Internet Music Stream vs. Download

The dispute over digital-music performance royalties relates to the differences between two different kinds of digital-music transmission: streaming and downloading. Streaming is typically defined as the transmission of digital content from a server computer to a client computer for immediate display (or play) on the client. The user may or may not be able to save the media stream or pause, rewind or fast-forward it, but the important feature for purposes of the court's analysis in ASCAP is that streamed media is designed to be played by the recipient simultaneously with its transmission.

Downloaded content, on the other hand, is designed to be stored by the user until some future time and played back at the user's option, perhaps multiple times, though it may contain digital-rights management features restricting its continued use. Examples of streamed content include Internet radio and YouTube videos. Examples of downloaded content include songs purchased from online music stores.

Essentially all of the major players in the digital-media world agree that streaming is functionally indistinguishable from traditional radio or TV broadcasts, which have long been considered 'performance' under copyright law. As such, ASCAP has taken the position that it's entitled to collect a performance royalty for media streams, and, although there are ongoing issues surrounding the amount and structure of that royalty payment, there is little dispute that some performance royalty is appropriate for that kind of use.

But ASCAP also stated that a digital download of music files for later use constitutes a 'performance' under the copyright laws. As such, ASCAP has argued that it is entitled to collect a performance royalty on behalf of its composer and publisher clients each time, for example, a song is purchased from an online music service.

In attempting to work out a reasonable royalty structure for such downloads, ASCAP reached an impasse with three music service operators: RealNetworks (which runs the Rhapsody music service), Yahoo and AOL. Unable to resolve the royalty-rate issue, the parties took their dispute to the ASCAP rate court and ended up making cross motions for summary judgment on the threshold issue of whether downloading a digital-music file constitutes a 'performance' at all for purposes of copyright law.

The court granted summary judgment to RealNetworks, Yahoo! and AOL, finding that downloading does not constitute performance and that ASCAP therefore has no right to collect any royalties at all on music downloads. Reviewing the dictionary definitions of the word 'perform,' the court wrote: 'We can conceive of no construction that extends it to the copying of a digital file from one computer to another in the absence of any perceptible rendition. Rather, the downloading of a music file is more accurately characterized as a method of reproducing that file.'

To those familiar with the technology, this seems an obvious conclusion, and most commentators expected this outcome. After all, for anyone who has used one of these services, downloading does not 'feel' like performance or even like listening to the radio. But as a legal matter the question is substantially more complex than this plain-language analysis might suggest and it reveals some of the weaknesses in the statutory language around the performance right ' language that is beginning to show its age as technology moves ahead.

When a Performance Is Public

Under 17 U.S.C Sec. 106(4), the owner of a copyright has the exclusive right 'in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly' or to authorize others to do so. Under 17 U.S.C. Sec. 101, to 'perform' a work means 'to recite, render, play, dance, or act it, either directly or by means of any device or process' and to perform a work 'publicly' can mean one of two things:

• To perform or display it at a place open to the public or at any place where a substantial number of
  persons outside of a normal circle of a family and its social acquaintances is gathered; or
• To transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or 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.

The second prong of the 'public performance' definition is sometimes called the 'transmit clause' and under this clause a performance is 'public' even if it is transmitted through a medium (such as radio or television) that consumers usually enjoy in private.

The ASCAP court found (correctly) that either prong of the public performance definition requires that the work be 'performed.' And because it found that 'in order for a song to be performed, it must be transmitted in a manner designed for contemporaneous perception,' that ended its inquiry. But while this analysis reaches intuitively the right result, it is difficult to square with the precise statutory language.

ASCAP argued that, under the plain language of the transmit clause, public performance requires only two things: a 'performance' and a transmission into the public sphere. The statute does not specify that the performance must take place after the transmission or that the transmission must constitute the performance. In fact, the statute seems to say the opposite ' that a public performance means 'to transmit or otherwise communicate a performance or display of the work.' This implies that the performance has already taken place when the transmission occurs, which only makes sense in the original context of the statute.

Thus, the court's analysis ' whether the download itself constitutes a performance ' is irrelevant. The question (under a strict reading of the statute) is whether the download constitutes a transmission or communication of a performance. ASCAP argues that, because a sound recording can't exist unless the work has, at some point, been performed, the digital file must embody a performance and the download is a transmission of that earlier performance, so it constitutes a public performance under the transmit clause. While this argument is extremely counterintuitive, it does not appear on its face to be barred by the statute.

