a primer on the law of webcasting and digital music delivery by

LEGAL AFFAIRS

A Primer on the Law ofWebcasting and Digital Music Delivery

by Bob Kohn

This article is dedicated to the memory of FrankSinatra, whose life of music followed its own laws.

The passing away of Francis Albert Sinatra earlierthis year marked the end of an era, but he remained withus long enough to witness the dawn of a new age, onethat is being hailed as the digital millennium. For severalyears now, copies of Frank Sinatra's most popular re-cordings have been transmitted, mostly illegally, overthe Internet, passing through cyberspace, like Strangersin the Night, to and from destinations unknown to the

ENTERTAINMENT LAW REPORTER

VOLUME 20, NUMBER 4, SEPTEMBER 1998

societies and collection agencies responsible for licens-ing these transmissions.

These recordings, and the musical works whichunderlie them, are being transmitted over the Internet intwo basic ways: (1) by transmissions that are akin to ra-dio broadcasts over the Internet, whether to the public atlarge or directly to individuals upon request, calledwebcasting, and (2) by the delivery of computer files,much like word processing files or spreadsheet files,that contain sound recordings that can be played on per-sonal computers and other devices equipped with thenecessary decoding and audio software and hardware.These I will refer to as downloadable music files or bythe name of the file format which made them popular,MP3.

The webcasting of sound recordings and the pro-liferation of downloadable MP3 files have caused thosewho create and distribute recorded entertainment to



question whether the laws designed to protect theircopyrighted content, such as musical works and soundrecordings, will effectively be enforceable in the digitalworld. To address the concerns of those who have an-swered this question in the negative, lawmakers haveproposed and enacted new legislation.

The Digital Performance Rights in Sound Record-ings Act of 1995 (the "1995 Act") was enacted to spe-cifically address the concerns raised by copyrightowners of musical works and sound recordings. This im-portant legislation made two significant, but distinct,changes affecting the licensing of musical works under U.S. copyright law, one to address the questions raisedby webcasting, and the other to address the questionsraised by downloadable music files.

Because the 1995 Act fell short of addressingmany of the questions raised by the application of digitaltechnology to entertainment content, Congress recently



proposed the Digital Millennium Copyright Act (the"DM Act"). The proposed DM Act is primarily intendedto implement the recent World Intellectual Property Or-ganization (WIPO) Copyright Treaty and WIPO Per-formances and Phonograms Treaty, both concluded atGeneva, Switzerland on December 20, 1996.

However, by a last minute amendment proposedin the House version of the bill, the proposed DM Actwould appear to reverse certain provisions of the 1995Act relating to webcasting, provisions which also appearto have originally been a negotiation error by the recordindustry. At the time of this writing, the DM Act wasapproved by the House of Representatives and wasawaiting action by the Congressional Conference Com-mittee for reconciliation with the Senate version of theproposed Act.

This article will discuss the application of the1995 Act, and the relevant provisions of the proposed



DM Act, to webcasting and downloadable music deliv-ery. It will also specifically address certain importantcontroversies that neither the 1995 Act nor the proposedDM Act appear to resolve.

Issues

In a presentation I made at the first "MP3 Sum-mit," a meeting of the nascent MP3 industry held on July2, 1998 in San Diego, California, I provided a brief out-line of forms of copyright protection that Congress pro-vided the music industry when it enacted the 1995 Act.That outline is summarized in the following Table.



downloadable files as they begin making plans to effecttheir digital audio transmissions containing copyrightedmusic. The answer to most of these questions is straight-forward. The answers to Questions 1 and 3, however,are likely to remain the subject of some debate in thecoming months, and the answer to Question 10 will de-pend entirely on whether the DM Act (in the form pro-posed by the House) is passed into law.

Recent Legislative Developments

To appreciate the importance of the proposed DMAct on Question 10, and how it affects webcasters, youmust understand how the bill came about. In June, 1998,the Recording Industry Association (RIAA) sent a letterto about 40 web radio stations stating that they requirelicenses from record companies for the "webcasting" oftheir sound recordings over the Internet. "I write," stated



Steven Marks, vice president and deputy general coun-sel for the Recording Industry Association of American(the "RIAA"), "because our record company membersare the copyright owners of the sound recordings thatyou are transmitting, and we want to ensure that youhave secured the appropriate permission to Webcastthose recordings." (The RIAA's letter, as well as theother documents mentioned below may be found in theirentirety through web links located athttp://www.kohnmusic.com and athttp://www.mp3.com.)

In a brief article I wrote for non-lawyers, pub-lished in June, 1998 on the web, I pointed out that theRIAA letter neglected to state that only certain types ofwebcasts of copyrighted sound recordings require li-censes from record companies, and I attempted to ex-plain why many of them do not. Specifically, I statedthat the 1995 Act exempted non-interactive, non-



subscription digital audio transmissions of sound record-ings, such as those produced by Internet radio stations,from any requirement of a license from their owners. Steven Marks of the RIAA responded to that arti-cle in a formal letter to me dated July 1, 1998, which hethen distributed for publication on the web and else-where. In this new letter, he attempted to explain whythe RIAA believes the 1995 Act does not exempt non-interactive, non-subscription digital audio transmissionsof sound recordings from the copyright owner's exclu-sive rights. A few weeks later, I posted on the web anarticle which refuted his analysis.

Meanwhile, on July 1, 1998, Hilary Rosen, Presi-dent & CEO of the RIAA wrote a blistering letter to theCEO's of the top webcasting companies on the web, in-cluding RealNetworks, makers of software that facili-tates digital audio transmissions, and Broadcast.Com, aleading Internet publisher of digital audio transmissions,



such as retransmissions of radio broadcasts. A monthearlier RealNetworks and Broadcast.Com had formedthe Digital Media Association (or, "DiMA") to serve asa voice in Washington on behalf of Internet audio com-panies. In her letter, Rosen accused these companies of,among other things, "stabbing [the recording industry] inthe back."

DiMA responded to that Rosen's letter by letterdated July 8, 1998, suggesting that one of the reasonsDiMA was formed in the first place was that RIAA hadgone around the backs of webcasters by lobbying toeliminate the ephemeral recording exception these com-panies had been relying on to facilitate their webcastingactivities.

DiMA, however, was not comfortable being onthe receiving end of the shrill of accusations being madeby the RIAA, and offered to sit down with the RIAA toreach a compromise. In mid-July, DiMA and the RIAA



met to discuss ways of compromising their differences.Within days, they reached an agreement in principle thatwould (1) eliminate the exemption for webcasters setforth in Section 114(d)(1) of the Copyright Act, (2) adda compulsory license scheme for limited kinds of "eligi-ble" transmissions (i.e., those made by webcasters hav-ing the profile of members of DiMA), and (3) addlanguage to Section 112 that would make it clear the"eligible" webcasters could make ephemeral recordingsof sound recordings for the purposes of facilitating theirwebcasts.

On Thursday, July 23, 1998 representatives of theRIAA and DiMA and other music industry groups metwith the U.S. Copyright Office in Washington, D.C. andwere told by the Register of Copyrights that they haduntil the following Friday, July 31, 1998, to draft thelegislation they were seeking. Miraculously, on August4, 1998, the House of Representatives passed an



amendment to the DM Act which included the legisla-tion drafted and agreed upon by the RIAA and DiMAjust days, and perhaps hours, earlier. At the time of thiswriting, the DM Act was awaiting action by the Con-gressional Conference Committee for reconciliation witha Senate version of the proposed Act.

Two Copyrights Involved

Before addressing the questions presented in theTable, it should be helpful to first review several impor-tant concepts, the first of which involves the differencebetween (a) a song and (b) a sound recording of a song.

Anyone seeking to obtain a license (i.e., permis-sion) to use a recording of a song must first understandthat his or her use will normally involve not one, but twocopyrights: (a) the copyright in the sound recording and(b) the copyright in the underlying song, or musical



work. The copyright in a sound recording, a particular aseries of sounds, is completely separate from the copy-right in the underlying song featured in the soundrecording.

For example, there exists a valid copyright in thesong I've Got You Under My Skin by Cole Porter andthe copyright is owned by Warner/Chappell Music, Inc.,a music publishing company. At the same time, severalrecords of I've Got You Under My Skin have been re-corded by numerous recording artists over the years. Acompletely separate copyright exists for each particularrecording - the sequence of sounds that make up the per-formance of the song by a singer and orchestra. Theserecordings are owned by the respective record compa-nies that commissioned their creation. For example, the1956 version of Frank Sinatra's recording of I've GotYou Under My Skin is owned by Capitol Records.



Thus, if you wished to obtain permission to useSinatra's 1956 recording of I've Got You Under MySkin, you would require the permission of Capitol to usethe recording and the permission of Warner/Chappell touse the underlying song. You could not use the record-ing without permission from both companies. If youwished to make a new recording of the song I've GotYou Under My Skin, you would require permissionfrom Warner/Chappell, but you would not require per-mission from Capitol Records or any other record com-pany who happens to own a recording of the song.

Performance Right vs. Reproduction Right

The second important concept underlying this de-bate involves the difference between what is known asthe reproduction right and the public performance right.The copyright law provides an owner of copyright



several exclusive rights, including the exclusive right "toreproduce the work" (e.g., to make physical copies, suchas CDs and sheet music) and "to publicly perform" thework (e.g., rendering a live performance of a song in anightclub, or playing a recording of a song on the radio).

This exclusive right to reproduce copyrightedworks applies to both musical works (e.g., the Cole Por-ter song) and sound recordings (e.g., the particular re-cording of it owned by Capitol Records). By contrast,however, the right of public performance under the U.S.copyright law only applies to songs, not to sound re-cordings. The owners of copyrights in songs have al-ways had a general right of public performance in theirmusical works. As a result, the copyright owner of thesong I've Got You Under My Skin (in this case,Warner/Chappel, through its performance rights repre-sentative, ASCAP) will collect money from radio broad-casts of Sinatra's 1956 recording.



By contrast, the record company (in this example,Capitol Records) is not entitled to collect money fromsuch radio broadcasts, because, at least in the U.S.,owners of sound recordings do not have a general publicperformance right.

Digital Performance Rights in Sound Recordings Act of1995

As mentioned above, the 1995 Act made two sig-nificant, but distinct, changes affecting the licensing ofmusical works under U.S. copyright law: (1) to addressthe questions raised by webcasting, it created a new, butlimited, digital public performance right for sound re-cordings, and (2) to address the questions raised bydownloadable music files, it broadened the CopyrightAct's existing compulsory mechanical license provision



to include the reproduction and delivery of musicalworks in sound recordings by digital transmission.

Sound Recordings. Section 106 of the U.S. Copy-right Act sets forth the exclusive rights of a copyrightowner, which includes the exclusive right of reproduc-tion and the exclusive right of public performance dis-cussed in the previous section. However, the exclusiveright of public performance, set forth in Section 106(4),only applies to the following specific types of copy-righted works: "literary, musical, dramatic, and choreo-graphic works, pantomimes, and motion pictures andother audiovisual works." Note that sound recordingsare not on the list.

To partially address this omission, the 1995 Actadded a new Section 106(6), which provided the ownerof copyrights in sound recordings an exclusive right inthe public performance, but only when such perform-ance is "by means of a digital audio transmission." This



new limited right of public performance does not applyat all to analog transmissions and was severely limitedby the exemptions and other conditions set forth in Sec-tion 114 of the Copyright Act, entitled, "Scope of Exclu-sive rights in Sound Recordings," which I'll turn tobelow.

Musical Works. Under Section 106(1) of theCopyright Act, a copyright owner of a musical work hasan exclusive right to reproduce the song in copies andphonorecords. This right, however, is subject to Section115 of the Copyright Act, which is often referred to asthe "compulsory license provision." Briefly, as long asrecords of a song were previously distributed in theUnited States, the compulsory license provision allowsanyone else to compel the copyright owner of a song(e.g., a music publisher) to license the song at a licensefee that is established by law - this fee is called the



"statutory rate." The statutory rate, as of January 1998,is 7.1 cents, or 1.35 cents per minute of playing time.

The 1995 Act broadened Section 115 so that theexisting compulsory mechanical license now coversdownloadable music files, something which the 1995Act calls "digital phonorecord deliveries" (which are ex-plained in more detail below). In other words, if youwant to effect digital phonorecord deliveries of otherpeoples songs, you may obtain a license at the statutoryrate. The 1995 Act established a procedure by which thestatutory rate for these digital phonorecord deliverieswould be set, but as of the time of this writing, such ratehas not been announced. (For purposes of this article, itis assumed that the statutory rates for the reproductionand distribution of phonorecords in physical form andthat of digital phonorecord deliveries will be the same).

The Players



The final concepts underlying this debate con-cerns knowing who the various music industry playersare and who they represent While this may be secondnature to music industry veterans, webcasters who ear-nestly try to discern who it is they have to pay, and whatit is they have to pay for, can find this to be a most in-timidating endeavor. With apologies for the entertain-ment law buffs for the following superfluity and toforeign nationals for omitting all but the relevant U.S.industry players in our wonderfully complex industry, Ioffer the following simplified descriptions:

Record Company. Record companies are entitieswho enter into contractual relationships with recordingartists for the financing, promotion, and distribution ofsound and video recordings featuring artists' perform-ances. In return, the artist is paid a royalty, which istypically in the form of some percentage of the revenues



earned by the record company in connection with thevarious kinds of commercial exploitation of the artist'srecorded performances.

Music Publisher. Music publishers are entitieswho enter into contractual relationships with songwrit-ers, often the same person as the recording artist, for thecommercial exploitation of the songs written by thesongwriters. Publishers may license the song for use inrecordings made and distributed by record companies,for use in printed editions, such as sheet music andsongbooks, and for live and recorded performances ofthe songs in nightclubs, restaurants, hotels and similarestablishments and on radio, television and other kindsof broadcasts.

ASCAP/BMI/SESAC. These organizations, com-monly known as "performance rights societies," repre-sent music publishers and songwriters solely withrespect to the performances of the songs. Music



publishers and songwriters use these organizations tocollect money from nightclubs, restaurants, hotels, andother venues, and radio and televisions stations for thepublic performance of all the songs they represent intheir respective catalogs. They may charge the venuesan annual flat fee and charge the radio and televisionstations a percentage of advertising revenues in ex-change for a "blanket license" to use all of the songs theparticular performance rights society controls or repre-sents. After collecting the money on a blanket basis,each organization then takes surveys of what songs areplayed during the year; they then allocate the total col-lected revenue among the particular songs performedand pay each respective music songwriter and corre-sponding music publisher an amount representing whatthe song earned in performance royalties during theyear. The performance rights societies only deal with thesongs, not the recordings of songs, and as previously



mentioned, only deal with performances of songs, notwith the making or distribution of records or other cop-ies containing songs.

Harry Fox Agency. This is an organization thatspecializes in issuing licenses to record companies forthe reproduction of songs in CDs and other kinds of re-cords. The fees they charge for these uses is limited bythe "statutory rate" specified in the U.S. Copyright Act.After retaining a small percentage for its services, theHarry Fox Agency pays these fees to music publishers(which then pays typically half of that to the song-writer). Some music publishers issue their own mechani-cal licenses directly to record companies, but many findthe economies of scale offered by the Harry Fox Agencyto be worth the services fee charged. Though the HarryFox Agency performs other kinds of licensing servicesfor music publishers, they do not license performance of



songs or engage in any form of licensing services for re-cord companies.

Recording Industry Association of America. TheRIAA, headquartered in Washington, D.C., is a tradeassociation which represents record companies. TheRIAA's stated mission is to promote the mutual interestsof record companies, as well as the betterment of the in-dustry overall through government relations, intellectualproperty protection, and international activities. The as-sociation also operates an aggressive anti-piracy unit,conducts extensive consumer and industry research, andprovides ongoing communications support.

Terms of Art

With these important concepts in mind, we cannow turn to answering the ten basic licensing questionsraised by the digital transmission of recorded music.



Before exploring these questions, one at a time, we willreview two key terms of art: that of (1) "digital audiotransmission" and (2) "digital phonorecord delivery."

Digital Audio Transmission

First, as mentioned above, the 1995 Act providedto owners of sound recordings an exclusive right to pub-licly perform them by digital audio transmission. Essen-tially, to qualify for the exclusive right, the transmissionmust be (a) in digital form, (b) audio-only, and (c) atransmission.

