Music Site Ruled Not 'Interactive' Enough

A Webcasting service that provides users with individualized Internet radio stations is not required to pay licensing fees to copyright holders of the songs the service plays, the Second U.S. Circuit Court of Appeals has ruled.

The circuit found that, as a matter of law, the service that provides the stations in which content is affected by customers' ratings of titles, artists and albums, is not “interactive” enough to impose the fees. Instead, it is only required to pay a statutory licensing fee as set by the Copyright Royalty Board.

In issuing Arista Records, LLC v. Launch Media Inc., 07-2576-cv, the circuit became the first appellate court in the nation to address the issue. The case has been closely watched by the recording industry, according to Reuters.

The appeal was decided by Judges Guido Calabresi and Richard C. Wesley, and, sitting by designation, Judge Christopher F. Droney of the District of Connecticut.

Arista Records, BMG Music and Zomba Recording LLC brought suit in 2001 against Launch Media Inc., claiming Launch violated the Digital Millennium Copyright Act of 1998, 17 U.S.C. '114.

Launch, which is owned by Yahoo!, runs the Webcasting service LAUNCHcast, which lets users create “stations” or groups of songs from a particular genre similar to an artist or song already selected by the user.

Under '114(j)(7), an interactive service is one “that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording ' which is selected by or on behalf of the recipient.”

If LAUNCHcast were to be deemed an interactive service, it would be required to pay licensing fees to copyright holders for each song it plays for its listeners. If it is not an interactive service, it must pay only a single statutory licensing fee set by the Copyright Royalty Board, the circuit noted.

A jury before Southern District Judge Richard Owen found that LAUNCHcast was not an interactive service.

For Judge, Not Jury

While the circuit agreed with the jury in an opinion written by Wesley, the panel said the issue was a matter of law that should have been decided by a judge, not a jury.

“We affirm because as a matter of law LAUNCHcast was not an interactive service,” Wesley said. “It does not provide copyrighted sound recordings on request, nor does it transmit a program specially created for the user within the meaning of '114(j)(7).”

Owen had instructed the jurors that it was up to them “to decide how much influence a consumer or a recipient can have on the programming offered by the transmitting entity ' the broadcaster ' before that activity must be characterized as interactive” and “there is no bright line marking the limits between an interactive service and a non-interactive service.”

Wesley said that “these instructions may have misled the jury into believing that it was the jury's responsibility to determine the legal definition of interactive, a task far beyond the scope of its duty.”

He then described why.

“Whenever the user logs into LAUNCHcast and selects a station, LAUNCHcast generates a playlist of 50 songs based on several variables,” Wesley said. “LAUNCHcast does not provide a list of the pool of songs or of the songs in the generated playlist, and therefore, the user does not know what songs might be played.”

LAUNCHcast assembles a “hash- table” or playlist of some 10,000 songs, included among them songs rated by the user.

If a user has rated only 10 songs, Wesley explained, “no more than two of those songs can be selected for the playlist.”

The service selects songs at random, excludes some songs that do not meet certain criteria and does not play the same song twice from the playlist. It also will not allow more than three songs to be played by a particular artist.

In the end, LAUNCHcast orders a playlist of 50 songs.

“Based on a review of how LAUNCHcast functions, it is clear that LAUNCHcast does not provide a specially created program within the meaning of '114(j)(7) because the [W]ebcasting service does not provide sufficient control to users such that playlists are so predictable that users will choose to listen to a [W]ebcast in lieu of purchasing music, thereby ' in the aggregate ' diminishing record sales,” he said.

First, he said, the “rules governing what songs are pooled in the hashtable ensure that the user has almost no ability to choose, let alone predict, which specific songs will be pooled in anticipation for selection to the playlist.

Second the rules also prevent the user's “explicitly rated songs from being anywhere near the majority of the songs on the playlist.”

Finally, he said, “each playlist is unique to each user” and “a user cannot listen to the playlist of another user and anticipate the songs to be played from that playlist, even if the user has selected the same preferences and rated all songs, artists and albums identically as the other user.”

The Associated Press reported that since relaunching in February, powered by CBS Radio, LAUNCHcast no longer offers Webcasts based on individual preferences, although Yahoo! says it has been working to restart that.