The court noted and attempted to address this issue, writing that '[t]he statutory language itself, however, makes clear that the transmission of a performance, rather than just the transmission of data constituting a media file, is required in order to implicate the public performance right in a copyrighted work.' This statement only confuses the issue further, however. In modern telecommunications, there can be no 'transmission of a performance' other than by 'transmission of data constituting a media file.'

Digital-cable television, Internet radio and streamed music, all of which are unarguably 'performances' and recognized as such by all parties in the suit, involve nothing more than the transmission of data constituting a media file; the only difference between them and a download is whether that file is stored for later use or played contemporaneously with transmission on the user's computer. And, as ASCAP points out, that difference is nowhere to be found in the statute.

Circuit Precedent

Furthermore, the case law in the area is not particularly clear. For example, the U.S. Court of Appeals for the Second Circuit has held that the transmission of a TV signal to a satellite constitutes a 'public performance' even where the satellite signal would never be viewed by anyone in the United States ' thus the uplink to the satellite (which is, of course, invisible and never seen by any human) is a 'public performance' even though the following downlink to the users (a more traditional 'performance' had it occurred in the United Sates) was outside the scope of U.S. law.

The circuit, in National Football League v. PrimeTime 24 Joint Venture, wrote: 'We believe the most logical interpretation of the Copyright Act is to hold that a public performance or display includes 'each step in the process by which a protected work wends its way to its audience.” National Football League v. Prime-Time 24 Joint Venture, 211 F.3d 10 (2d Cir. 2000), quoting David v. Showtime/The Movie Channel Inc., 697 F.Supp. 752 (S.D.N.Y. 1988). In David, the court found that transmission of programs containing copyrighted songs to cable operators for later transmission to viewers also constituted a public performance.

If transmission to a satellite is a public performance because it is one step in a chain that will lead to performance, it is difficult to understand why downloading is not the same ' in fact as a technical matter the two processes are functionally identical and it is certainly the case that users who download music are likely, eventually, to play (and thus 'perform') it.

The ASCAP court attempted to distinguish these cases by suggesting that they were more akin to the streaming case than the downloading case because the media was eventually destined to be consumed in real time. As a technical matter, that distinction makes no sense ' satellites do not receive streams, they receive entire blocks of programming for later retransmission ' but as an
economic and practical matter, that distinction makes perfect sense and addresses the precise issue that other courts (and, unfortunately, the statutory language) fail to articulate.

Double-Dipping Issue

Despite these issues of statutory construction and inconsistent case law, as the ASCAP court noted, the Copyright Office has taken the specific position that digital downloads should not constitute a public performance absent a contemporaneous performance and that, if they do, arguments concerning fair use and the making of buffer copies should be applicable to such use.

In addition, there's already a statutory system (embodied at 17 U.S.C. Sec. 115) under which publishers and songwriters receive a statutory royalty ' called the 'digital phonorecord delivery' (DPD) royalty ' for digital music downloads. This is perhaps the most fundamental argument, from an economic standpoint, against imposing an additional 'performance' royalty on digital downloads: that royalty is already being collected and distributed by statute.

ASCAP argues that the DPD royalty is not based on performance rights and that Sec. 115 is not exclusive, and that is true. In some cases, if a use of a copyrighted work implicates several different rights, the user must license all of those rights, sometimes from different rights holders. Thus, it is possible Congress intended users to have to pay both a DPD royalty and a performance royalty for each download, but here the DPD statutory system was designed specifically for this purpose and nothing in the legislative history suggests that it was intended to be supplementary to a performance royalty. Economically, that construction simply makes no sense, and the court's view is far more in keeping with the existing statutory framework.

'Download' Defined

The final question, then, in light of the inability of various courts to provide clear guidance on the issue, is how a 'download' should be defined. As ASCAP points out, the idea of 'contemporaneous performance' actually makes very little
sense. According to ASCAP, using Rhapsody, a user must wait approximately three seconds for a 'stream' to buffer and begin playing. Using partial download technology, a user can begin listening to a downloading song within approximately seven seconds. As downloading technology improves, the gap will get even shorter.

