Designer Skin LLC v. S & L Vitamins, Inc., et al.
Bonneville International Corp., et al. v. Marybeth Peters, as Register of Copyrights, et al.
Civ. No. 01-0408, 153 F. Supp.2d 763 (E.D. Pa., August 1, 2001) aff'd. 347 F3d 485 (3rd Cir. 2003)
FCC licensed AM-FM radio stations are permitted to broadcast sound recordings over the air in their geographic region without paying royalties to those who hold a copyright in those sound recordings. The United States Copyright Office promulgated rules ("Rules") making it clear that the statute under which such royalty free transmissions are permitted, 17 U.S.C. §114, does not extend to the simultaneous transmission of those radio broadcasts over the Internet via streaming. Those who wish to make such transmissions must accordingly obtain a license, with attendant fees, from the holders of the copyright in those sound recordings they seek to "stream". Holding both that the Copyright Office had the authority to promulgate rules interpreting the statute in question and had approximately exercised such authority here, the Court upheld the Rules against challenge.
This case turns on the appropriate interpretation of the Digital Performance Right in Sound Recording Act ("DPRA"), enacted in 1995. The DPRA amended various provisions of the Copyright Act to grant a limited right of public performance to the holders of the copyright in sound recordings. Under the DPRA, one could not publically perform, by means of a digital audio transmission, a sound recording over an interactive service, without obtaining the consent of the holder of the copyright in such sound recording. The operator of a non-interactive subscription service could also not publicly perform such a recording without obtaining a license to do so. Unlike interactive services, however, the statute obligated the copyright holder to provide such a license to the operator of a noninteractive subscription service, and dictated the manner in which the appropriate royalty will be determined.
No right, however, was given to the copyright holder to prevent the public performance of their sound recording via a "nonsubscription broadcast transmission." This statutory exception was embodied in 17 U.S.C. § 114, which provides, in pertinent part, that "the performance of a sound recording publically by means of a digital audio transmission, other than as part of an interactive service, is not an infringement of section 106(6) if the performance is part of (A)(iii) a nonsubscription broadcast transmission."
The section was intended to permit the operators of FCC-licensed radio stations to continue to broadcast sound recordings over the air without paying a royalty to the holders of the copyright in such sound recordings.
Under the statute a "subscription" transmission is defined as "a transmission that is controlled and limited to particular recipients, and for which consideration is required to be paid . . . to receive the transmission . . .". A "broadcast" transmission is defined as "a transmission made by a terrestrial broadcast station licensed as such by the [FCC]." A "nonsubscription transmission" is defined simply as "any transmission that is not a subscription transmission."
Finding that Congress had "implicitly" delegated to the Copyright Office the authority to interpret the DPRA, the Court turned to the propriety of the Copyright Office's rule making. According to the Court, if Congress "unambiguously expressed" its intention in the statute, the Court's inquiry end, and the Court must simply give effect to that intent. If, however, "the statute is silent or ambiguous with respect to the specific issue," the Court is to determine if "the agency's answer is a reasonable one based on a permissible construction of the statute."
Upon analysis, the Court determined that "the statute is either silent, or, at best ambiguous on the issue" of whether streaming was or was not intended to be exempt from the public performance right in the underlying sound recordings. The Court further determined that the Copyright Office's rulemaking on this subject was reasonable, and accordingly upheld it.
Both plaintiffs (AM/FM radio broadcasters) and defendants claimed that the language of the statutory exemption supported their position. As stated above, the statute exempts "nonsubscription broadcast transmissions." A "broadcast" transmission is defined as "a transmission made by a terrestrial broadcast station licensed as such by the [FCC]." Plaintiffs argued that their streaming transmissions fell within the ambit of this definition. First, such transmission were free, and therefore nonsubscription. Second, because the transmissions originated from FCC licensed radio stations, located on Earth, the transmissions were made by "a terrestrial broadcast station" which was "licensed as such by the [FCC]."
The defendants countered that the phrase "licensed as such by the [FCC]" meant that the transmitter had to be engaging in a type of activity (such as over-the-air broadcasting) for which it had been licensed by the FCC. As the FCC did not issue licenses for Internet streaming, argued defendants, the exemption did not apply to such activities.
The Court concluded the statute was ambiguous on the question of whether streaming was subject to the exemption. This, in turn, left the matter in the hands of the Copyright Office.
Finding that the Copyright Office's rule making on this subject as a reasonable and appropriate interpretation of Congress' intent in enacting the DPRA, the Court upheld the statute. In reaching this conclusion the Court pointed favorably to a number of factors relied on by the Copyright Office in reaching its determination:
1. In 1998, Congress enacted the Digital Millenium Copyright Act ("DMCA"), which, among other things, eliminated an exemption from the public performance right which had been granted for "an initial nonsubscription retransmission made for direct reception by members of the public of a prior or simultaneous incidental transmission that is not made for direct reception by members of the public." This exemption was eliminated by Congress to prevent "webcasters" from being exempt from the public performance right. The Court pointed to this enactment as supportive of its decision and that of the Copyright Office, noting:
Congress' choice not to exempt webcasting from the public performance right of section 106, see 17 U.S.C. § 114(d)(2), is problematic to Plaintiffs' reading of the statute. It is strange that Congress would choose not to exempt webcasting, but choose to exempt AM/FM streaming, an activity that shares many characteristics with webcasting.
2. The Copyright Office interpreted the phrase "licensed as such by the [FCC]" as requiring the activity that was to be subject to the exemption to be licensed by the FCC. Finding that Internet streaming was not so licensed, the Copyright Office determined it was not intended by Congress to be included within the statutory exception. The Court agreed with this interpretation, stating:
Even more problematic to Plaintiffs' interpretation of the statute is the presence of the phrase "licensed as such by the [FCC]" within the definition of a "broadcast transmission." It is true that AM/FM broadcasters engaged in streaming their broadcasts over the Internet are licensed by the FCC. However, the presence of the term "licensed as such by the [FCC]" suggests not only that a broadcast station is licensed by the FCC, it implies that the broadcast station is engaging in those activities which are licensed by the FCC. The idea that Congress intended FCC-licensed entities to be exempt from the public performance right while engaging in activities the FCC does not regulate, without some explicit reference in the statute stating so, is extremely unlikely.
3. The Court and the Copyright Office also both pointed to a number of conflicts that would occur among various provisions of the DPRA if the exemption was extended to Internet streaming, including conflicts with Section 112 of the Copyright Act, which permits licensed broadcast radio or television stations to make one ephemeral copy of a copyrighted work in furtherance of transmissions within their local service area (Internet streaming occurs worldwide), as well as Section 114(d)(2)(B) and (C) of the Copyright Act.