A "digital transmission" is a transmission that is ina digital or other non-analog format. Thus, AM and FMbroadcasts in analog form are not covered. Next, it mustbe audio-only, not audiovisual, because audiovisualworks already have a public performance right underSection 106(4). As a result, audiovisual works, such as



music videos, are not subject to any of the limitations towhich Section 106(6) is subject, even if only the sound-track of the video is transmitted. Finally, it must be atransmission. To "transmit" a work is to communicate itby any process or device whereby sounds or images arereceived beyond the place from which they are sent.Thus, rendering a live performance, even with the use ofa megaphone or loudspeakers, does not itself involve atransmission.

Digital Phonorecord Delivery

Second, there are two basic kinds of digital audiotransmissions: (1) those that result in a specifically iden-tifiable reproduction of a phonorecord by or for anytransmission recipient and (2) those that don't. Trans-missions that do are called "digital phonorecord deliver-ies," the detailed definition of which is set forth in the



next section. An example of a digital phonorecord deliv-ery would be the commercial sale from a web site of an"MP3 file" - that is, a sound recording saved as com-puter data file using the compression techniques of anMPEG layer-3 software encoder - downloaded from aweb site directly over the Internet to the home computerof a consumer.

Digital Audio Transmissions That Result in Digital Phonorecord Deliveries

Question 1: What licenses are required from the ownerof a song to permit a digital phonorecord delivery of asound recording containing the song - that is, the digitaltransmission that results in the recipient winding up witha phonorecord containing the song?



Reproduction Right. Recall that a copyrightowner of a musical work has an exclusive right to repro-duce the song in copies and phonorecords. This right issubject to Section 115 of the Copyright Act, which is of-ten referred to as the "compulsory license provision."Briefly, as long as records of a song were previouslydistributed in the United States, the compulsory licenseprovision allows anyone else to compel the copyrightowner of a song (e.g., a music publisher) to license thesong at a license fee that is established by law - this feeis called, the "statutory rate."

As mentioned above, the statutory rate, as ofJanuary 1998, is (assumed to be) 7.1 cents, or 1.35cents per minute of playing time. In other words, if youwant to effect digital phonorecord deliveries of otherpeoples' songs, you may obtain a license at the statutoryrate. The license which authorizes these transmissions iscalled a "mechanical license," and the organization in



the United States that issues most of them is the HarryFox Agency. The nice thing about these licenses is thatyou know you can always get it, and the statutory rateserves as a ceiling to what the music publishers or theHarry Fox Agency can charge you. In addition, theHarry Fox Agency is currently negotiating an agreementwith its international counterparts that would make itclear that mechanical licenses will be collected from thesource of the transmission - that is, the web site offeringthe digital phonorecord deliveries - regardless of wherein the world the transmission recipient receives his orher copy of the recording. Mechanical licenses are easyto get, and God bless them.

Performance Right. But there is a little contro-versy brewing here. The performance rights societies(e.g., ASCAP, BMI, SESAC) appear to be taking theposition that a performance license is required to effecta digital phonorecord delivery, even though a statutory



mechanical reproduction license has already been ob-tained for the same delivery. In their view, all transmis-sions of songs constitute performances of songs,whether or not they result in a specifically identifiablephonorecord made by or for the transmission recipient,and therefore, they say, you must also pay a public per-formance fee for these transmissions.

The performance rights societies have not yet dis-closed how much they intend to charge for these trans-missions. They are likely to seek something less thanwhat they charge for transmissions that do not constitutedigital phonorecord deliveries, such as "streaming"audio transmissions (see below).

A webcaster may legitimately ask: if I am paying7.1 cents for the digital phonorecord delivery, why mustI also pay for its transmission, particularly if the phon-orecord is not truly performed or in any way rendered



during the transmission? Isn't this a form of "double-dipping" by the music industry?

I have yet to take a position on this particularcontroversy, but, at the risk of being branded a pirate bythe music industry and a music industry lackey by theweb community, I will venture to briefly point out vari-ous positions that have been, or may be, made to sup-port each side in this debate.

For example, the performance rights societiescould point to the definition of "digital phonorecord de-livery" to support its position. The complete definitionof that term, which was added to the Copyright Act bythe 1995 Act, is as follows:

"A `digital phonorecord delivery' is each individ-ual delivery of a phonorecord by digital transmission ofa sound recording which results in a specifically identifi-able reproduction by or for any transmission recipient ofa phonorecord of that sound recording, regardless of



whether the digital transmission is also a public per-formance of the sound recording or any nondramaticmusical work embodied therein."

One could certainly infer from the italicized lan-guage that a digital phonorecord delivery may involvethe public performance of the musical work embodied inthe sound recording. But only that it may do so is thebest you can say about it. If Congress intended to defini-tively answer the question, it certainly could have doneso in unambiguous terms, such as, "A digital transmis-sion containing a sound recording that results in a digitalphonorecord delivery constitutes a performance of anymusical work embodied in that sound recording." But itdidn't.

Quite possibly, Congress recognized that somedigital phonorecord deliveries may be performed or"streamed" for listening by the user while they are beingdownloaded; hence, the italicized language may have



been needed to make certain that a digital phonorecorddelivery will still be deemed such, even if the digitaltransmission happens also to constitute a publicperformance.

The performance rights societies could point tothe definition of public performance:"To perform . . . a work publicly means -

(1) to perform or display it at a place open to thepublic or at any place where a substantial number ofpersons outside of a normal circle of a family and its so-cial acquaintances is gathered; or

(2) to transmit or otherwise communicate aperformance or display of the work to a place specifiedby clause (1) or to the public, by means of any device orprocess, whether the members of the public capable ofreceiving the performance or display receive it in thesame place or in separate places and at the same time orat different times."



It appears, from the italicized language, that itdoes not matter whether you hear the performance at thesame time as you download the file. Certainly, when arecording is being streamed to you, it is first buffered inyour computer's temporary memory, before the record-ing is actually played so that you can hear it. What is thedifference between storing the recording in temporarymemory and storing it on your hard disk (which is typi-cally the case with a digital phonorecord delivery) priorto your hearing the recording?

The problem with these arguments is that theabove definition concerns not what a performance is, butwhat it means to perform a work publicly (as opposed toprivately). Nevertheless, even if the transmission of awork is considered a public one, it may still not consti-tute a performance. According to the Copyright Act,



"To perform a work means to recite, render, play,dance, or act it, either directly or by means of any de-vice or process . . . "

It may well be asked, where, for purposes of thedefinition of "perform," is the "rendering" or the "play-ing" of the work in a the transmission of a downloadedmusic file? The performance rights societies could takethe position that a sound recording of a work is itself a"rendering" (i.e. a performance, albeit a recorded one)of the work. This is as opposed to sheet music where themusical notations only are listed. When one digitallytransmits the sound file, one is engaged in a transmis-sion of the recorded performance, as hence, it may besaid, the requisite "rendering" is taking place.

This argument would be plausible but not for thedefinition of "sound recordings," which is defined in theCopyright Act as "works that result from the fixation ofa series of sounds." Thus, by definition, a sound



recording is a fixation of sounds, not a rendering ofsounds. Arguably, then, by transmitting a sound record-ing, you are transmitting a fixation of sounds, not a per-formance or rendering of them.

A better argument, from the performance rightssocieties perspective, would be to say that the down-loading of a digital file is part of a process that results ina rendering or playing of the work at the recipient's end.Recall that to perform a work means to render or playthe work, "either directly or by means of a device orprocess." Thus, arguably, the process of transmittingthe bits constituting a digital sound recording file, the re-cipient's buffering those bits or saving them to his harddisk or other storage media, and his playing of the bits,either as the bits are being downloaded or later, even af-ter the entire file has been saved to disk, constitutes aplaying or rendering of the sound recording, "either di-rectly or by means of a device or process."



Because technology now permits the playing ofthe bits either as the bits are being downloaded or afterall the bits in the file have been received, the distinctionbetween a digital phonorecord delivery (DPD) and anon-DPD (i.e., a purely "streaming" digital audio trans-mission) is being blurred. The performance rights socie-ties may argue that all of these transmissions should beconsidered performances, merely because it is too im-practical, on a case-by-case basis, to make a distinctionbetween them.

In addition, the performance rights societies haveargued that a digital phonorecord delivery provides anadded value to the consumer - that is, with the advent ofdigital deliveries, the consumer no longer has to schlepdown to a record store to buy a CD; he or she can justorder it online and receive it in minutes. Consequently,that added value should be paid for. This argument,however, was first made before the success of



companies like Amazon.com, from whom you can noworder a CD and have it sent to you by overnight courier.What practical difference does it make whether thetracks constituting a record album come to you over-night or several minutes or hours after you have re-quested them to be downloaded?

Moreover, it may be reasonable to assume that ifCongress made digital phonorecord deliveries subject toa compulsory license under Section 115, and set the feefor such licenses at the statutory rate, then, arguably, itshould be unnecessary for anyone to pay more than thestatutory rate to effect the delivery, "regardless ofwhether the digital transmission is also a public per-formance of . . . any musical work embodied therein."Again, the quoted language is from the Act's definitionof digital phonorecord delivery, and one could inferfrom it that Congress wanted to make certain that a digi-tal download of a sound recording will be deemed a



digital phonorecord delivery, subject to the compulsorylicense, with no one having to pay more than the statu-tory rate, even if the digital transmission happens also toconstitute a public performance.

If the performance rights societies are not suc-cessful in persuading the industry, or a court, that alldigital phonorecord deliveries constitute performances,one might think that the practical result will be this: ifthe statutory rate for a mechanical reproduction licenseis paid with respect to a transmission, then, a perform-ance royalty is not due for the same transmission. Pay-ment of the statutory fee for a mechanical license isintended to cover the sale of a copy (i.e., a physicalphonorecord or a digital phonorecord delivery) and,theoretically, all private performances of the song aris-ing from the use of such copy - and this would includethe first performance or rendering that occurs concur-rently with the transmission of the digital phonorecord



delivery or sometime after the digital phonorecord deliv-ery is completed.

This, however, is complicated by the followingproblem: As will be discussed below in connection withQuestion #3, the Harry Fox Agency, on behalf of themusic publishers which it represents, appears to be tak-ing the position that a digital audio transmission of amusical work that is effected by means of an "interactiveservice" (discussed below) constitutes a digital phonore-cord delivery, even though there is no assurance that therecipient will end up with a reusable copy of the record-ing. As such, the transmission will require payment ofthe statutory compulsory license fee, currently 7.1 cents.As pointed out below, no one disputes that a transmis-sion that is a mere "streaming" of a recording is a publicperformance of the song underlying the recording, enti-tling the performance rights society to legitimately col-lect performance royalties for them. But, here again, the



industry may be open to the accusation of"double-dipping."

It would seem that this sticky problem is some-thing that should be worked out between the perform-ance rights societies, which are largely controlled bysongwriters and music publishers, and the Harry FoxAgency (or directly by their music publisher membersand the songwriters who they represent). The problem isthat neither group is likely to welcome the prospect ofgiving up their side of the revenues to avoid the per-ceived "double-dipping" problem.

Be that as it may, other arguments, of varying de-grees of persuasiveness, have been put forth by bothproponents and detractors on this question, but I thoughtit wise to reserve my views on the subject until suchtime as I have formulated them.



Question 2: What licenses are required from the ownerof a recording to permit a digital phonorecord deliverycontaining the song - that is, the digital transmission thatresults in the recipient receiving a phonorecord contain-ing the recording?

There is no controversy about the answer to thisquestion: persons desiring to make digital phonorecorddeliveries of sound recordings must obtain a licensefrom the person who owns the recording, which is typi-cally a record company. Further, unlike for the use ofthe underlying song, there is no compulsory license forthese kinds of digital audio transmissions. In otherwords, you must obtain permission from the recordcompany and the record company can charge whateverit likes or even refuse to grant you permission to makethe transmission.



The reason for this is simple: digital phonorecorddeliveries directly replace sales of records. Without suchsales, the purpose of the copyright law will be defeated:Record companies would be unable to finance, promoteand distribute new recordings, and artists would be un-able earn royalties to support professional recording ca-reers. As a result, there will be an economicallyinsufficient supply of quality musical recordings for thebuying public. It is the very purpose of the copyright lawto ensure that artists and their record companies receiveeconomic remuneration for their undertakings, so that anefficient supply of quality musical works and sound re-cordings will be produced and distributed to the listen-ing public.

This theme of the extent to which digital audiotransmissions would replace the sale of records playedan important role in the development of the 1995 Actand is an important concept in understanding the



distinctions among the various kinds of transmissionsidentified in the 1995 Act discussed below. For exam-ple, there is a great distinction between what licensesare required for digital audio transmissions that consti-tute digital phonorecords and transmissions that do not.As we shall see, the law extends stronger and moreflexible performance rights to the owners of sound re-cordings in instances where the digital audio transmis-sion poses a greater risk of replacing a record sale.

Digital Audio Transmissions That Do Not Result inDigital Phonorecord Deliveries

Of transmissions that do not result in digital phon-orecord deliveries, there are two basic types: transmis-sions that are part of an interactive service and thosethat are not.

Under the U.S Copyright Act,



"An `interactive service' is one that enables a member ofthe public to receive, on request, a transmission of a par-ticular sound recording chosen by or on behalf of the re-cipient. The ability of individuals to request thatparticular sound recordings be performed for receptionby the public at large does make a service interactive."

Clearly, even if the digital audio transmissiondoes not result in a copy at the recipient's end of thetransmission, if the recipient can choose, on request, "aparticular recording," then there is a high risk that therecipient will never need to purchase a copy of the re-cording or purchase a digital phonorecord delivery. Ifthe interactive transmission is cheap enough, and thesound quality good enough, members of the public maychoose to listen to interactive transmissions instead.Thus, to serve the purpose of the Copyright Act, a li-cense for interactive transmissions is required. Let's take



a look at what this specifically means in terms of thesong and the sound recording.

Question 3: What licenses are required from the ownerof a song to permit a digital transmission that is part ofan interactive service, but does not result in a digitalphonorecord delivery of the song?

Performance rights. Clearly, a digital transmissionof a song that is part of an interactive service, but doesnot result in a digital phonorecord delivery of the song -for example, the mere "streaming" of a song after a userclicks on an icon or link to receive a transmission of aparticular sound recording - constitutes a public per-formance of the song. Hence, the performance rights so-cieties (e.g., ASCAP/BMI/SESAC) are entitled tocollect performance royalties under their "blanket"



licenses to web sites that offer these interactivetransmissions.

Reproduction rights. It is here we find our secondopen controversy. As mentioned above, the Harry FoxAgency, on behalf of its music publisher members, istaking the position that songs digitally streamed from in-teractive services constitute digital phonorecord deliver-ies, even if no digital copy is, or can be, made by or forthe intended recipient of the transmission. Accordingly,interactive transmissions of purely streamed musicwould require payment of the statutory compulsory li-cense fee of 7.1 cents each.

As with the other potential "double-dipping" issuediscussed in connection with the answer to Question #2above, I have not formulated any definitive view on thissubject, but the music publishers can take solace from avery specific provision that was in the DRPA and is now



part of the compulsory license provision at Section115(c)(3)(L):"The provisions of this section concerning digital phon-orecord deliveries shall not apply to any exempt trans-missions or retransmissions under section 114(d)(1)."

In the view of the Harry Fox Agency, the abovelanguage implies that the provisions concerning digitalphonorecord deliveries, while not applying to any ex-empt transmissions under Section 114(d)(1) - which wewill discuss below - does in fact apply to those transmis-sions that are not exempt under Section 114, whichwould include all transmissions made as part of interac-tive services. Thus, according to the argument, the trans-mitter must pay 7.1 cents per interactive digital audiotransmission, whether or not a copy results in the recipi-ent. Regardless of whether one may agree with this re-sult, the argument that the law, as written, requires thisresult, is a strong one.



Nevertheless, the Harry Fox Agency has recog-nized that an interactive transmission of a song that is ofa short duration and which does not result in a copy be-ing made for the intended recipient, is not likely to havean effect on the sale of a record or a full digital phonore-cord delivery of the song. Accordingly, the Harry FoxAgency (and presumably the music publishers it repre-sents) will allow such interactive transmissions withoutrequiring payment of the statutory fee if (a) no morethan 30-seconds of the song is transmitted and (2) thetransmission is effected by or with the permission of theowner of the sound recording embodying the song.Note, this does not allow anyone to make such30-second transmissions, only the record company thatowns the recording, or its licensees.

