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According to press reports, the Recording Industry Association (RIAA) recently sent a letter to about 40 web radio stations indicating that they require licenses from the record companies for the webcasting of their sound recordings. "I write," wrote Steven Marks, vice president and deputy general counsel for the RIAA, "because our record company members are the copyright owners of the sound recordings that you are transmitting, and we want to ensure that you have secured the appropriate permission to Webcast those recordings."

What these letters neglected to state is that only certain types of webcasts of copyrighted sound recordings require licenses from record companies -- many of them do not. This article attempts to answer the questions Which do? and Which don't?

Song v. Sound Recording of the Song

When you hear a song on the radio, you are hearing the fruits of two copyrights: the copyright in the song (e.g., "I've Got You Under My Skin" by Cole Porter) and the copyright in a particular sound recording of the song (e.g., the 1956 Sinatra recording of the song, as opposed to his 1963 recording).

The copyright owners of song (in this case, the Estate of Cole Porter through its performance rights representative, ASCAP) will collect money from that radio broadcast, because copyright owners of songs have always had "an exclusive right to publicly perform" them. However, the record company (e.g., in this example, Capitol Records) does not collect money from a radio broadcast of the Sinatra recording it owns because, at least in the U.S., owners of sound recordings never had a public performance right. See Section 106(4) which leaves out "sound recordings": http://www.law.cornell.edu/uscode/17/106.shtml.

Digital Audio Transmissions

This has changed slightly with the Digital Performance Rights in Sound Recordings Act of 1995 (the "1995 Act"). The 1995 Act added a new exclusive right for copyright owners of sound recordings.

Though its does not provide a general public performance right in sound recordings, like those of songs, it does provide a limited form of transmission right implemented as a new Section 106(6) of the Copyright Act: The owner of copyright in a sound recording now has the exclusive right to perform the work publicly by means of a digital audio transmission." See http://www.law.cornell.edu/uscode/17/106.shtml.

Important Exemption

Section 106(6) of the Copyright Act must be read in conjunction with Section 114 which includes provisions which severely limits the effect of this new digital audio transmission right. Section 114(d) http://www.law.cornell.edu/uscode/17/114.shtml, entitled "Limitations on Exclusive Right," lists several "exemptions," including the following:

"Notwithstanding the provisions of section 106(6) - (1) Exempt transmissions and retransmissions. - the performance of a sound recording publicly by means of a digital audio transmission, other than as a part of an interactive service, is not an infringement of section 106(6) if the performance is part of - (A)(i) a nonsubscription transmission other than a retransmission;"

This means that a web radio station which webcasts, for example, Top 40 hits, does not require permission from any of the record companies as long as (1) the transmission is not an "interactive service and (2) the transmission is a "nonsubscription transmission" and (3) is a nonsubscription transmission "other than a retransmission" Let's take these one at a time:

(1) The transmission is not an "interactive service"

The Act provides the following definition: "An 'interactive service' is one that enables a member of the public to receive, on request, a transmission of a particular sound recording chosen by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the public at large does not make a service interactive. If an entity offers both interactive and non-interactive services (either concurrently or at different times), the non-interactive component shall not be treated as part of an interactive service." Clearly, a web radio station which loops through a number of recordings, like a broadcast radio station, is not an "interactive service." It does not enable a member of the public to receive on request "a particular sound recording."

(2) The transmission is a "nonsubscription transmission"

The Act actually contains the following definition: "A 'nonsubscription' transmission is any transmission that is not a subscription transmission." Fortunately, it is followed by: "A 'subscription' transmission is a transmission that is controlled and limited to particular recipients, and for which consideration is required to be paid or otherwise given by or on behalf of the recipient to receive the transmission or a package of transmissions including the transmission." Thus, as long as the web radio station is "broadcast" or "webcast" to the general public and a subscription fee is not collected, the transmission is a nonsubscription transmission.

(3) The transmission is a nonsubscription transmission "other than a retransmission"

Nonsubscription transmissions that are retransmissions of, for example, subscription transmissions or transmissions that were part of an interactive service, are not exempt. If this were otherwise, then you could circumvent your obligation to pay license fees for a subscription transmission or an interactive service by merely receiving and re-transmitting them on a nonsubscription basis.

In any event, the original transmitter of a nonsubscription transmission could not be liable for anything subsequently done by a re-transmitter. For example, if the re-transmitter limited the audience of the retransmission and charged a fee, it would be making subscription transmissions and would therefore be responsible for obtaining the necessary licenses for such transmissions. Nevertheless, the original transmitter would not require any licenses for his original transmission of sound recordings on a nonsubscription basis. These nonsubscription transmission are exempt.

RIAA's Position

According to sources within the Recording Industry Association of America (RIAA), which represents the major record companies, the RIAA is currently taking the position that these non-interactive, nonsubscription transmissions by web radio stations are NOT exempt under Section 114.