The fact is that the ability to listen to downloads as they arrive exists now and will improve in the future ' using that as the basis for a legal distinction of this importance is a recipe for disaster. Instead, the distinction should be based on the end user's eventual bundle of rights: If the user can retain the file for later use (or if the user must take some additional action to play the file) then the file is a download; if not, then the file is a stream.

This essentially replicates the distinction that the ASCAP court most frequently returned to ' listening to the radio versus buying a CD. By focusing on the end user, it also deals with issues such as that in PrimeTime 24: A satellite transmission is, technically, a one-time download to the satellite, but the end user's bundle of rights is to watch the content as a one-time stream, thus the transmission is a stream, or a performance, which makes economic sense if the goal is to avoid satellite piracy.

Of course, it may be difficult to ground this kind of distinction in existing statutory language, but the ASCAP court seems to have taken a step in the right direction.

Editor's Note: A statement on www.ascap.com from ASCAP CEO John LoFrumento: 'Now that the Court has ruled on this legal issue, the proceeding will go to trial to determine a reasonable license fee for the Internet services. The trial is set to begin on September 10, 2007, and is scheduled to run for three weeks. There is no way to predict when the Court will issue its final judgment setting the license fees. However, once the Court rules on that issue, it will be possible for ASCAP to appeal the decision regarding downloads, as well as any other aspects of the case.'

Stephen M. Kramarsky is a member of the New York City-based Dewey Pegno & Kramarsky (www.dpklaw.com), specializing in complex intellectual-property litigation.

If a music file is downloaded to a computer and no one is there to play it, does it constitute a performance? This is not some question from a digital-age freshman philosophy seminar ' it was the legal issue recently facing Judge William C. Connor in the U.S. District Court for the Southern District of New York in United States v. American Society of Composers, Authors and Publishers (ASCAP), 485 F.Supp.2d 438 (S.D.N.Y. 2007). Connor found that a digital download alone, as distinct from a digital media 'stream,' does not constitute a performance. While this decision seems obvious and has been widely viewed as correct (by everyone other than ASCAP), it is not actually as simple as it first seems.

ASCAP is one of three performance-rights organizations (along with BMI and SESAC) that track public performances of musical compositions, and collect and distribute royalties to publishers and composer members. Because a performance occurs every time a song is played on the radio or television, the process is extremely cumbersome and the performance-rights organizations make it possible to efficiently track, collect and distribute the statutorily mandated royalties. ASCAP functions under an amended final judgment, dating (in various versions) from a 1941 antitrust action. Pursuant to the amended final judgment, ASCAP establishes a fixed royalty rate for each type of performance of its works. Disputes over the appropriate royalty rate for a given kind of performance are adjudicated by the court that heard the original antitrust action ' often called the ASCAP rate court ' if the rate cannot be decided between the parties. These rate disputes still appear under the original 1941 'Civ.' docket number in the Southern District and Judge Connor presides over these cases.

Streaming v. Downloading

The dispute over digital-music performance royalties relates to the differences between two different kinds of digital-music transmission: streaming and downloading. Streaming is typically defined as the transmission of digital content from a server computer to a client computer for immediate display (or play) on the client. The user may or may not be able to save the media stream or pause, rewind or fast-forward it, but the important feature for purposes of the court's analysis in ASCAP is that streamed media is designed to be played by the recipient simultaneously with its transmission.

Downloaded content, on the other hand, is designed to be stored by the user until some future time and played back at the user's option, perhaps multiple times, though it may contain digital-rights management features restricting its continued use. Examples of streamed content include Internet radio and YouTube videos. Examples of downloaded content include songs purchased from online music stores.

Essentially all of the major players in the digital-media world agree that streaming is functionally indistinguishable from traditional radio or TV broadcasts, which have long been considered 'performance' under copyright law. As such, ASCAP has taken the position that it's entitled to collect a performance royalty for media streams, and, although there are ongoing issues surrounding the amount and structure of that royalty payment, there is little dispute that some performance royalty is appropriate for that kind of use.

But ASCAP also stated that a digital download of music files for later use constitutes a 'performance' under the copyright laws. As such, ASCAP has argued that it is entitled to collect a performance royalty on behalf of its composer and publisher clients each time, for example, a song is purchased from an online music service.