Question 4: What licenses are required from the ownerof a recording to permit a digital transmission that is part



of an interactive service, but does not result in a digitalphonorecord delivery of the recording?

As mentioned above, even if the digital audiotransmission does not result in a copy at the recipient'send of the transmission, if the recipient can choose, onrequest, "a particular recording," then there is a high riskthat the recipient will never need to purchase a copy ofthe recording or purchase a digital phonorecord deliv-ery. For this reason, the law specifically gives owners ofsound recordings, typically record companies, an exclu-sive right to license digital audio transmissions that arepart of interactive services. This means the record com-pany can charge what it wishes for these transmissionsor refuse to provide a license at all.

Non-Interactive Services



As mentioned above, there are two kinds of digi-tal audio transmissions that do not result in digital phon-orecord deliveries: those that are part of an interactiveservice and those not part of an interactive service. Ofthose transmissions that are not part of an interactiveservice, there are two types: subscription transmissionsand non-subscription transmissions.

The former requires a license, in one form or an-other, and the latter, under 1995 Act, does not require alicense. Why? Returning to our recurrent theme, thedistinction between subscription and non-subscriptiontransmissions was made because it was felt that the riskof a music service which consumers pay for on a sub-scription basis poses a moderate to high risk of replac-ing the sales of records (either physical CDs or digitalphonorecord deliveries), while those which are on anonsubscription basis, like traditional, advertising



supported radio broadcasts, and the like, pose only alow risk of replacing record sales. Here are the relevant definitions:

"A `subscription transmission' is a transmissionthat is controlled and limited to particular recipients, andfor which consideration is required to be paid or other-wise given by or on behalf of the recipient to receive thetransmission or a package of transmissions including thetransmission.

A `nonsubscription transmission' is any transmis-sion that is not a subscription transmission."

Let's first turn to subscription transmissions.

Subscription Transmissions

I would have liked to report that the distinctionbetween subscription and nonsubscription transmissionsends there, but it doesn't. Keeping in the theme of



providing greater rights where there is a higher risk ofreplacing record sales, it was thought that some sub-scription transmissions are less likely to replace recordsales than others. Accordingly, certain subscriptiontransmissions would be treated like any interactive serv-ice, giving the record companies full flexibility to nego-tiate whatever license fees they like or refuse to licensethese forms of subscription transmissions. Other formsof subscription transmissions, those which pose a lowerthreat of replacing the sales of records, would fall withinan area of the law which would allow transmitting or-ganizations, like webcasters, to compel the record com-panies to grant a license and to pay a fee set not by therecord companies, but by a federal arbitration panel.

Thus, the 1995 Act established two types of sub-scription transmissions of sound recordings: (i) volun-tary subscription transmissions and (ii) compulsorysubscription transmissions. Both require licenses from



the sound recording owners, typically record companies.However, the former may be licensed by the recordcompanies on a voluntary basis, meaning the recordcompanies can set any licensee fee they wish, or refuseto license these transmissions. With respect to compul-sory subscription transmissions, the record companiescan be compelled to grant licenses and the license feesare subject to a statutory fee, which will effectivelyserve as a maximum amount that will be charged forsuch licenses. Let's first review the licensing questionsarising from voluntary subscription transmissions - thatis, those which are not subject to compulsory licensing.

Question 5: What licenses are required from the ownerof a song to permit a digital transmission that does notresult in a digital phonorecord delivery of the song, isnot part of an interactive service, but is part of a



subscription transmission that does not comply withcompulsory license provision?

As with the distinction between subscription andnon-subscription transmissions, the distinction betweensubscription transmissions that qualify for compulsorylicensing and those that do not, is not relevant to thequestion of what license is required from the owner ofthe song embodied in a particular sound recording. (Thedistinction is only relevant to the question of what li-censes are required from record companies for the trans-mission of these recordings). Thus, to transmit the song(as opposed to the sound recording) you always requirea public performance license from the applicable per-formance rights society (e.g., ASCAP, BMI, orSESAC).

This is because, unlike with the general publicperformance rights which owners of songs have always



enjoyed, owners of sound recordings do not have a gen-eral pubic performance right. The owners of sound re-cordings were only recently given a public performanceright for digital audio transmissions of their recordings,and only after a period of prolonged negotiations whichresulted in the limitations reflected in Section 114, in-cluding these fine distinctions between interactive andnon-interactive services, subscription and non-subscription transmissions, and subscription transmis-sions that are subject to a compulsory license and thosewhich are not. As we shall see, recognizing this licens-ing regime which Congress established is key to unlock-ing the answers to the questions raised by the recordingindustry with respect to non-subscription transmissions,under the 1995 Act.

Question 6: What licenses are required from the ownerof a recording to permit a digital transmission that does



not result in a digital phonorecord delivery of the re-cording, is not part of an interactive service, but is partof a subscription transmission that does not comply withcompulsory license provision?

Leaving aside for the moment the criteria neces-sary to qualify for a compulsory license to make digitalaudio transmissions of sound recordings on a subscrip-tion basis, the person making a non-qualifying subscrip-tion transmission of a recording must obtain a licensefrom the record company who owns the recording.Moreover, given that the license is voluntary, the feecharged by the record company for this license is com-pletely subject to negotiation, meaning the record com-pany may charge what it wants and is free even to refuseto provide a license for these transmissions.



Question 7: What licenses are required from the ownerof a song to permit a digital transmission that does notresult in a digital phonorecord delivery of the song, isnot part of an interactive service, but is part of a sub-scription transmission that does comply with compul-sory license provision?

As mentioned above, the distinction betweensubscription transmissions that qualify for a compulsorylicense and those that don't is not relevant to the ques-tion of what license is required from the owner of thesong. The person making such a digital transmissionmust obtain a blanket license from the applicable per-formance rights society. Question 8: What licenses are required from the ownerof a recording to permit a digital transmission that doesnot result in a digital phonorecord delivery of the



recording, is not part of an interactive service, but is partof a subscription transmission that does comply withcompulsory license provision?

Recall that, if you are a transmitting entity thatwishes to operate a subscription service, you have oneof two forms of licensing mechanisms available to you:a "voluntary license" or a "compulsory license." Undera "voluntary license," the record companies in a freemarket can charge whatever they wish or refuse to li-cense your transmissions at all. Under the "compulsorylicense," the record companies can be compelled to li-cense the transmissions under license fees set by a gov-ernmental body, fees called the statutory rate, whicheffectively becomes a maximum fee that the record com-panies can charge for your use.

To qualify for a compulsory license to make asubscription transmission, a transmitting organization



must meet the conditions set forth in Section 114(d)(2)of the Copyright Act. To complicate matters, however,the proposed DM Act would replace the provisions ofSection 114(d)(2) with a new set of conditions that arein many respects more restrictive than those found underthe Copyright Act amendments made under the 1995Act. Accordingly, we will briefly review the applicableconditions, first under the current law and then under theproposed DM Act.

Subscription Transmissions Under the 1995 Act.To qualify, under the law currently in effect, for a com-pulsory license to make a subscription transmission, thefollowing conditions must be met by the transmittingentity:(A) the transmission is not part of an interactive serv-ice (defined above);(B) the transmission does not exceed the "sound re-cording performance complement" (see below)



(C) the transmitting entity does not publish an ad-vance program schedule or prior announcement of thetitles of the specific sound recordings to be transmitted;(D) the transmitting entity does not automatically andintentionally cause any device receiving the transmissionto switch from one program channel to another, and (E) the transmission of the sound recording is accom-panied by any copyright management information en-coded in that sound recording by the copyright owner.

The overall purpose of these conditions is to pro-vide webcasters, and other transmitting organizations,with a guarantee that if the subscription transmissionswhich they desire to make have a low risk of being usedby consumers to replace sales of records, then the trans-mitting entity will be allowed to compel the record com-panies to grant them a license to make suchtransmissions at a special rate that is established by law.



The lower risk of these transmissions being usedto replace record sales is reflected in the conditions. Forexample, the transmission cannot be part of an interac-tive service. If the consumer were permitted to click onan icon or web link (or issue a voice command) and re-ceive a particular recording on demand, he could be pre-pared to record each transmission and use suchrecordings for future private performances, which arenot subject to payment to the sound recording owners.Similarly, the transmitting entity must not publish anyadvance program schedule or make any prior announce-ment of the titles of the specific recordings to be trans-mitted. Again, having access to the playlist in advancewould allow the consumer to cherry-pick which soundrecordings he or she would like to record at home.

Further, the transmission must not exceed the"sound recording performance complement." The soundrecording performance complement, which is defined



below, is designed to prevent a transmitter from obtain-ing a compulsory license at the preferred statutory ratefor transmissions, such as an all Beatles channel ortransmissions of all the songs from the same album.

"The `sound recording performance complement'is the transmission during any 3-hour period, on a par-ticular channel used by a transmitting entity, of no morethan -

(A) 3 different selections of sound recordingsfrom any one phonorecord lawfully distributed for pub-lic performance or sale in the United States, if no morethan 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 phonore-

cords lawfully distributed together as a unit for publicperformance or sale in the United States, if no more than



three such selections are transmitted consecutively: Pro-vided, That the transmission of selections in excess ofthe numerical limits provided for in clauses (A) and (B)from multiple phonorecords shall nonetheless qualify asa sound recording performance complement if the pro-gramming of the multiple phonorecords was not willfullyintended to avoid the numerical limitations prescribed insuch clauses."

Again, the purpose the sound recording perform-ance complement was to help define a category of trans-missions that pose only a moderate risk that consumerswill make home recordings of the transmission for thepurpose of avoiding having to purchase records for laterprivate performances.

If the subscription transmission meets all of theabove conditions, it will qualify for a compulsory li-cense. In other words, the transmitting organization,



under the law, can compel the record companies to pro-vide it with a license to make these transmissions andthe license fee will be limited to the fee established bylaw.

Procedures relating to the compulsory license forsubscription transmissions is set forth in Interim Regula-tions on Notice and Recordkeeping for Digital Subscrip-tion Transmissions Docket No. RM 96-3B, 63Fed.Register 34289 (June 24, 1998), (on the web athttp://lcweb.loc.gov/copyright/fedreg/96-3b.html). Sub-scription transmission services will be required to pro-vide detailed reports, and maintain extensive records, oftheir use of sound recordings under the license. The or-ganizations participating in the U.S. Copyright Office'sdevelopment of these procedures included the Record-ing Industry Association of America (RIAA), and threedigital music subscription services operating in theUnited States: DMX, Inc. (DMX); Muzak, Inc.; and



Digital Cable Radio Associates/Music Choice (DCR).Further, after the license fees for these transmissionshave been paid, the money collected will be allocated tothe record companies and recording artists, subject toprovisions set forth in the 1995 Act.

Subscription Transmissions Under the ProposedDM Act. If the proposed DM Act is enacted in the formcurrently proposed by the House, the conditions neces-sary for a transmitting organization to effect subscriptiontransmissions would change. The new conditions pro-posed under the DM Act are set forth on the web athttp://thomas.loc.gov/cgi-bin/query/D?c105:20:./temp/~c105AmWsxV:e99622:.

Briefly, the applicability of the restrictions upon atransmitting organization depends upon whether thetransmitting organization had been offering its webcastson or before July 31, 1998 using the same medium oftransmission after that date that it was using before. If



that is the case, then a compulsory license for a sub-scription transmission would be available at a rate setunder the auspices of the U.S. Librarian of Congress if:

"(i) the transmission is not part of an interactiveservice;

(ii) except in the case of a transmission to a busi-ness establishment, the transmitting entity does not auto-matically and intentionally cause any device receivingthe transmission to switch from one program channel toanother;

(iii) the transmission of the sound recording is ac-companied by the information encoded in that sound re-cording, if any, by or under the authority of thecopyright owner of that sound recording, that identifiesthe title of the sound recording, the featured recordingartist who performs on the sound recording, and relatedinformation, including information concerning the under-lying musical work and its writer;



(iv) the transmission does not exceed the soundrecording performance complement; and

(v) the transmitting entity does not cause to bepublished by means of an advance program schedule orprior announcement the titles of the specific sound re-cordings or phonorecords embodying such sound re-cordings to be transmitted; . . . ."

If, however, the transmitting organization had notbeen offering webcasts on or before July 31, 1998 orhad been using a medium of transmission before thatdate different from that which it was using after thattime, then a compulsory license for a subscription trans-mission would be available at a rate set under the aus-pices of the U.S. Librarian of Congress if thetransmissions meet the same conditions as those re-quired for anyone desiring to make "eligible nonsub-scription transmissions." The conditions necessary foreligible nonsubscription transmissions to qualify for a



compulsory license under the proposed DM Act are setforth below.

Non-Subscription Transmissions

Question 9: What licenses are required from the ownerof a song to permit a digital transmission that does notresult in a digital phonorecord delivery of the song, isnot part of an interactive service, and constitutes a non-subscription transmission?

Again, the distinction between subscription andnon-subscription services is not relevant to licensing theunderlying song. The person making such digital trans-missions must obtain a blanket license from the applica-ble performance rights society (e.g., ASCAP, BMI orSESAC).



It is worth noting, at this juncture, that if the DMAct is passed in the form currently proposed by theHouse (i.e., eliminating the exemption for non-interactive, non-subscription transmissions), then theperformance rights societies, and their music publisherand songwriter members, could suffer a significant re-duction in performance royalty income, arising from thefewer number of web radio stations engaging in non-interactive, non-subscription web transmissions.

Question 10: What licenses are required from the ownerof a recording to permit a digital transmission that doesnot result in a digital phonorecord delivery of the re-cording, is not part of an interactive service, and is notpart of a subscription service?

As noted above, the answer to this question de-pends entirely on whether the DM Act is passed in the



form currently proposed by the House, a form whicheliminates the exemption currently enjoyed by non-interactive, non-subscription transmissions and replacesit with a compulsory license in favor of a limited class ofwebcasters.

Answer to Question 10 Under the 1995 Act

In July, 1998, the RIAA had been taking the posi-tion that the Copyright Act, as amended by the 1995Act, provided no such exemption. Because the fate ofthe DM Act remains unclear, it is worth analyzing theRIAA position some detail.

According to the RIAA, a license (i.e., permis-sion) is required from the owner of the sound recordingto effect a non-interactive, non-subscription transmissionover the web, and that the granting of a license is com-pletely voluntary - that is, a license that may be issued



on any negotiated terms and not subject to any statutoryor compulsory provision that would require record com-panies to issue such a license at any specified rate, oreven at all. This position was espoused in detail by theSteve Marks, deputy general counsel of the RIAA in aletter to me dated July 1, 1998, and which may be foundat http://www.kohnmusic.com or http://www.mp3.com.By contrast, the right answer, I submit, is simply this:under the 1995 Act, no license from the sound recordingowner is required to effect such transmissions.

As we have seen, the 1995 Act established a con-tinuum of rights, from those transmissions that are likelyto replace the sale of records (or digital phonorecord de-liveries) to those that are not likely to replace such sales(such, as radio broadcasts and radio-like webcasts).Those digital transmissions that were deemed to pose nomore risk of replacing records than radio broadcastswere granted an exemption from the limited



performance right granted under the new Section 106(6)of the Copyright Act. This exemption is set forth in Sec-tion 114(d) of the Copyright Act, which may be foundon the web at,http://lcweb.loc.gov/copyright/title17/1-114.html. If thetransmission fits within any of the categories of Section114(d), it is considered "exempt," which means that nolicense is required from the owner of the sound record-ing to effect the transmission.

The greater part of Section 114(d) is intended tomake it clear that public performances of sound record-ings over the radio continue to be free of any require-ment of a license from the owners of the soundrecordings, even though such performances are bymeans of digital audio transmissions, provided they arenot part of an interactive service, and are made on anon-subscription basis.



The part of Section 114(d) relevant to webcasterswho wish to make non-interactive, non-subscriptiontransmissions of sound recordings is as follows:"(d) LIMITATIONS ON EXCLUSIVE RIGHT- Not-withstanding the provisions of section 106(6)-

(1) EXEMPT TRANSMISSIONS AND RE-TRANSMISSIONS- The performance of a sound re-cording publicly by means of a digital audiotransmission, other than as a part of an interactive serv-ice, is not an infringement of section 106(6) if the per-formance is part of-

(A)(i) a nonsubscription transmission otherthan a retransmission;. . .

