artists and recording companies on the other.
The CRB would calculate fair market value when setting songwriter publishing rates on digital music services, in addition to four other considerations it already uses. For example, the CRB could consider the rates that are set between Sound Exchange (which collects royalties for recordings played over the Internet) and digital music service providers such as Pandora. Broadcasters are concerned because they fear that they will be stuck with the tab for correcting any inequities the CRB perceives between songwriters and artist rates.
The real issue at hand, however, is the fact that technologies are shifting faster than the law can adapt. In many ways, the copyright law, like many telecommunications laws and regulations, has historically been crafted around traditional industry “silo” models such as radio vs. TV vs. cable vs. telephony vs. Internet vs. publishing vs. recording. But thanks to the continuing evolution of technology, those once-clearly delineated lines are blurring and will continue to blur. This may require a complete overhaul of the system.
There are already initial efforts underway to update the Communications Act to remove the traditional industry silos of broadcasting, cable, wireless and telephony. Such changes will have to be carefully crafted and interpreted to avoid unintended consequences. In 2008, for example, the Second Circuit’s Cablevision decision – which held that Cablevision’s remote storage DVR did not infringe on broadcasters’ copyrights – led to an unintended consequence we now know as Aereo, much like the 1908 player piano decision changed for the next century the law of how music is copied and licensed.
In the Aereo oral argument before the Supreme Court, the justices were clearly concerned about the impact their decision could have on other developing technologies such as cloud storage. We are a long way from player pianos, but lessons can be learned and old models need revising.