Such a position, in this author's view, flies the face of the letter of the law, as well as its clear intent. Congress did not provide to copyright owners of sound recordings a general public performance right, and specifically intended to exempt traditional broadcasts and broadcast-like transmissions of sound recordings from licensing requirements. They drew a clear line at subscription transmissions and interactive transmissions, because these forms of transmissions, in contrast to nonsubscription transmissions and radio broadcasts, place a high risk of replacing the sale of copies of recorded music.

The RIAA has not yet stated the basis for its extraordinary reading of the Act, but it is hoped that they will avoid maintaining any extreme position that may detract from their legitimate interests in licensing subscription and interactive transmissions.

Subscription Transmissions

In the event you are operating a subscription service, you will be subject to one of two forms of licensing mechanisms: a "statutory license" or a "voluntary license." Under the "statutory license" mechanism, the record companies can be compelled to license the transmissions under license fees set by a governmental body. Under a "voluntary license" mechanism, the record companies in a free market can charge whatever they wish or refuse to license at all. To qualify for the statutory license scheme, there are several conditions that must be met, including the following: (A) the transmission is not part of an interactive service (defined above);

(B) the transmission does not exceed the "sound recording complement" (see below)

(C) the transmitting entity does not publish in advance the titles of the sound recordings being transmitted.

The "sound recording performance complement" is the transmission during any 3-hour period, on a particular channel used by a transmitting entity, of no more than -

(A) 3 different selections of sound recordings from any one phonorecord lawfully distributed for public performance or sale in the United States, if no more than 2 such selections are transmitted consecutively; or

(B) 4 different selections of sound recordings - (i) by the same featured recording artist; or (ii) from any set or compilation of phonorecords lawfully distributed together as a unit for public performance or sale in the United States, if no more than three such selections are transmitted consecutively: Provided, That the transmission of selections in excess of the numerical limits provided for in clauses (A) and (B) from multiple phonorecords shall nonetheless qualify as a sound recording performance complement if the programming of the multiple phonorecords was not willfully intended to avoid the numerical limitations prescribed in such clauses.

There are other conditions, and if you are transmitting sound recordings on a subscription basis, you should consult Section 114(d)(2) and a lawyer familiar with the Act. Note, nonsubscription transmissions are not subject to any of the above conditions. You can, for example, operate a non-interactive web radio station which makes nonsubscription transmissions, and still post your playlist. It is suggested, however, that webcasters who wish to remain off the radar scope of the RIAA should apply these conditions to their own nonsubscription, noninteractive webcasts.

Ephemeral Recordings

If you plan to make a copy of each recording to facilitate your exempt Internet broadcasts (e.g., copy to hard disk), you should review the requirements of the ephemeral recording exemption under Section 112: http://www.law.cornell.edu/uscode/17/112.shtml.

"Notwithstanding the provisions of section 106, . . . it is not an infringement of copyright for a transmitting organization entitled to transmit to the public a performance or display of a work, under a license or transfer of the copyright or under the limitations on exclusive rights in sound recordings specified by section 114(a), to make no more than one copy or phonorecord of a particular transmission program embodying the performance or display, if -

(1) the copy or phonorecord is retained and used solely by the transmitting organization that made it, and no further copies or phonorecords are reproduced from it; and

(2) the copy or phonorecord is used solely for the transmitting organization's own transmissions within its local service area, or for purposes of archival preservation or security; and

(3) unless preserved exclusively for archival purposes, the copy or phonorecord is destroyed within six months from the date the transmission program was first transmitted to the public."

The RIAA is currently taking the position that the ephemeral recording exemption in Section 112 does not apply to web radio stations, but there are more than adequate grounds for the contrary view. Webcasters would be advised to actually purchase the applicable CDs, maintain your receipt, and make your one permitted copy directly from the CD you purchased.

Get A License to Perform the Underlying Songs

Of course, because the owners of the copyrights in the songs (as distinguished from the sound recordings of those songs) being transmitted on the web radio station have an exclusive right to publicly perform those songs, the webcasters must obtain appropriate performance licenses to webcast them, which can easily be obtained from ASCAP and BMI.

International Considerations

Finally, there are international licensing considerations that may come into play (i.e., the above is only the U.S. copyright law and the Internet is worldwide), but those considerations must be reviewed in the context of the many cross-jurisdictional issues raised by the Internet itself, which the courts of the world have not even begin to sort out. Should you have any questions on any of these matters, feel free to post them in the conference area of KohnMusic. We look forward to helping everyone sort through these interesting legal issues.

Copyright Bob Kohn 1998 All rights reserved. The foregoing is designed to provide accurate and authoritative information regarding the subject matter covered, but it is distributed with the understanding that neither the publisher nor its author is engaged in rendering legal or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.