(C) a transmission that comes within any ofthe following categories-

(i) a prior or simultaneous transmis-sion incidental to an exempt transmission, such as a feed



received by and then retransmitted by an exempt trans-mitter: Provided, That such incidental transmissions donot include any subscription transmission directly for re-ception by members of the public; . . .

(iii) a retransmission by any retrans-mitter . . . of a transmission by a transmitter licensed topublicly perform the sound recording as a part of thattransmission, if the retransmission is simultaneous withthe licensed transmission and authorized by thetransmitter; . . . "

There is no question, in my view, that a web radiostation which transmits popular sound recordings on anon-subscription basis is engaged in "a nonsubscriptiontransmission other than a retransmission." Neverthe-less, in an attempt to refute what appears to be a ratherclear and unambiguous exemption for non-interactive,non-subscription transmissions, the RIAA offered in its



July 1 letter two arguments, one that may reflect a mis-understanding of how the Internet operates and anotherthat actually drives home the very point they are tryingto refute: First, the RIAA says:

"You argued that the retransmissions made duringthe course of sending music to the end user would becovered by the exemption in section 114(d)(1)(C)(i),which exempts "a prior or simultaneous transmission in-cidental to an exempt transmission.

However, the retransmissions that occur duringthe course of an Internet transmission cannot in any waybe characterized as `prior or simultaneous' because theyobviously occur after the initial transmission. The exam-ple set forth in the exemption itself - `a feed received byand then retransmitted by an exempt transmitter' - is alsovery different from the transmissions and retransmis-sions caused by a webcaster."



It is reasonable to ask, what support is there forthe notion that an Internet transmission cannot be char-acterized as "a simultaneous transmission incidental toan exempt transmission"? Though the additional phrase,"such as a feed received by and then retransmitted by anexempt transmitter" is merely an example of such a si-multaneous transmission, why would not an Internettransmission be akin to such a transmission?

When a web radio station webcasts a sound re-cording, the recording is sent bit-by-bit in somethingcalled a data stream, which consists of packets of data.Appended to these packets are "headers" which containinformation, known as protocol information, which in-cludes information about the intended destination of thedata stream. It is analogous to sending a book one line ata time to a single addressee, but in different envelopes,with information indicating which line and page it isfrom, for purposes of later assembly. This data stream is



sent over telephone lines to a device called a "router,"and as the data stream passes through the router, therouter looks at the destination address set forth in theprotocol headers and sends or "routes" the stream on itsway, through the best route available, to the destinationaddress. The data stream may pass through anywherefrom 2 to 10 or so routers in the course of its march to adestination, such as an Internet browser on a personalcomputer, where it is reassembled in the proper orderfor viewing or listening by the user.

This all occurs simultaneously, and arguablywithout any form of "retransmission." However, let'sassume the passing of the data stream from one router tothe next constitutes a series of retransmissions. In theparagraph that preceded the RIAA's comment about114(d)(1)(c)(i), the RIAA said the following:

"Even if GoodNoise's initial transmission may beexempt under section 114(d)(1)(A)(i), the many



retransmissions that follow and are necessary to enablethe end-user to receive the music are not exempt. IfGoodNoise's initial transmission was licensed, the sub-sequent retransmissions `through to the listener' wouldbe exempt under section 114(d)(1)(C)(iii). Similarly,when a subscription music service obtains a license, theretransmissions necessary to deliver music to a listenerare exempt only because of section 114(d)(1)(C)(iii).However, in the absence of a license, these retransmis-sions are infringing."

In the above paragraph, the RIAA directly refutedtheir own argument. Section 114(d)(1)(C)(iii) exempts "(iii) a retransmission by any transmitter . . . of a trans-mission by a transmitter licensed to publicly perform thesound recording as part of that transmission, if the re-transmission is simultaneous with the licensed transmis-sion and authorized by the transmitter."



In other words, the RIAA first informs us that asubscription service which makes transmissions over theweb will find that the retransmissions it makes exemptunder Section 114(d)(1)(c)(iii) above. Since that Sectiononly exempts retransmissions that are "simultaneouswith" the licensed transmissions, the RIAA is admittingthat digital transmissions - whether on a subscription ornon-subscription basis - over the Internet are"simultaneous"!

In other words, webcasts over the Internet on asubscription basis, according to the RIAA, necessarilyinvolve the propagation of simultaneous transmissions.Of course, the only difference, under the law, between asubscription transmission and a non-subscription trans-mission concerns whether the recipient is paying for thetransmission - the difference has nothing to do with howthey are transmitted or retransmitted. The unavoidableconclusion is that simultaneous transmissions incidental



to non-interactive, non-subscription webcasts that areexempt under 114(d)(1)(A)(i) are exempt under114(d)(1)(c)(i) (provided, of course, that "such inciden-tal transmissions do not include any subscription trans-mission directly for reception by members of thepublic").

Accordingly, plain logic demands that non-interactive, nonsubscription webcasts are exempt under114(d)(1)(A)(i) and any simultaneous transmissions inci-dental to them are also exempt under 114(d)(1)(C)(i),under the 1995 Act.

But we have more than logic to support this view;we have common sense and what appears to be the plainrationale behind the 1995 Act: namely, the notion thatCongress was trying to provide a means of compensa-tion to owners of sound recordings to the extent, andonly to the extent, there is a high or moderate likelihoodthat record sales would be replaced.



As we have seen above, the distinctions betweenanalog audio transmissions and digital audio transmis-sions, between digital audio transmissions that constitutedigital phonorecord deliveries and those that do not, be-tween interactive and non-interactive services, betweensubscription and non-subscription transmissions, and be-tween voluntary and compulsory subscription services,all point to a continuum aimed at finding a balance be-tween maintaining the status quo with respect to broad-cast and broadcast-like transmissions of soundrecordings and protection against the loss of sales fromtransmissions that may tend to replace traditional recordsales and sales of digital phonorecord deliveries.

If non-interactive, non-subscription webcastswere intended to be subject to voluntary licensing (i.e.,licensing which may be made at any price or no pricewithin the complete discretion of the record company),then why would Congress have made certain kinds of



subscription transmissions subject to compulsory licens-ing and left non-subscription transmissions subject to afull voluntary license by record companies? Would notCongress have had even a greater reason to make non-subscription transmissions subject to compulsory licens-ing? Would Congress have given exemptions allowingowners of radio stations complete freedom to effecttransmissions of their broadcasts over the Internet, butrefuse to allow entrepreneurs with fewer resources con-duct the same activity over the Internet on a level play-ing field with the broadcasters?

Would ASCAP and BMI have allowed a substan-tial source of music publishing income, income whichthey are actively seeking from sites which webcastspopular recordings, just vanish? Could we not inferfrom ASCAP's and BMI's active licensing of web siteswhich webcast popular recordings that the music



industry has already operating under the assumption thatthis activity was exempt under the 1995 Act?

These are some of the questions that would haveto be answered should the law be interpreted to not ex-empt non-interactive, non-subscription webcasts and thesimultaneous transmissions incidental to them.

The RIAA's argument that legislative history sug-gests another result is questionable at best. They sug-gested that earlier versions of the bill that became the1995 Act contained an outright exemption for "a non-subscription transmission" that was not "part of an inter-active service," and said that before enactment thatprovision was replaced by a more refined Section114(d)(1)(A). But, the final bill did maintain the outrightexemption for non-subscription transmissions and theentire section providing the exemption continued to con-tain the condition that the exempt transmissions must notbe "part of an interactive service." What the revision



did was to clarify that retransmissions could not be usedto circumvent the exemptions. That is, for example, youcould not retransmit an exempt transmission as a sub-scription transmission and circumvent the requirement ofobtaining a voluntary or compulsory license for theretransmission.

As I suggested above, to be consistent with thecontinuum established by Congress - one that was in-tended to strike a balance between maintaining thestatus quo with respect to broadcast and broadcast-liketransmissions of sound recordings, on the one hand, andthe protection against the loss of sales from transmis-sions that may replace traditional record sales and salesof digital phonorecord deliveries, on the other - non-interactive, non-subscription transmissions either wouldhave been made exempt or would have been made sub-ject to a compulsory license. It would not have beensubject to a negotiated or "voluntary" license.



Thus, the RIAA's argument that under the 1995Act no exemption exists for non-interactive, non-subscription transmissions is clearly wrong, not onlyfrom its clear statutory interpretation but from a publicpolicy perspective, as well. Further, to the extent theRIAA had a hand in the drafting of the recent amend-ments which have been proposed to eliminate the ex-emption, it would appear such efforts would serve as anadmission on the RIAA's part that their previous posi-tion was severely mistaken.

Answer to Question 10 Under Proposed Digital Millen-nium Copyright Act - Compulsory Licensing for Non-subscription Transmissions

As a result of last minute lobbying by the RIAAand DiMA described above, the House of Representa-tives recently passed an amendment to its version of the



proposed Digital Millennium Copyright Act. Thatamendment would (1) eliminate the exemption forwebcasters set forth in Section 114(d)(1) of the Copy-right Act, (2) add a compulsory license scheme for lim-ited kinds of "eligible" transmissions (i.e., those madeby webcasters having the profile of members of DiMA),and (3) add language to Section 114 that would make itclear the "eligible" webcasters could make ephemeralrecordings of sound recordings for the purposes of fa-cilitating their webcasts. This section will summarize thefirst of those two changes, and the affect on ephemeralrecordings will be discussed in the following section.

Exemption Eliminated. The proposed bill by theHouse eliminates the current Section 114(d)(1)(A),which contains an exemption (from a sound recordingowner's exclusive rights) for a "nonsubscription trans-mission other than a retransmission." The proposed lawwould now merely preserve the exemption for "a



nonsubscription broadcast transmission." A "broadcasttransmission" is defined as "a transmission made by aterrestrial broadcast station licensed as such by the Fed-eral Communications Commissions." Thus, under theHouse proposal, to make exempt non-interactive, non-subscription transmissions over the Internet, a webcasterwould have to buy a radio station from which to origi-nate those transmissions.

Limited Compulsory License. To placate themembers of DiMA (who agreed to help the RIAA lobbyto eliminate the exemption for nonsubscription transmis-sions), the House bill proposes a new section under theheading, "Statutory Licensing of Certain Transmis-sions." This section provides for a compulsory licensefor eligible nonsubscription transmissions. These "eligi-ble" transmissions are defined as follows:"An `eligible nonsubscription transmission' is a noninter-active, nonsubscription transmission made as part of a



service that provides audio programming consisting, inwhole or in part, of performances of sound recordings,including retransmissions of broadcast transmissions, ifthe primary purpose of the service is to provide to thepublic such audio or other entertainment programming,and the primary purpose of the service is not to sell, ad-vertise, or promote particular products or services otherthan sound recordings, live concerts, or other music-related events."

Those desiring to make "eligible nonsubscriptiontransmissions" may thus compel the record companies toprovide them with a license to do so, provided theycomply with certain restrictions on how they make thosetransmissions and pay a fee that will be set under proce-dures to be established by the U.S. Librarian ofCongress.

To be eligible for the compulsory license, trans-mitting organizations who make "eligible



nonsubscription transmissions" need comply with cer-tain restrictions, including those imposed upon organiza-tions who desire to engage in making subscriptiontransmissions under a compulsory license (under the1995 Act). These proposed restrictions may be found at:http://thomas.loc.gov/cgi-bin/query/D?c105:20:./temp/~c105AmWsxV:e99622.

Briefly, the applicability of the restrictions upon atransmitting organization depends upon whether thetransmitting organization had been offering its webcastson or before July 31, 1998 using the same medium oftransmission after that date that it was using before. Ifthat is the case, then a compulsory license for a sub-scription transmission would be available at a rate setunder the auspices of the U.S. Librarian of Congress un-der the same conditions as though they were eligiblenonsubscription transmissions. These conditions are:



"(i) the transmission is not part of an interactiveservice;

(ii) except in the case of a transmission to a busi-ness establishment, the transmitting entity does not auto-matically and intentionally cause any device receivingthe transmission to switch from one program channel toanother;

(iii) the transmission of the sound recording is ac-companied by the information encoded in that sound re-cording, if any, by or under the authority of thecopyright owner of that sound recording, that identifiesthe title of the sound recording, the featured recordingartist who performs on the sound recording, and relatedinformation, including information concerning the under-lying musical work and its writer; . . . . "

If, however, organization was not offering itswebcasts on or before July 31, 1998 or was doing so,but is now using a different means of transmission than



before, then a compulsory license, at a rate set under theauspices of the U.S. Librarian of Congress, for an eligi-ble nonsubscription transmission (and non-exempt sub-scription transmissions) would be available if, inaddition to restrictions (i) through (iii) above:

"(iii) the transmission does not exceed the soundrecording performance complement (defined above), ex-cept that this requirement shall not apply in the case of aretransmission of a broadcast transmission if the retrans-mission is made by a transmitting entity that does nothave the right or ability to control the programming ofthe broadcast station making the broadcast transmission,unless the broadcast station makes broadcasttransmissions-

(I) in digital format that regularly exceedthe sound recording performance complement; or



(II) in analog format, a substantial portionof which, on a weekly basis, exceed the sound recordingperformance complement;Provided, however, That the sound recording copyrightowner or its representative has notified the transmittingentity in writing that broadcast transmissions of thecopyright owner's sound recordings exceed the soundrecording complement as provided in this clause;

(iv) the transmitting entity does not cause to bepublished, or induce or facilitate the publication, bymeans of an advance program schedule or prior an-nouncement, the titles of the specific sound recordingsto be transmitted, the phonorecords embodying suchsound recordings, or, other than for illustrative purposes,the names of the featured recording artists, except thatthis clause does not disqualify a transmitting entity thatmakes a prior announcement that a particular artist willbe featured within an unspecified future time period and,



in any 1-hour period, no more than 3 such announce-ments are made with respect to no more than 2 artists ineach announcement;

(v) the transmission is not part of-(I) an archived program of less than 5

hours duration;(II) an archived program of greater than 5

hours duration that is made available for a period ex-ceeding 2 weeks;

(III) a continuous program which is of lessthan 3 hours duration; or

(IV) a program, other than an archived orcontinuous program, that is transmitted at a scheduledtime more than 3 additional times in a 2-week periodfollowing the first transmission of the program and foran additional 2-week period more than 1 month follow-ing the end of the first such 2-week period;



(vi) the transmitting entity does not knowinglyperform the sound recording in a manner that is likely tocause confusion, to cause mistake, or to deceive, as tothe affiliation, connection, or association of the copy-right owner or featured recording artist with the trans-mitting entity or a particular product or serviceadvertised by the transmitting entity, or as to the origin,sponsorship, or approval by the copyright owner or fea-tured recording artist of the activities of the transmittingentity other than the performance of the sound recordingitself;

(vii) the transmitting entity cooperates to prevent,to the extent feasible without imposing substantial costsor burdens, a transmission recipient or any other personor entity from automatically scanning the transmittingentity's transmissions together with transmissions byother transmitting entities to select a particular sound re-cording to be transmitted to the transmission recipient;



(viii) the transmitting entity takes reasonable stepsto ensure, to the extent within its control, that the trans-mission recipient cannot make a phonorecord in a digitalformat of the transmission, and the transmitting entitytakes no affirmative steps to cause or induce the makingof a phonorecord by the transmission recipient;

(ix) phonorecords of the sound recording havebeen distributed to the public in the United States underthe authority of the copyright owner or the copyrightowner authorizes the transmitting entity to transmit thesound recording, and the transmitting entity makes thetransmission from a phonorecord lawfully made underthis title;

(x) the transmitting entity accommodates anddoes not interfere with the transmission of technicalmeasures that are widely used by sound recording copy-right owners to identify or protect copyrighted works,and that are technically feasible of being transmitted by



the transmitting entity without imposing substantial costson the transmitting entity or resulting in perceptible auralor visual degradation of the digital signal; and

(xi) in the case of an eligible nonsubscriptiontransmission, the transmitting entity identifies the soundrecording during, but not before, the time it is per-formed, including the title of the sound recording, the ti-tle of the phonorecord embodying such sound recording,if any, and the featured recording artist in a manner topermit it to be perceived by the transmission recipient,except that the obligation in this clause shall not take ef-fect until 1 year after the date of the enactment of theDigital Millennium Copyright Act."

A transmitting organization who makes eligiblenonsubscription transmissions that comply with theabove requirements may apply for a compulsory licenseto make those transmissions and pay the fee that will be



established under a process regulated by the U.S. Li-brarian of Congress.