In attempting to work out a reasonable royalty structure for such downloads, ASCAP reached an impasse with three music service operators: RealNetworks (which runs the Rhapsody music service), Yahoo and AOL. Unable to resolve the royalty-rate issue, the parties took their dispute to the ASCAP rate court and ended up making cross motions for summary judgment on the threshold issue of whether downloading a digital-music file constitutes a 'performance' at all for purposes of copyright law.

The court granted summary judgment to RealNetworks, Yahoo! and AOL, finding that downloading does not constitute performance and that ASCAP therefore has no right to collect any royalties at all on music downloads. Reviewing the dictionary definitions of the word 'perform,' the court wrote: 'We can conceive of no construction that extends it to the copying of a digital file from one computer to another in the absence of any perceptible rendition. Rather, the downloading of a music file is more accurately characterized as a method of reproducing that file.'

To those familiar with the technology, this seems an obvious conclusion, and most commentators expected this outcome. After all, for anyone who has used one of these services, downloading does not 'feel' like performance or even like listening to the radio. But as a legal matter the question is substantially more complex than this plain-language analysis might suggest and it reveals some of the weaknesses in the statutory language around the performance right ' language that is beginning to show its age as technology moves ahead.

When a Performance Is Public

Under 17 U.S.C Sec. 106(4), the owner of a copyright has the exclusive right 'in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly' or to authorize others to do so. Under 17 U.S.C. Sec. 101, to 'perform' a work means 'to recite, render, play, dance, or act it, either directly or by means of any device or process' and to perform a work 'publicly' can mean one of two things:

• To perform or display it at a place open to the public or at any place where a substantial number of
  persons outside of a normal circle of a family and its social acquaintances is gathered; or
• To transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or 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.

The second prong of the 'public performance' definition is sometimes called the 'transmit clause' and under this clause a performance is 'public' even if it is transmitted through a medium (such as radio or television) that consumers usually enjoy in private.

The ASCAP court found (correctly) that either prong of the public performance definition requires that the work be 'performed.' And because it found that 'in order for a song to be performed, it must be transmitted in a manner designed for contemporaneous perception,' that ended its inquiry. But while this analysis reaches intuitively the right result, it is difficult to square with the precise statutory language.

ASCAP argued that, under the plain language of the transmit clause, public performance requires only two things: a 'performance' and a transmission into the public sphere. The statute does not specify that the performance must take place after the transmission or that the transmission must constitute the performance. In fact, the statute seems to say the opposite ' that a public performance means 'to transmit or otherwise communicate a performance or display of the work.' This implies that the performance has already taken place when the transmission occurs, which only makes sense in the original context of the statute.

Thus, the court's analysis ' whether the download itself constitutes a performance ' is irrelevant. The question (under a strict reading of the statute) is whether the download constitutes a transmission or communication of a performance. ASCAP argues that, because a sound recording can't exist unless the work has, at some point, been performed, the digital file must embody a performance and the download is a transmission of that earlier performance, so it constitutes a public performance under the transmit clause. While this argument is extremely counterintuitive, it does not appear on its face to be barred by the statute.

The court noted and attempted to address this issue, writing that '[t]he statutory language itself, however, makes clear that the transmission of a performance, rather than just the transmission of data constituting a media file, is required in order to implicate the public performance right in a copyrighted work.' This statement only confuses the issue further, however. In modern telecommunications, there can be no 'transmission of a performance' other than by 'transmission of data constituting a media file.'

Digital-cable television, Internet radio and streamed music, all of which are unarguably 'performances' and recognized as such by all parties in the suit, involve nothing more than the transmission of data constituting a media file; the only difference between them and a download is whether that file is stored for later use or played contemporaneously with transmission on the user's computer. And, as ASCAP points out, that difference is nowhere to be found in the statute.

Circuit Precedent

Furthermore, the case law in the area is not particularly clear. For example, the U.S. Court of Appeals for the Second Circuit has held that the transmission of a TV signal to a satellite constitutes a 'public performance' even where the satellite signal would never be viewed by anyone in the United States ' thus the uplink to the satellite (which is, of course, invisible and never seen by any human) is a 'public performance' even though the following downlink to the users (a more traditional 'performance' had it occurred in the United Sates) was outside the scope of U.S. law.