Note, under the proposed DM Act, the compul-sory license does not inure to the benefit of anywebcaster, only those whose "primary purpose" is "notto sell, advertise, or promote particular products or serv-ices other than sound recordings, live concerts, or othermusic-related events." Anyone else must obtain a li-cense from the owners of the sound recordings, whichmay be offered at any negotiated fee or not at all, by therecord companies. Not surprisingly, the compulsory li-cense appears to be available only to companies havingthe business profile of the members of DiMA.

Fees. It is interesting to note that when the Librar-ian of Congress called for comments on the properstatutory rate to be established for subscription transmis-sions under the 1995 Act, the RIAA requested a royaltyrate of 41.5% of the digital music service's gross



revenues, with a flat minimum fee! Representatives forthe subscription transmission organizations requestedroyalty rates ranging from 1/2% to 2%, and they op-posed the setting of a flat minimum fee. The CopyrightRoyalty Arbitration Panel that presided over the matterdetermined that the subscription services pay a royaltyof 5% of their gross revenues, with no minimum licensefee. The RIAA appealed that ruling and succeeded inconvincing the Librarian of Congress to set aside thePanel's ruling.

The Librarian of Congress considered the ratesthat broadcasters pay for licenses of public perform-ances of musical compositions (i.e., to ASCAP, BMIand SESAC), because these rates represent an actualmarketplace value for a public performance right insound recordings. The RIAA had asked for a rate thatwas greater than the rate paid to ASCAP, BM andSESAC, but the Librarian of Congress concluded that



the value of the public performance right in the soundrecording does not exceed the value of the public per-formance right in the underlying musical work. Unfortu-nately, because the actual license fees paid for thepublic performance of the musical works is subject to aprotective order, the statutory rate for the performancesound recordings by subscription services has not beenpublicly disclosed.

Ephemeral Recordings

The copyright law, under Section 106(1), pro-vides a copyright owner with the exclusive right to makecopies of his copyrighted work. However, transmittingorganizations, such as radio and television broadcasters,have long found it necessary to make copies of thecopyrighted works they transmit, typically by making a



tape of a work that was first provided in another me-dium (such as a CD), to facilitate the transmission.

Unless there were an exemption from the copy-right owner's exclusive right, a transmitting organizationwho makes such copies to facilitate its legitimate trans-missions would risk being sued for copyright infringe-ment. For that reason, the Copyright Act provides anexemption for what are called ephemeral recordings,and that exemption is set forth in Section 112 asfollows:

"Notwithstanding the provisions of section 106, .. . it is not an infringement of copyright for a transmit-ting organization entitled to transmit to the public a per-formance or display of a work, under a license ortransfer of the copyright or under the limitations on ex-clusive rights in sound recordings specified by section114(a), to make no more than one copy or phonorecord



of a particular transmission program embodying the per-formance or display, if -

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

(2) the copy or phonorecord is used solely forthe transmitting organization's own transmissions withinits local service area, or for purposes of archival preser-vation or security; and

(3) unless preserved exclusively for archivalpurposes, the copy or phonorecord is destroyed withinsix months from the date the transmission program wasfirst transmitted to the public."

The RIAA has taken the position that the forego-ing exemption only applies to:"reproductions embodying performances made under li-cense, transfer of copyright ownership or the Section



114(a) exception to the general performance right ofSection 106(4). It does not apply to reproductions em-bodying performances made by means of digital audiotransmissions, which are subject to the performanceright of Section 106(6)."

That argument is refuted easily by pointing outthat Section 112 begins, "Notwithstanding the provi-sions of section 106 . . ." - meaning, all of Section 106,not just Section 106(4), but all of 106.

The RIAA has also asserted that the fact thatCongress, when it enacted 1995 Act, did not amendSection 112 at the same time is "evidence that Congressintended not to extend the ephemeral recording exemp-tion to digital audio transmissions." Of course, the sameomission is also evidence that Congress thought theephemeral recording exemption certainly did apply towebcasters and, therefore, felt no need to add anythingto Section 112 to that effect. Moreover, why would



Congress have created an exemption for non-subscription transmissions, but leave no practical wayfor anyone to use the exemption?

Finally, the RIAA has taken the position that "even if Section 112 is applicable to digital audio trans-missions, the copies by this section are to be used onlyfor transmissions within the transmitting organization's`local service area.'"

The legislative history of the Copyright Act de-fines the term "local service area" in only three contexts:in the case of a television broadcast station, in the caseof a low power television station, and in the case of a ra-dio broadcast station. It does not refer to Internet websites, naturally, because they did not exist in 1976 whenthe Copyright Act was passed. But this does not meanthat web sites are not covered; it only means that the ex-tent of the local service area is not defined. Where theyare defined, the legislative history seems to contemplate



that transmissions may be sent by wire beyond the placewhere the primary broadcast transmission takes place.In the case of television stations, for example, the localservice area comprises the area in which such station isentitled to insist upon its signal being transmitted by acable system pursuant to the rules and regulations of theFederal Communications Commissions.

Thus, the term "local service area" does not con-fine the transmission to a service area which is "local,"but, in the case of television radio stations licensed bythe FCC, such transmissions are confined to those areaspermitted by the FCC. Since web stations are not soregulated, the local service area appears to be through-out the Internet, but perhaps not beyond, such asthrough analog radio broadcasts. The local services areaof a short wave broadcast is worldwide, no differentfrom a webcast, but I would be surprised to learn ifbroadcasters have been operating under the assumption



that the ephemeral recording exemption applies only tosmall regional or "local" broadcasters.

Granted, Section 112 only permits the making of"no more than one copy or phonorecord of a particulartransmission program." This, according to the RIAA,makes is problematic for webcasters who wish to installcopies on multiple servers. While this may be problem-atic for large, commercial webcasters, one copy wouldcertainly be sufficient for the many thousands of smallweb sites who wish to take advantage of the exemptionprovided in Section 114(d)(1) and offer non-interactive,non-subscription transmissions.

As a result of negotiations between the RIAA andthe National Association of Broadcasters (NAB), theSenate version of the proposed Digital MillenniumCopyright Act (Senate Bill 2037) would amend Section112 to provide a specific exemption for broadcast radioor television stations licensed by the FCC who provide



"a performance of a sound recording in a digital formaton a nonsubscription basis." According to informationobtained by the Digital Media Association (DIMA), theNAB initially proposed that the ephemeral recording ex-emption be revised to make it clear it applied to all law-ful digital transmissions, but the RIAA had explicitlydemanded that the exemption not apply to cable, satel-lite or Internet broadcasters. Should the bill pass as soamended, the RIAA could take the position that by onlyexempting broadcast radio and television stations, thelegislation should now be construed as not exemptingwebcasters. Webcasters might then need to rely on theless specific exemption offered by the "fair use" provi-sions set forth in Section 107 of the Copyright Act.

As a result of more recent negotiations betweenthe RIAA and DiMA, discussed at the outset of this arti-cle, the House version of the DM Act would amendSection 112 to include provisions for the compulsory



license of ephemeral recordings that are made by trans-mitting organizations entitled to transmit public perform-ances of sound recordings under Section 114 (discussedabove). A statutory rate or license fee for such copieswould be set under a procedure established by the Li-brarian of Congress.

Should the Exemption for Nonsubscription Transmis-sions Originated by Webcasters be Eliminated?

The question whether the exemption for non-interactive, non-subscription transmissions should beeliminated is a relevant one, unless and until the Presi-dent signs into law the Digital Millennium CopyrightAct, in the form currently proposed by the House ofRepresentatives. From the record companies perspec-tive, the answer to that question is clearly yes. Never-theless, there may be still be good reasons to either



maintain the exemption or broaden the types of trans-missions that are subject to a compulsory license. First, music publishers and songwriters have a di-rect interest in promoting as many non-interactive, non-subscription web radio stations as possible, allowingthem to issue many more blanket licenses for the use ofmusic on these sites. Presumably, Congress took intoconsideration the interests of the performance rights so-cieties and their members when determining the kinds oftransmissions which should be considered exempt,which should be subject to a compulsory license, andwhich should be subject to a voluntary license. Giventhe particular circumstances of the amendment's passage(see above), it is not likely the Congress took anythinginto consideration, except that fact that two powerfullobbying organizations came to an agreement on thesubject.



Second, under Section 114(d), broadcast radiostations who desire to webcast their on-the-air broad-casts of sound recordings over the Internet appear to re-main exempt from licensing requirements. Why shouldwebcasters who don't own radio stations be put at acompetitive disadvantage to radio stations? It appearsthat any large webcast company could use its size andresources to purchase FCC licensed radio stations in or-der to webcast sound recordings over the web withoutpayment to record companies.

Similarly, what accounts for the distinction be-tween those making "eligible" nonsubscription transmis-sions and those who make ineligible ones? Lookingdown the list of members of DiMA, its striking that allof them would appear to be engaging in eligible nonsub-scription transmissions, yet that organization appearedinstrumental in eliminating the exemption for all otherkinds of webcasters.



Finally, assuming that all non-subscription trans-missions (including broadcast transmissions) were sub-ject to a compulsory license, a level playing field wouldonly result if the compulsory license was as easy to ob-tain and administer as the performance licenses that areoffered by ASCAP or BMI. If, on the other hand, any-thing akin to the requirements of the compulsory licensefor subscription transmissions is instituted for non-subscription transmissions - for "Interim Regulations onNotice and Recordkeeping for Digital SubscriptionTransmissions," Docket No. RM 96-3B, seehttp://lcweb.loc.gov/ copyright/fedreg/96-3b.html - onlylarge, well financed web sites will, as a practical matter,have access to sound recordings for non-subscriptiontransmissions.Perhaps the ideal of a level playing field isnot politically possible today, given the tenacity of thelobbying organizations involved, the complexities of theissues, and the amount of money which is at stake.



Certainly, the new technologies provide more thanenough challenges to the music and recording industries,and giving the content creators the benefit of the doubt,at least at the current time, may be just what is neededto maintain the incentives necessary to promote thecreation of creative works of authorship. In the end,however, the ideal of a level playing field may best beaccomplished by the granting of a general public per-formance right in sound recordings coupled with a fairlyeasy to administer compulsory license, such as those of-fered by ASCAP and BMI.

Conclusion

Before gently exiting this round of the debate, Ifeel compelled to respond to some personal remarks thatthe RIAA made in their letter to me of July 1. The RIAAaccused me of being disingenuous for writing "in the



guise of academia" without pointing out the fact thatGoodNoise has a "vested interest" in this debate. I amcertain that readers of my original article were not con-fused about my association with GoodNoise, as the arti-cle specifically displays that association clearly, with alink to the GoodNoise website, where my company's in-tentions to operate a web radio station is stated on thefirst page. If a charge of disingenuousness is to be made,it may be appropriate to ask why an organization likethe RIAA would publicly maintain the position that thelaw does not exempt non-subscription transmissionswhile privately lobby to change the law to remove thatexemption, and why in face of that exemption, they at-tempted to obliterate the application of the ephemeralrecording exception, the only means for webcasters topractically take advantage of it.

In addition, it is certainly true that GoodNoise hasa vested interest in this debate, but not for the reason



proffered by the RIAA in their letter. GoodNoise is a re-cord company which is primarily focused on selling re-cordings by digital phonorecord delivery; its intention toprovide non-subscription webcasts is merely an inciden-tal adjunct to its web site. More important, as an ownerof sound recordings, it is certainly in GoodNoise's inter-est for there to be a full general performance right insound recordings. Nevertheless, GoodNoise considersitself a responsible member of the web community, andwhen its management reviewed the RIAA's original let-ter to webcasters, they were astounded by what was ei-ther a gross misunderstanding of the law or a deliberateattempt to deceive the web community about the scopeof the rights of owners of sound recordings. Accord-ingly, they asked me to publicly express my personalviews on the subject, notwithstanding GoodNoise'svested interest in requiring licenses for non-subscriptiontransmissions.



With that out of the way, I now submit the abovequestions, and the answers I have been able to give, forpublic and professional consideration.

Bob Kohn is Chairman of the Board of Good-Noise Corporation, The Internet Record Company(www.goodnoise.com), a leading provider of digital mu-sic recordings direct to consumers over the Internet. Heis also co-author of the 1,500 page book, Kohn On Mu-sic Licensing (www.kohnmusic.com), a practical guideto the business and legal aspects of the music industry,which he wrote with his father, Al Kohn, retired vicepresident of licensing for Warner Bros. Music. Prior toGoodNoise, Mr. Kohn served as chief legal counsel forPretty Good Privacy, Inc., Borland International, Inc.,and Ashton-Tate Corporation. Prior to Ashton-Tate, hewas an attorney at the Beverly Hills law offices of Rudin& Richman, an entertainment law firm whose clients



included Frank Sinatra, Liza Minelli, Cher, and WarnerBros. Music. He also served as Associate Editor of theEntertainment Law Reporter, for which he continues toserve as a member of its Advisory Board. After graduat-ing from Loyola Law School in Los Angeles, Mr. Kohnbecame a member of the California Bar in 1981. He isAdjunct Professor of Law at Monterey College of Law,and lives with his family in Pebble Beach, California.

Copyright Bob Kohn 1998 All rights reserved.The foregoing is designed to provide accurate andauthoritative information regarding the subject mattercovered, but it is distributed with the understanding thatneither the publisher nor its author is engaged in render-ing legal or other professional advice. If legal advice orother expert assistance is required, the services of acompetent professional person should be sought. How-ever, should you have any questions on any of thesematters, feel free to post them in the conference area of



http://www.kohnmusic.com. We look forward to helpingeveryone sort through these interesting legal issues. [ELR 20:4:4]

WASHINGTON MONITOR

Sony Corporation agrees to pay million-dollar pen-alty, and to comply with cease-and-desist order, onaccount of allegedly inadequate disclosures to SECand shareholders prior to 1994 write-down of $2.7billion in Sony Pictures goodwill

Sony Corporation has agreed to pay a $1 millioncivil penalty in order to settle a case filed against it bythe U.S. Securities and Exchange Commission. TheSEC's complaint alleged that during the four months pre-ceding Sony's November 1994 write-down of



approximately $2.7 billion of goodwill associated withthe acquisition of Columbia/Tri-Star Pictures, which be-came its Sony Pictures subsidiary, Sony made inade-quate disclosures about the nature and extent of SonyPictures' net losses and their impact on the consolidatedresults Sony was reporting.

The allegedly inadequate disclosures were con-tained in reports Sony filed with the SEC which in-cluded copies of quarterly earnings releases issued bySony, and in the "Management's Discussion and Analy-sis" sections of Sony's annual reports to shareholdersand the SEC.

The SEC also faulted Sony for reporting the com-bined results of Sony Pictures and Sony's profitable mu-sic business as a single "entertainment" segment, ratherthan reporting Sony Pictures' financial results as a sepa-rate industry segment, which had the effect of obscuringthe losses sustained by Sony Pictures.



Though Sony settled the case and agreed to paythe million-dollar penalty, it did not admit or denying theallegations of the SEC's complaint.

The SEC also initiated an administrative proceed-ing against Sony, based on the same allegations, whichwas settled with a cease and desist order. In this pro-ceeding, the SEC also found that Sumio Sano was acause of Sony's violations. Sano was a director of Sonyand the General Manager of its Capital Market and In-vestor Relations Division.

The cease and desist order prohibits Sony andSano from committing or causing violations of federalsecurities law. It specifically orders Sony: to engage anindependent auditor to examine the "Management's Dis-cussion and Analysis" sections of its annual reports forthe fiscal year ending March 31, 1999; to adopt and im-plement procedures and practices to ensure that Sony'sChief Financial Officer will be designated as the officer



primarily responsible for ensuring that Sony's public fi-nancial disclosures are accurate and otherwise in com-pliance with applicable legal and accountingrequirements; and to continue to apply FAS 131, whichprovides guidance relating to industry segment report-ing, for purposes of reporting its financial results.

In settling the administrative proceeding, Sonyand Sano consented to issuance of the cease and desistorder without admitting or denying the assertions madein that order. SEC v. Sony Corporation, Case No. 1:98CV01935,D.D.C.; Litigation Release No. 15832 (August 5, 1998)(available at the SEC's web site, http://www.sec.gov)[ELR 20:4:24]



Copyright Office publishes ninth list of foreignworks whose once-expired copyrights have beenrestored

The United States Copyright Office has publishedits ninth list of foreign works whose owners have filedNotices of Intent to Enforce Restored Copyrights. Theforeign works in question are those that once were in thepublic domain in the United States, but whose copy-rights were restored on January 1, 1996, as a result ofCongress' enactment of a new section 104A of theCopyright Act as required by the Uruguay RoundAgreements Act.

The deadline for filing Notices of Intent to En-force was December 31, 1997 for works whose copy-rights were restored on January 1, 1996, and this ninthlist covers all works for which such Notices were filedby that date.



The deadline for filing Notices for works fromAngola is November 30, 1998, and or works from Mon-golia is January 28, 1999. The only other works thatmay become eligible thereafter would be works fromcountries that become new adherents to the Berne Con-vention, new members of the World Trade Organization,or designated in a Presidential proclamation. The Copy-right Office will publish further lists, only if Notices forworks from such countries actually are filed.

Copyright Restoration of Works in Accordance With theUruguay Round Agreements Act, Library of Congress,Copyright Office, 63 Federal Register 43930 (Aug. 14,1998) [ELR 20:4:24]



RECENT CASES

Turner Entertainment has exclusive right to distrib-ute "Gone with the Wind"; although heirs of DavidSelznick have beneficial interest in movie's copy-right, they do not have right to authorize others toexploit it, federal District Court rules

When Turner Broadcasting bought MGM in1986, one of the assets it acquired was most of thecopyright to "Gone with the Wind." That classic moviewas produced, almost a half century earlier, by David O.Selznick through his independent production companySelznick International Pictures, Inc. Financing and ClarkGable were provided by MGM, and in return, MGM ac-quired a 25% interest in the movie and the exclusiveright to distribute it until 1946.



Selznick International was liquidated in 1940 andits assets - including its interest in the copyright to"Gone with the Wind" - were distributed to its share-holders. Before its exclusive distribution rights expiredin 1946, MGM acquired most - but not all - of the inter-ests in the movie's copyright from those who thenowned them. However, some of David Selznick's heirsretained their interests in the copyright. So even after itsexclusive rights expired in 1946, MGM continued todistribute the movie, and continued to account toSelznick's heirs, just as it had in the past.

This arrangement seems to have worked fine for ahalf century or so. But eventually, Selznick's heirs filedsuit against Turner contending, among other things, thatas co-owners of the movie's copyright, they too had theright to exploit and distribute "Gone with the Wind" -that Turner, in other words, did not have the exclusiveright to do so. Turner of course contended otherwise.



And in response to cross-motions for summary judg-ment, federal District Judge Kim Wardlaw has agreedwith Turner.

Turner contended that it retained the exclusiveright to distribute the movie for three reasons. First, itargued that the original contract remained in effect, be-cause Selznick's heirs had continued to request account-ings pursuant to its terms and because Turner and theheirs had continued to treat the contract as though itwere in effect. Judge Wardlaw was not persuaded bythis argument, however, because by its own terms,MGM's exclusive right to distribute the movie expired in1946.

Turner also argued that since it and the heirs hadcontinued to treat the contract as though it were in ef-fect, an implied contract existed between them whoseterms were the same as the original contract. JudgeWardlaw rejected this argument too, for two reasons.



Their continued reliance on the terms of the originalagreement "may simply be a matter of convenience anddoes not demonstrate a mutual intent to enter into an im-plied contract." Moreover, even if they had entered intoan implied contract, that contract had no particular termand thus could be terminated by the heirs on reasonablenotice.

Turner ultimately prevailed with its third argu-ment. The copyright to "Gone with the Wind" was re-newed in 1967 by MGM in its own name; the heirs didnothing to renew their interest. The heirs did not forfeittheir interest by failing to renew. But as a matter ofcopyright law, when only one co-owner renews a copy-right, that owner "takes legal title to the renewal copy-right as constructive trustee on behalf of thenon-renewing co-owner." This made MGM, and thenTurner as its successor, the sole owner of legal title tothe renewal term of "Gone with the Wind," on its own



behalf and as constructive trustee for Selznick's heirs.The heirs are now "beneficial owners" of their interestsin the movie's copyright. But Judge Wardlaw concluded"that well-established principles of trust law dictate thatthe beneficial owner may not transfer legal title to any orall of the exclusive rights of copyright ownership. Tradi-tional trust principles provide that the trustee has the ex-clusive right to sell or lease the trust res, subject to thecare and loyalty of the fiduciary and a duty of account-ing to the beneficiaries."

Though this result seems technical, Judge Ward-law explained that there is clear logic to it. "Where thereis only one claimant listed on the renewal application, apurchaser of exclusive rights from the claimant cannot,by looking at the renewal application, be assured that hehas actually obtained the exclusive rights in the work ifit is possible that someone other than the listed claimanthas legal rights in the work." Therefore, the judge held



that "because the plaintiffs' names do not appear on therenewal certificate, they may not exercise the nonexclu-sive ownership rights of co-owners of legal title to thework."

Editor's note: While Turner has won the battle, itmay not have won the war. Buried in two footnotes toher opinion, Judge Wardlaw gave Selznick's heirs hintsat how they might exploit "Gone with the Wind" them-selves, despite the rest of the decision. First, the judgespecifically noted that she had "reserve[d] judgment" onwhether the heirs could exploit the movie themselves, byrenting a theater and exhibiting it for example. "[I]t mayvery well be that . . . the beneficial owner, unlike thirdparties, cannot be held liable to the legal owner for in-fringement, and, thus, as a logical corollary, would holda nontransferable right to exploit the work itself," JudgeWardlaw observed. Second, the judge noted that"[t]here is no evidence in this record to suggest that



plaintiffs have attempted to correct the records of theCopyright Office in an appropriate proceeding." Thissuggests that if the heirs could correct the records of theCopyright Office to show that they are co-owners of themovie's renewal copyright, then they too would be ableto distribute "Gone with the Wind" by issuing nonexclu-sive licenses to others. This of course would destroyTurner's ability to issue exclusive licenses, which mightwell reduce the total value of the movie's copyright, thusgiving both sides of this dispute a powerful incentive tocompromise.

Selznick v. Turner Entertainment Co., 990 F.Supp.1180, 1997 U.S.Dist.LEXIS 21729 (C.D.Cal. 1997)[ELR 20:4:25]



Agreement granting MGM "perpetual" distributionrights to "King of Kings" did not expire at end ofmovie's first copyright term, federal appellate courtaffirms

A grant of "perpetual" distribution rights does notexpire 28 years after the movie was first released - noteven if the movie is from the pre-1978 era, and thus itscopyright is divided into an initial 28-year term and aseparate 47-year renewal term. A federal Court of Ap-peals has affirmed that this is so, in a case brought byP.C. Films Corp., the current owner of the copyright tothe movie "King of Kings," against the movie's currentdistributors, Turner Entertainment and Warner HomeVideo.

"King of Kings" was financed by MGM pursuantto a contract that gave MGM "perpetual" distributionrights to the movie but left its copyright in the hands of



Samuel Bronston Productions, Inc., the company thatproduced it. P.C. Films bought the movie's copyrightwhen Bronston went bankrupt. And Turner and WarnerHome Video acquired distribution rights from MGMwhen Turner bought MGM's library.

P.C. Films renewed the movie's copyright in 1989and then asserted that the "perpetual" grant of distribu-tion rights was effective only for the first term of themovie's copyright, not for its renewal term. Turner disa-greed; and federal District Judge Barbara Jones did too(ELR 19:7:8). P.C. Films appealed, but the Court of Ap-peals has disagreed with P.C. Film's argument as well.

In an opinion by Judge Fred Parker, the appellatecourt has confirmed that "perpetual" means "continuingforever," and this language is sufficient to bring this caseunder those precedents which have held that the law'spresumption against transfers of renewal-term rights isovercome by "language which expressly grants rights in



`renewals of copyright' or `extensions of copyright,'" andthat "the words `forever' and `hereafter' embraced the re-newal term." Moreover, uncontradicted testimony byBenjamin Melniker, MGM's General Counsel at thetime the distribution agreement was negotiated, showedthat MGM would not have financed the movie for lessthan perpetual distribution rights.

P.C. Films argued that a "perpetual" grant of dis-tribution rights should not be enforced, because such agrant would be against public and copyright policy. Thiswas so, P.C. Films said, because copyright law providesprotection only for a limited time. In this case, for exam-ple, the copyright to "King of Kings" will expire entirelyat the end of the year 2036. Judge Parker responded thatit was unnecessary and premature to consider this issue.On behalf of the appellate court he said, "We decline todecide whether the [perpetual distribution agreement]



imposes restrictions on P.C. Films beyond the renewalperiod."

P.C. Films Corp. v. MGM/UA Home Video Inc., 138F.3d 453, 1998 U.S.App.LEXIS 2835 (2d Cir. 1998)[ELR 20:4:26]

Paramount Pictures' ad for "Naked Gun" was fairuse parody of Annie Leibovitz's photo of pregnantDemi Moore, federal appellate court affirms

Paramount Pictures has prevailed again, this timeon appeal, in a copyright infringement lawsuit filedagainst it by photographer Annie Leibovitz. The suitwas triggered by an early ad for Paramount's NakedGun: The Final Insult 33 1/3 which featured a photo ofactor Leslie Nielsen's head superimposed on the naked



body of a pregnant model. The model in the Paramountad was posed in a fashion that copied the pose of actressDemi Moore in a photo taken by Leibovitz for theAugust 1991 cover of Vanity Fair.

Paramount agreed that its ad was copied fromLeibovitz's photograph, and that its ad and Leibovitz'sphotograph were so similar that Paramount could avoidliability only if its ad was a fair use. Thus, early in thecase, both Paramount and Leibovitz moved for summaryjudgment on the fair use question. Federal District CourtJudge Loretta Preska ruled in Paramount's favor (ELR19:5:9).

Leibovitz appealed, arguing that it was she, notParamount, who was entitled to summary judgment, be-cause the studio's use "was commercial and thereforeshould receive little protection under the fair use doc-trine." In an opinion by Judge Jon O. Newman, theCourt of Appeals agreed that the "commercial nature of



Paramount's advertisement weighs against it in the fairuse balance." Nevertheless, it concluded that "this ad-vertisement qualifies as a parody entitled to the fair usedefense under the analysis set forth by the SupremeCourt in Campbell v. Acuff-Rose Music, Inc." - the "2Live Crew/Pretty Woman" case (ELR 15:12:18).

The "2 Live Crew" case was significant, JudgeNewman explained, because in it, the Supreme Court"abandoned" its prior position that commercial uses arepresumptively unfair, and instead ruled that commercialuses merely tend to weigh against fair use.

In Leibovitz's case, "the smirking face of Nielsencontrasts so strikingly with the serious expression on theface of Moore, the ad may reasonably be perceived ascommenting on the seriousness, even the pretentious-ness, of the original." The fact that the ad commented onthe original did not end the analysis on this factor, be-cause the ad was used to promote a movie. However,



Judge Newman concluded that "On balance, the strongparodic nature of the ad tips the first factor significantlytoward fair use, even after making some discount for thefact that it promotes a commercial product."

The judge distinguished the factually similar caseof Steinberg v. Columbia Pictures (ELR 9:5:9) - whichheld that the poster for the movie "Moscow on the Hud-son" was not a fair use of artist Saul Steinberg's NewYorker magazine cover - saying that in that case, "acopyrighted drawing was appropriated solely to adver-tise a movie, without any pretense of making a commentupon the original."

Judge Newman also concluded that the "effect . .. on the market for the original" factor counted in Para-mount's favor, because Leibovitz "all but concedes thatthe Paramount photograph did not interfere with any po-tential market for her photograph or for derivative worksbased upon it."



The "nature of the copyrighted work" factorcounted in Leibovitz's favor, because Paramount con-ceded that her photograph "exhibited significant creativeexpression." But according to Judge Newman, the Su-preme Court's "2 Live Crew" decision "instructs that thecreative nature of an original will normally not providemuch help in determining whether a parody of the origi-nal is fair use." Although this "factor therefore favorsLeibovitz . . . , the weight attributed to it in this case isslight."

Likewise, the "amount and substantiality of thework used" factor did not help Leibovitz, even thoughParamount's copying of the protected elements of herphotograph "took more . . . than was minimally neces-sary to conjure it up." This was so, Judge Newman ex-plained, because the "2 Live Crew" decision "instructsthat a parodist's copying of more of an original than isnecessary to conjure it up will not necessarily tip the



third factor against fair use." Thus, this "factor does nothelp Leibovitz, even though the degree of copying ofprotectable elements was extensive."

Thus, of the four factors the Copyright Act makesrelevant for fair use analysis, two favored Paramount,one favored Leibovitz only slightly, and one did not helpLeibovitz. In the aggregate then, Judge Newman wassatisfied that the balance "markedly" favoredParamount.

Leibovitz v. Paramount Pictures Corp., 137 F.3d 109,1998 U.S.App.LEXIS 2693 (2d Cir. 1998) [ELR20:4:26]



First-sale doctrine bars right of publicity claims bybaseball player Orel Hershisher and race-car driverClifford Allison against company that sells plaquesmade by framing licensed Hershisher and Allisontrading cards

Baseball player Orel Hershisher and race cardriver Clifford Allison have confronted and defeatedcountless opponents in their storied sports careers. Butone opponent has defeated them, in a way that makes le-gal precedent.

That opponent is Vintage Sports Plaques, an en-terprising company that purchases trading cards from li-censed manufacturers and dealers and frames thosecards, without altering them in any way, by mountingthem between transparent acrylic sheets and woodboards. Each plaque is labeled with a plate that bearsthe athlete's name, and some plaques feature a clock



with a sports motif. The one thing Vintage Sports does-n't do is get a license from anyone to make its plaques.

Hershisher and Allison are two of the athleteswhose licensed cards have been purchased by VintageSports and made into plaques. In response, Hershisherand Allison's widow sued Vintage Sports, alleging thatits products violate their publicity rights under Alabamacommon law. Vintage responded by asserting that its ac-tivities are protected by the first-sale doctrine. FederalDistrict Judge Sam Pointer agreed, and dismissed theircase.

Undaunted - or at least aware that the game isn'tover till the final inning has been played, and the race is-n't over until the final lap has been run - Hershisher andAllison appealed. But in a precedent-setting opinion, theCourt of Appeals has affirmed.

The first-sale doctrine provides that once ownersof intellectual property rights permit the sale of copies of



their works, they may not thereafter control the furtherdistribution of those copies. Court of Appeals JudgePhyllis Kravitch noted that the first-sale doctrine limits,in this fashion, the rights of copyright, patent and trade-mark owners. And Judge Kravitch concluded that treat-ing publicity rights differently would have undesirableconsequences.

For example, she said, "a decision by this courtnot to apply the first-sale doctrine to right of publicityactions would render tortious the resale of sports tradingcards and memorabilia and thus would have a profoundeffect on the market for trading cards, which now sup-ports a multi-billion industry." Also the judge said that ifthe first-sale doctrine did not apply to the right of pub-licity, "framing a magazine advertisement that bears theimage of a celebrity and reselling it as a collector's item,reselling an empty cereal box that bears a celebrity's en-dorsement, or even reselling a used poster promoting a



professional sporting event" all would "presumably" beprohibited.

Judge Kravitch emphasized that applying thefirst-sale doctrine to publicity rights "would not elimi-nate completely a celebrity's control over the use of hername or image." It would not, she explained, because"the right of publicity protects against unauthorized useof an image, and a celebrity would continue to enjoy theright to license the use of her image in the first instance - and thus enjoy the power to determine when, or if, herimage will be distributed." In this very case, the judgenoted, Hershisher and Allison "have received sizableroyalties from the use of their images on the tradingcards at issue, images that could not have been used inthe first place without permission."

Allison v. Vintage Sports Plaques, 136 F.3d 1443, 1998U.S.App.LEXIS 5026 (11th Cir. 1998) [ELR 20:4:27]



Producers and distributors of movie "DonnieBrisco" win dismissal of defamation and privacy suitfiled by John "Boobie" Cerasani; federal judge findsCerasani's reputation is so "badly tarnished" he is"libel-proof"

In a stroke of literary understatement, federal Dis-trict Judge Denny Chin reported that "Cerasani is not amodel citizen." Cerasani is John "Boobie" Cerasani, "aconvicted racketeer, Mafia associate, bank robber, anddrug dealer" who also has been indicted for participating"in an organized crime scheme to manipulate the stockmarket . . . by threats of violence."