The circuit, in National Football League v. PrimeTime 24 Joint Venture, wrote: 'We believe the most logical interpretation of the Copyright Act is to hold that a public performance or display includes 'each step in the process by which a protected work wends its way to its audience.” National Football League v. Prime-Time 24 Joint Venture , 211 F.3d 10 (2d Cir. 2000), quoting David v. Showtime/The Movie Channel Inc., 697 F.Supp. 752 (S.D.N.Y. 1988). In David, the court found that transmission of programs containing copyrighted songs to cable operators for later transmission to viewers also constituted a public performance.

If transmission to a satellite is a public performance because it is one step in a chain that will lead to performance, it is difficult to understand why downloading is not the same ' in fact as a technical matter the two processes are functionally identical and it is certainly the case that users who download music are likely, eventually, to play (and thus 'perform') it.

The ASCAP court attempted to distinguish these cases by suggesting that they were more akin to the streaming case than the downloading case because the media was eventually destined to be consumed in real time. As a technical matter, that distinction makes no sense ' satellites do not receive streams, they receive entire blocks of programming for later retransmission ' but as an
economic and practical matter, that distinction makes perfect sense and addresses the precise issue that other courts (and, unfortunately, the statutory language) fail to articulate.

Double-Dipping Issue

Despite these issues of statutory construction and inconsistent case law, as the ASCAP court noted, the Copyright Office has taken the specific position that digital downloads should not constitute a public performance absent a contemporaneous performance and that, if they do, arguments concerning fair use and the making of buffer copies should be applicable to such use.

In addition, there's already a statutory system (embodied at 17 U.S.C. Sec. 115) under which publishers and songwriters receive a statutory royalty ' called the 'digital phonorecord delivery' (DPD) royalty ' for digital music downloads. This is perhaps the most fundamental argument, from an economic standpoint, against imposing an additional 'performance' royalty on digital downloads: that royalty is already being collected and distributed by statute.

ASCAP argues that the DPD royalty is not based on performance rights and that Sec. 115 is not exclusive, and that is true. In some cases, if a use of a copyrighted work implicates several different rights, the user must license all of those rights, sometimes from different rights holders. Thus, it is possible Congress intended users to have to pay both a DPD royalty and a performance royalty for each download, but here the DPD statutory system was designed specifically for this purpose and nothing in the legislative history suggests that it was intended to be supplementary to a performance royalty. Economically, that construction simply makes no sense, and the court's view is far more in keeping with the existing statutory framework.

'Download' Defined

The final question, then, in light of the inability of various courts to provide clear guidance on the issue, is how a 'download' should be defined. As ASCAP points out, the idea of 'contemporaneous performance' actually makes very little
sense. According to ASCAP, using Rhapsody, a user must wait approximately three seconds for a 'stream' to buffer and begin playing. Using partial download technology, a user can begin listening to a downloading song within approximately seven seconds. As downloading technology improves, the gap will get even shorter.

The fact is that the ability to listen to downloads as they arrive exists now and will improve in the future ' using that as the basis for a legal distinction of this importance is a recipe for disaster. Instead, the distinction should be based on the end user's eventual bundle of rights: If the user can retain the file for later use (or if the user must take some additional action to play the file) then the file is a download; if not, then the file is a stream.

This essentially replicates the distinction that the ASCAP court most frequently returned to ' listening to the radio versus buying a CD. By focusing on the end user, it also deals with issues such as that in PrimeTime 24: A satellite transmission is, technically, a one-time download to the satellite, but the end user's bundle of rights is to watch the content as a one-time stream, thus the transmission is a stream, or a performance, which makes economic sense if the goal is to avoid satellite piracy.

Of course, it may be difficult to ground this kind of distinction in existing statutory language, but the ASCAP court seems to have taken a step in the right direction.

Editor's Note: A statement on www.ascap.com from ASCAP CEO John LoFrumento: 'Now that the Court has ruled on this legal issue, the proceeding will go to trial to determine a reasonable license fee for the Internet services. The trial is set to begin on September 10, 2007, and is scheduled to run for three weeks. There is no way to predict when the Court will issue its final judgment setting the license fees. However, once the Court rules on that issue, it will be possible for ASCAP to appeal the decision regarding downloads, as well as any other aspects of the case.'

Stephen M. Kramarsky is a member of the New York City-based Dewey Pegno & Kramarsky (www.dpklaw.com), specializing in complex intellectual-property litigation.