Judge Chin became judicially acquainted withCerasani's career because Cerasani was portrayed in thebook and movie versions of "Donnie Brisco" in waysthat did not please him.



Though Cerasani did nothing in response to the1987 publication of the book, he did take action in re-sponse to the 1997 release of the movie. He sued Sonyand Tristar Pictures, Mandalay Entertainment, Peter Gu-ber, Barry Levinson and others for defamation and inva-sion of privacy. The defendants immediately respondedwith a motion to dismiss, asserting that Cerasani's com-plaint (and a proposed amended complaint) failed tostate a claim. Judge Chin has agreed.

In his opinion granting the defendants' motion todismiss, Judge Chin reviewed the highlights ofCerasani's "criminal record and his well-publicized repu-tation for having committed the violent acts at issue."Quite apart from "Donnie Brisco's" portrayal ofCerasani, he also had been the subject of testimony atwidely-reported Mafia trials, and had been the subjectof numerous newspaper articles detailing that testimony.On this basis, the judge held that "Cerasani's reputation



is so `badly tarnished' that, even assuming . . . the film[is] defamatory, he can suffer no further harm and henceno reasonable jury could award him anything more thannominal damages." For this reason, Judge Chin con-cluded that "Cerasani is `libel-proof.'"

Cerasani also asserted claims under New YorkCivil Rights Law section 51 - New York's right of pri-vacy and publicity statute. This claim failed, because thereleased version of "Donnie Brisco" referred to Cerasanias "Paulie" rather than as "John," "Boobie" or"Cerasani." When applying that statute, New York"courts have repeatedly dismissed claims premised onthe use of a fictitious rather than actual name." A pre-release version of the movie did refer to Cerasani by hisown name, but that version was not exhibited for "pur-poses of trade," as the statute requires; instead it wasexhibited at a pre-release screening for "creative and



editorial purposes" as to which the statute does notapply.

Finally, Judge Chin dismissed Cerasani's "falselight" invasion of privacy claim, because "New Yorkdoes not recognize any such false light claim."

Cerasani v. Sony Corp., 991 F.Supp. 343, 1998U.S.Dist.LEXIS 220 (S.D.N.Y. 1998) [ELR 20:4:28]

America Online wins dismissal of defamation suitfiled by White House aides Sidney and JacquelineBlumenthal on account of statements made inDrudge Report, but court refuses to dismiss ortransfer suit against Matt Drudge himself

In the online world of instant communications,mistakes are sometimes made. Cyber gossip columnist



Matt Drudge apparently made a big one when, on thebasis of a tip from "one influential Republican," hewrote that Sidney Blumenthal had abused his wife Jac-queline. Both Blumenthals work in the White House,Sidney as an Assistant to the President, and Jacquelineas the Director of the President's Commission on WhiteHouse Fellowships.

This defamatory statement was disseminated inthe Drudge Report, an Internet distributed newsletterMatt Drudge writes from his apartment in Los Angeles.The Drudge Report also is made available to AmericaOnline subscribers, in return for which AOL paysDrudge royalties of $3,000 a month.

The Blumenthals reacted to Drudge's allegationswith a lawyer-letter and a defamation suit. The letter in-duced Drudge to issue a retraction, which AOL postedon its service, and an apology from Drudge as well. Butthe Blumenthals proceeded with their suit nonetheless.



AOL responded with a motion for summary judg-ment, and Drudge with a motion to dismiss or transferfor lack of personal jurisdiction. AOL's motion has beengranted; Drudge's has not.

AOL successfully relied on the CommunicationsDecency Act of 1996, one section of which gives immu-nity to providers of interactive computer services for li-ability they might otherwise incur on account of materialdisseminated by them but created by others. The Blu-menthals argued that this section should not apply toAOL's dissemination of the Drudge Report, becauseAOL knew that Drudge would be providing "gossip andrumor" and actively urged people to subscribe to AOLto get it.

Federal District Judge Paul Friedman seemed tosympathize with the Blumenthals. "If it were writing ona clean slate, this Court would agree with plaintiffs," thejudge wrote, adding that "it would seem only fair to hold



AOL to the liability standards applied to a publisher or,at least, like a book store owner or library, to the liabil-ity standards applied to a distributor." But the judge wasnot writing on a clean slate. "Congress has made a dif-ferent policy choice by providing immunity even wherethe interactive service provider has an active, even ag-gressive role in making available content provided byothers," he explained.

The Blumenthals filed their suit in federal court inthe District of Columbia. Since Drudge lives and worksin Los Angeles, he argued that the court did not havepersonal jurisdiction over him, and thus the case shouldbe dismissed or transferred to Los Angeles. Judge Fried-man did not agree, however. He found that the Districtof Columbia Long-Arm statute gives him authority toexercise jurisdiction over Drudge in this case, and that itwould not violate Due Process for him to do so.



Blumenthal v. Drudge, 992 F.Supp. 44, 1998U.S.Dist.LEXIS 5606 (D.D.C. 1998) [ELR 20:4:29]

Neither RKO General nor Turner Entertainment isliable for payments due the American Federation ofMusicians trust fund in connection with revenuesearned by 1946-1958 movies

RKO General and Turner Entertainment have es-caped liability for payments allegedly due to the Holly-wood Film Trust, on account of revenues still beingearned by movies produced 40 and more years ago. TheHollywood Film Trust was created in 1954 as part of thesettlement of a strike by the American Federation ofMusicians against that era's major movie producers anddistributors. The Trust Agreement required signing pro-ducers and distributors to pay the Trust 5% of their



revenues from movies made between September 1946and January 1958, in order to create a fund that wouldsupport free public performances by instrumentalmusicians.

It appears that the parties anticipated that therights to at least some of the covered movies might atsome time in the future be transferred from signing com-panies to others. So in order to protect the fund, theTrust Agreement further provided that signing compa-nies would not transfer their rights in covered moviesunless the transferee signed the Agreement itself.

RKO signed the Trust Agreement in 1955. Muchlater, in 1984, it transferred its rights in covered moviesto a wholly-owned subsidiary and then sold all of thestock of that subsidiary to another company that had notsigned the Trust Agreement and never did. In 1987, thatcompany sold the stock to yet another company thatthen licensed the movies to Turner for television. Turner



has never signed the Trust Agreement either. And nopayments have been made to the Trust since 1984 whenRKO began the daisy chain by transferring its rights toits subsidiary.

RKO arguably breached the Trust Agreementwhen its subsidiary failed to make required payments in1984 and then again in 1987 when it sold the stock ofthe subsidiary to a non-signing company. But for somereason, the Trust didn't get around to suing RKO until1994. The statute of limitations for breach of contractunder applicable New York law is six years. But even ifRKO did breach, it did so seven or even ten years be-fore suit was filed. In an opinion by Judge JosephMcLaughlin, a federal Court of Appeals has affirmed alower court ruling that the statute of limitations thereforebarred the Trust's lawsuit. Judge McLaughlin rejected anumber of creative arguments offered by the Trust in its



attempt to establish a breach that occurred fewer thansix years before.

The Trust asserted two contract-based theoriesagainst Turner. First, the Trust claimed that it was athird-party beneficiary of the 1987 contract by whichTurner acquired rights in the movies from the companythat then owned them. Second, the Trust argued thatTurner was directly liable under that same contract, be-cause in it, Turner had agreed to assume certain obliga-tions, including - the Trust argued - obligations to paythe Trust.

In an opinion never published in print (though itcan be found at 1996 U.S.Dist.LEXIS 3508, 1996 WL131816), District Court Denise Cote rejected both ofthese theories. The third-party beneficiary argumentfailed, because there was no evidence to show that in1987 Turner or the company that then owned the moviesintended the Trust to be a beneficiary of their



agreement. The assumption-of-obligations argumentfailed, because the contract identified the obligationsTurner assumed, and they did not include the Trust Fundpayments that were the subject of this suit. On appeal,Judge McLaughlin affirmed these rulings "for substan-tially the reasons set forth in Judge Cote's Opinion."

Raine v. RKO General, Inc., 138 F.3d 90, 1998U.S.App.LEXIS 3182 (2d Cir. 1998) [ELR 20:4:29]



Playboy wins further damages in second phase ofcopyright case against owner and operators ofwebsite that distributed images to subscribers thathad been copied from magazine and uploaded tosite; but court rejects Playboy's trademark claims

Playboy Enterprises has been awarded an addi-tional $129,000 plus attorneys fees in a copyright in-fringement suit against the owner and operators of awebsite called Neptics. This award was made by federalDistrict Court Judge Barefoot Sanders at the conclusionof a non-jury trial. Judge Sanders also issued a perma-nent injunction against the defendants, barring themfrom committing any further infringements of Playboy'scopyrights.

In an earlier phase of this case, Playboy wasawarded $310,000 plus attorneys fees, in response tothe publisher's motion for summary judgment concerning



62 Playboy photographs the website had retrieved fromnewsgroups and posted to its own webservers (ELR19:11:11).

The non-jury trial conducted by Judge Sandersconcerned 29 additional photographs. Judge Sandersawarded Playboy $1,000 for the infringement of thecopyright to each of those 29 photos, plus an additional$20,000 each for the "willful" infringement of the copy-rights to five of those photos. The owner of the corpora-tion that operated the website and one of its employeeswere found vicariously liable for the infringements, andthus the judgment was entered against them as well.

While Playboy's victory was significant, it wasnot entirely complete. In addition to its copyright claims,the publisher also asserted claims against the website'sowner and operators for trademark infringement, dilu-tion, and federal and state unfair competition. JudgeSanders rejected those claims, however, finding that



Playboy had failed to prove elements necessary to suc-ceed on these legal theories.

Playboy Enterprises, Inc. v. Webbworld, Inc., 991F.Supp. 543, 1997 U.S.Dist.LEXIS 21264 (N.D.Tex.1997) [ELR 20:4:30]

Federal court denies Motion Picture Academy's mo-tion for injunction requiring Network Solutions tostop registering Internet domain names containingwords "Academy Awards" and "Oscars"

Internet domain names are registered to appli-cants by a company known as Network Solutions, Inc.,on a first-come first-served basis. The process is usuallydone by computer, with no human intervention. This hasenabled unscrupulous applicants to register domain



names containing famous trademarks owned by others,without the consent of trademark owners.

Suits against the unscrupulous have already beensuccessful. Panavision, for example, has won a trade-mark action against a fellow who registered"panavision.com" and "panaflex.com" as domain names,apparently with the hope of selling those registrations toPanavision at a huge profit (ELR 19:3:21).

The Academy of Motion Picture Arts and Sci-ences also has been victimized by poachers who haveregistered such domain names "academyaward.com"and "theoscars.net," without the Academy's permission.While the Academy could have sued those who regis-tered such domain names directly, just as Panavisiondid, the Academy tried a different tactic. It sued Net-work Solutions, Inc., hoping to get an injunction thatwould have prohibited Network Solutions from register-ing domain names that are confusingly similar to the



Academy's registered "Academy Awards" and "Oscar"trademarks.

If successful, this strategy would have reducedthe number of domain name trademark cases the Acad-emy would have to file in the future, because it wouldhave cut off further poaching on the Academy's trade-marks. But the strategy has not been successful.

Federal District Judge Laughlin Waters has de-nied the Academy's motion for a preliminary injunction,finding that it was unlikely to succeed on any of its vari-ous theories and finding the balance of hardships fa-vored Network Solutions rather than the Academy.

The judge rejected the Academy's federal andstate trademark dilution claims. The federal dilutionclaim was unlikely to succeed, Judge Waters concluded,because Network Solutions' own activities do not them-selves constitute the use of the Academy's trademarks"in commerce," and because "there is no precedent" for



a contributory dilution claim. The state contributory di-lution claim, under California law, failed for the samereasons.

The judge rejected the Academy's contributory in-fringement claim, because it hasn't been determined thatthe objected-to domain names infringe, and "thereforeNetwork Solutions could not possibly have actualknowledge that the registered owners of the domainnames at issue are involved in infringingactivities."Network Solutions was not itself an infringer,because it does not itself use the Academy's marks inconnection with the sale, distribution or advertising ofgoods or services, the judge ruled.

Finally, Judge Waters found that the balance ofhardships favored Network Solutions, rather than theAcademy, because "implementing a massive pre-screening process [to screen out infringing domainnames] would drastically change the nature of [Network



Solutions'] business [and] would likely drive the cost ofregistration up and slow the process down."

Academy of Motion Picture Arts and Sciences v. Net-work Solutions, Inc., 989 F.Supp. 1276, 1997U.S.Dist.LEXIS 20806 (C.D.Cal. 1997) [ELR 20:4:30]

New York City regulations on use of amplifiers inpublic places is unconstitutional in part, federal Dis-trict Court rules in case brought by street musician

Robert Turley is a self-employed street musicianwho plays a ten-string treble bass guitar in public spacesin New York City, usually in the Times Square area.Turley's guitar is made audible by a sound amplifier andthus subjected his performances to City regulation.



The City Administrative Code provides that themaximum volume for sound amplifiers is 75 decibels atsix feet, which wasn't loud enough to suit Turley's style.The Code also requires those who use amplifiers to getpermits, for which the Police Department charged $29 aday until 1996 and $45 a day ever since, which wasmore than Turley was willing to pay.

New York City has had trouble before with its at-tempts to regulate those who do business from thestreets, like street vendor artists (ELR 19:2:21). Turleyfollowed their lead in attacking, on First Amendmentgrounds, the constitutionality of the City's attempts toregulate those who use amplifiers. And like street artistsbefore him, he too has achieved significant success.

A jury ruled that the City's 75 decibel limit was"unreasonably low," and federal District Judge ShiraScheindlin denied the City's motion for a new trial onthat issue. While the City had offered testimony showing



the limit was reasonable, Turley's own expert testifiedthat to be heard, music must be 15 to 20 decibels louderthan the surrounding sounds. Even the City's expert ac-knowledged that the noise around Times Square aver-ages at least 70 decibels. Thus, said the judge, the jury'sverdict that a 75 decibel limit on amplified music wasunreasonable "was not seriously erroneous."

The jury also found that the City's pre-1996 per-mit fee of $29 was excessive, but the later $45 fee wasnot. The City offered explanations for how the jury mayhave reached this seemingly inconsistent verdict; butJudge Scheindlin granted Turley's motion for a new trialas to the $45 fee because the jury's verdict sheet did notsupport the City's explanation.

Judge Scheindlin conducted the retrial of the feeissue herself, and then ruled in Turley's favor. Music,even if amplified, is - like speech - protected by the FirstAmendment, and states may not tax constitutionally-



protected speech. On the other hand, the judge ex-plained, states may impose reasonable, content-neutral,narrowly-tailored time, place and manner regulations onspeech. And fees that are imposed to meet the expensesof administering such regulations (rather than to raiserevenue) "are constitutionally permissible." However,"A fee in excess of the amount necessary to offset thesecosts is impermissible."

After reviewing, in some detail, the cost-accounting testimony offered in support of the $45 per-mit fee, Judge Scheindlin concluded that "the City hasnot satisfied its burden of proving the average costs ofprocessing [a permit application] equals or exceeds thecurrent $45 fee." As a result, the judge ruled that the fee"is unreasonable and therefore violates Plaintiff's FirstAmendment rights," and she enjoined the City fromcharging that much (or more) for the amplifier permit.



Turley v. New York City Police Dept., 988 F.Supp.667, 1997 U.S.Dist.LEXIS 20240 (S.D.N.Y. 1997); 988F.Supp. 675, 1997 U.S.Dist.LEXIS 12815 (S.D.N.Y.1997) [ELR 20:4:31]

First Amendment rights of artist were not violatedwhen General Services Administration denied hisapplication to display sculpture of judge in lobby offederal building, because decision was reasonableand viewpoint neutral

Artist John Sefick creates satirical sculptures ofprominent people who are currently in the public eye.He likes to exhibit his work in the lobbies of federalbuildings, and has done so more than once under thePublic Buildings Cooperative Use Act. This little-knownfederal statute authorizes the General Services



Administration to make federal buildings available forcultural (and other) activities, including the fine artexhibits.

One of Sefick's sculptures was of federal DistrictJudge Brian Barnett Duff. Sefick applied for a permit todisplay the Duff sculpture in the lobby of the DirksenFederal Building in Chicago, which is the building inwhich Judge Duff's courtroom and the Seventh CircuitCourt of Appeals are located.

The General Services Administration denied Se-fick's application for at least three reasons: the Dirksenlobby was being reconstructed at the time; there hadbeen security threats to some of the building's occu-pants; and the sculpture may have influenced judicialproceedings taking place in the building. Sefick con-tended that this refusal violated his First Amendmentrights, and he filed a lawsuit so alleging (apparently in



the very courthouse in whose lobby he wanted to dis-play his sculpture).

Following a trial before Judge Rudy Lozano (ofthe Northern District of Indiana, sitting by designation),the government has won. The lobby of the DirksenBuilding is a nonpublic forum, the judge ruled, and thusthe GSA's decision not to permit Sefick to exhibit hiswork there was constitutional, so long as it was reason-able and viewpoint neutral.

Judge Lozano put the burden on the governmentto prove both reasonableness and viewpoint neutrality.Nonetheless, after reviewing the trial testimony in somedetail, the judge concluded the government had met itsburden. Although Sefick attacked the government's rea-sons as mere pretext, Judge Lozano did not agree. Hefound the government's construction-safety and securityconcerns to be reasonable. And he found the govern-ment's judicial-influence concern to be viewpoint



neutral, because the administrators who rejected Sefick'sapplication testified believably that they could not tellwhat viewpoint the Duff sculpture expressed.

Sefick v. Gardner, 990 F.Supp. 587, 1998U.S.Dist.LEXIS 1890 (N.D.Ill. 1998) [ELR 20:4:32]

Pittsburgh did not violate rights of independent ven-dors by granting exclusive vending license for ThreeRivers Stadium to one company and adopting an or-dinance that prohibits others from vending on Sta-dium property

When the Pirates and Steelers play home gamesin Pittsburgh's Three Rivers Stadium, they attract hugecrowds of fans - and potential customers. Not surpris-ingly, these crowds attracted a cadre of independent



vendors who offered to sell food, drink and souvenirs toarriving and departing fans. Until December 1995, inde-pendent vendors were able to ply their trade, even fromStadium property, so long as they stayed 250 or morefeet from the outside wall of the Stadium itself.

Three Rivers Stadium is owned by the City ofPittsburgh, and in December 1995, the City did twothings that affected independent vendors adversely. TheCity entered into an agreement with Pittsburgh StadiumConcessions, Inc., giving that company the exclusiveright to sell food, drink and souvenirs on Stadium prop-erty. And the City adopted an ordinance that prohibitsothers from doing so, on Stadium property or withinthirty feet of it.

Several independent vendors sued the City, as-serting that its actions deprived them of constitutionalrights and violated federal antitrust law. But federal Dis-trict Judge Alan Bloch has rejected the vendors'



contentions and has granted the City's motion for sum-mary judgment.

The vendors' substantive due process claimsfailed, Judge Bloch ruled, because the objected-to ordi-nance was adopted, in part, to maximize Stadium profits- in order to keep the Pirates and Steelers in Pittsburgh -and "[r]evenue production is a legitimate state interest."The vendors' equal protection claim was rejected for thesame reason.

The vendors argued that their procedural dueprocess rights had been violated, because one memberof the City Council who had voted for the ordinancealso was a member of the Stadium Authority (the Citybody that manages the Stadium). But the judge found nomerit in this argument, because voting in favor of the or-dinance was not a "prosecutorial function."

The vendors' antitrust claim lacked merit, becausethe City is immune from antitrust liability for actions it



takes as an "act of government." Entering into exclusivecontracts with suppliers of goods and services is such anact, Judge Bloch determined. And for that reason, theCity was immune from the vendors' antitrust claim.

Kaehly v. City of Pittsburgh, 988 F.Supp. 888, 1997U.S.Dist.LEXIS 7203 (W.D.Pa. 1997) [ELR 20:4:32]

Music publishers win copyright infringement suitagainst unlicensed radio station; station's owner isheld vicariously liable, and injunction is granted bar-ring station from broadcasting any ASCAP song

A religious radio station in Battle Creek, Michi-gan, has been found liable for copyright infringement,because it continued to broadcast songs after its ASCAPlicense was terminated for non-payment of license fees.



Federal District Judge Wendell Miles rejected the sta-tion's unsupported assertion that it was "confused" aboutthe status of its ASCAP license and was willing to paypast-due license fees if only ASCAP would send it abill.

Moreover, the station's owner, a Detroit class-action lawyer, has been held vicariously liable, eventhough programming decisions were made by the sta-tion's manager or disc jockeys rather than by the owner.The judge held the station owner vicariously liable, be-cause the owner had a financial interest in the station'suse of the songs and "he could have controlled the op-eration of the station had he so desired."

Although the lawsuit was filed by only fiveASCAP members, they sought and were granted an in-junction prohibiting the station from broadcasting "anyand all music in the ASCAP repertory." Judge Milesruled that such an injunction was proper, because the



station had admitted that it "constantly" plays ASCAP-licensed songs and that it had stopped paying ASCAPlicense fees, and because the station had been sued byother ASCAP members in a separate infringement case.

All Nations Music v. Christian Family Network, Inc.,989 F.Supp. 863, 1997 U.S.Dist.LEXIS 20064(W.D.Mich. 1997) [ELR 20:4:33]

Roger Williams University wins Title IX gender dis-crimination lawsuit filed by former Associate Ath-letic Director

Rhode Island's Roger Williams University haswon dismissal of a Title IX lawsuit filed against it byPatricia Bedard, the University's former Associate Ath-letic Director. In her suit, Bedard alleged that the



University had discriminated against her on account ofher gender in deciding to hire a man, instead of her, tobe Athletic Director, and then again when it later termi-nated her employment entirely.

Federal District Judge Ernest Torres has acceptedthe recommendation of Magistrate Judge Robert Love-green that the University's motion for summary judg-ment be granted. Judge Lovegreen agreed with Bedardthat Title IX creates a private cause of action for em-ployment discrimination by federally funded educationalinstitutions - a conclusion about which there are stillconflicting rulings. But that is as far as Bedard got withher case.

With respect to her failure-to-promote claim,Judge Lovegreen found that "Bedard was a prime candi-date [for Athletic Director], but, unfortunately for her,the final round of the selection process yielded a morequalified applicant to whom the job ultimately went." As



a result, the judge concluded, "a reasonable trier-of-factcould conclude that the University's decision not to pro-mote Bedard to Athletic Director was not motivated bya discriminatory animus, but instead by its desire to hirewhat it perceived as the most qualified applicant."

Similarly, with respect to her wrongful termina-tion claim, Judge Lovegreen found that "a rational trier-of-fact could conclude that the University's decision tofire Bedard was not motivated by a discriminatory ani-mus, but by a dissatisfaction with her performance."

Since the University provided evidence of non-discriminatory reasons for its actions, the burden shiftedto Bedard to produce evidence that the University's pur-ported reasons were mere pretext. This she failed to do,however, Judge Lovegreen concluded.



Bedard v. Roger Williams University, 989 F.Supp. 94,1997 U.S.Dist.LEXIS 19897 (D.R.I. 1997) [ELR20:4:33]

Slander claim of former women's basketball coach atUniversity of District of Columbia should have beenresolved by grievance procedures under Compre-hensive Merit Personnel Act, so $200,000 verdict isset aside

More than fifteen years of litigation have come tonothing for Bessie Stockard as a result of what somewould call an unanticipated technicality. The District ofColumbia Court of Appeals has held that BessieStockard's slander claim against the Athletic Director atthe University of the District of Columbia should havebeen resolved pursuant to the administrative grievance



procedures created by the D.C. Comprehensive MeritPersonnel Act, rather than by litigation. As a result, a$300,000 verdict in Stockard's favor, which was re-duced to $200,000 in an earlier phase of the case, was ineffect set aside. And judgment has been entered in favorof the Athletic Director and the University.

Stockard's suit was filed back in 1982 in responseto statements made by the Athletic Director accusingStockard of misappropriating funds. In most cases, ifsuch a statement were untrue, a defamation lawsuitwould be the proper procedure for seeking relief; andfor more than a decade, the parties to this lawsuit appearto have litigated this case as though slander were theproper claim. The first time the Court of Appeals heardthis case, it affirmed the $100,000 reduction inStockard's verdict, but remanded for consideration ofwhether the Athletic Director was entitled to absolute



immunity for her allegedly defamatory statement (ELR13:2:15).

Instead of resolving that question, however, thetrial court concluded that the Comprehensive Merit Per-sonnel Act applied. That Act covers "virtually everyconceivable personnel issue among the District [and] itsemployees"; and it contains administrative grievanceprocedures that must be used in lieu of lawsuits.

Though Stockard's claims are based on statementsthat were made almost 20 years ago, the Athletic Direc-tor and University may not be entirely done withStockard yet. The Court of Appeals decision in their fa-vor noted that the judges "express no opinion aboutwhether Stockard is, or is not, time barred from pursuingthese claims administratively."

Stockard v. Moss, 706 A.2d 561, 1997 D.C.LEXIS 212(D.C. 1997)[ELR 20:4:33]



Nightclub operator must pay minimum wage andovertime to exotic dancer, because she was employeeand not an exempt professional under Fair LaborStandards Act, federal District Court rules

Diamond A Entertainment, the owner of two Flor-ida nightclubs called Babe's and Foxy Lady, must payexotic dancer Lora Harrell minimum wages and over-time, as required by the Fair Labor Standards Act, fed-eral District Judge Susan Bucklew has ruled.

Diamond A argued that Harrell was not an "em-ployee," or if she was, she was a "professional," andthus the Act did not apply to her claim. The Fair LaborStandards Act requires minimum wages to be paid onlyto "employees," not to independent contractors; and theAct does not cover employees who are "professionals."

In this case, Harrell and Diamond A had enteredinto an agreement called a "License to Use Business



Premises" pursuant to which Harrell was granted a non-exclusive license to dance and entertain customers inBabe's and Foxy Lady. The agreement provided thatHarrell would pay Diamond A a license fee of $10 perday shift and $15 per night shift, and she would retainall tips (called "dance fees") she received fromcustomers.

On its face, the licensing agreement appears tomake Harrell an independent contractor rather than anemployee. But a multi-factor test is used to determinewhether an "employment" or "independent contractor"relationship exists for Fair Labor Standards Act pur-poses. When Judge Bucklew applied this test, she foundthat Harrell was an employee rather than an independentcontractor.

Although the Act exempts from its protectionthose employees who are "professionals," there also is amulti-factor test for determining whether someone is a



professional for the purposes of that Act. Again, whenthe judge applied that test, she concluded that Harrellwas not a "professional."

As a consequence of these findings, Judge Buck-lew has denied Diamond A's motion to dismiss Harrell'slawsuit.

Harrell v. Diamond A Entertainment, Inc., 992 F.Supp.1343, 1997 U.S.Dist.LEXIS 22632 (M.D.Fla. 1997)[ELR 20:4:34]



Federal District Courts uphold constitutionality oflocal ordinances prohibiting or regulating entertain-ment establishments featuring nude or toplessdancing

In separate cases, federal District Courts in Flor-ida, Connecticut and Texas have upheld the constitu-tionality of local ordinances that prohibit or regulateentertainment establishments featuring nude or toplessdancing. The ordinances had been challenged on FirstAmendment grounds, but the challenges have been re-jected in all three cases.

The Florida ordinance prohibits nude or toplessdancing in clubs that serve liquor. Such ordinances wereapproved by the United States Supreme Court as longago as 1972 in California v. LaRue, 409 U.S. 109, 93S.Ct. 390 (1972). But the owners of clubs in BayCounty, where the ordinance was adopted, argued that



the Supreme Court's more recent 1996 decision in 44Liquormart, Inc. v. Rhode Island (ELR 18:2:6) "im-pliedly overruled" California v. LaRue and other casesthat had upheld the constitutionality of such laws. JudgeRobert Hinkle disagreed, however.

The Connecticut ordinance requires "adult caba-rets" to operate only in certain "zones" in New Havenand only if a "special exception" is obtained from thecity's Board of Zoning Appeals. "Adult cabarets" are de-fined to include businesses that feature topless, nude and"exotic" dancing. A company that wanted to open a top-less bar in New Haven challenged the standards used bythe Board of Zoning Appeals in deciding whether togrant special exceptions, arguing that those standardsare unconstitutionally vague and do not provide suffi-ciently prompt judicial review. Judge Janet Artertondisagreed.



The Texas ordinance prohibits dancers from beingnude unless they are at least six feet from customers andon an elevated stage. It also prohibits dancers fromdrinking alcoholic beverages where they dance, whileworking and for 12 hours before or after working. Theordinance, adopted by Jefferson County, was challengedby the owner of an adult entertainment enterprise andseveral nude dancers. They contended that the ordinancewas not content-neutral, was impermissibly vague, andviolated the equal protection clause. But in a lengthy re-port, federal Magistrate Judge Earl Hines rejected thesecontentions; and federal District Judge Richard Schelladopted the Magistrate's recommendations and deniedthe plaintiffs' request for a preliminary injunction.

Toy Box, Inc. v. Bay County, 989 F.Supp. 1183, 1997U.S.Dist.LEXIS 21085 (N.D.Fla. 1997); Crown StreetEnterprises, Inc. v. City of New Haven, 989 F.Supp.



420, 1997 U.S.Dist.LEXIS 22548 (D.Conn. 1997);DFW Vending, Inc. v. Jefferson County, Tex., 991F.Supp. 578, 1997 U.S.Dist.LEXIS 21251, 1998U.S.Dist.LEXIS 306 (E.D.Tex. 1998) [ELR 20:4:34]

DEPARTMENTS

In the Law Reviews:

Comm/Ent, Hastings Communications and Entertain-ment Law Journal, has published Volume 20, Number 3with the following articles:

Trade Dress Protection for Product Configurations andthe Federal Right to Copy by Margreth Barret, 20Comm/Ent, Hastings Communications and Entertain-ment Law Journal 471 (1998)



Privacy On-Line: Washington Report by Nicholas W.Allard, 20 Comm/Ent, Hastings Communications andEntertainment Law Journal 511 (1998)

Regulating Cyberspace: Metaphor, Rhetoric, Reality,and the Framing of Legal Options by Clay Calvert, 20 Comm/Ent, Hastings Communications and Entertain-ment Law Journal 541 (1998)

Jazzing Up the Copyright Act? Resolving the Uncertain-ties of the United States Anti-Bootlegging Law by SusanM. Deas, 20 Comm/Ent, Hastings Communications andEntertainment Law Journal 567 (1998)

Interpreting the Communications Assistance for LawEnforcement Act of 1994: The Justice Department Ver-sus the Telecommunications Industry & Privacy Rights



Advocates by Hildegarde A. Senseney, 20 Comm/Ent,Hastings Communiations and Entertainment Law Jour-nal 665 (1998)

Should Congress Regulate Cyberspace? by Greg Y.Sato, 20 Comm/Ent, Hastings Communications and En-tertainment Law Review 699 (1998)

The Entertainment Law Review, published by Sweet &Maxwell Ltd. Legal Information Resources, The Hatch-ery, Hall Bank Lane, Mytholmroyd, Hebden Bridge,West Yorkshire HX7 5HQ, Telephone 01422 888000,has issued Volume 9, Issue 5 with the following articles:

Pastiched-off by Richard Harrison, 9 EntertainmentLaw Review 181 (1998) (for address, see above)



Public Domain Films-Legal Pitfall or CommercialSense? by Sarah Tuckman, 9 Entertainment Law Re-view 187 (1998) (for address, see above)

The Draft Directive on the Harmonisation of Certain As-pects of Copyright and Related Rights in the Informa-tion Society by Karen Murray, 9 Entertainment LawReview 190 (1998) (for address, see above)

Digital Audio Broadcasting and the Future of UnitedKingdom Radio by Keir Ashton, 9 Entertainment LawReview 193 (1998) (for address, see above)

It's Just Not Cricket by Paul Cairns and Arun Katyar, 9Entertainment Law Review 196 (1998) (for address, seeabove)



"Les Idees sont de Libre Parcours": Programme FormatProtection in the French and Italian Systems-Part 1:France by Allesandra Gagliardi, 9 Entertainment LawReview 200 (1998) (for address, see above)

A Common Thread in Collective Copyright Licensing?by Jonathan E. Rayner James and Andrew Norris, 9 En-tertainment Law Review 205 (1998) (for address, seeabove)

The European Intellectual Property Review, publishedby Sweet & Maxwell, 100 Avenue Road, Swiss Cot-tage, London, NW3 3PF, England, Telephone +441264 342766, FAX +44 1264 342761, has issued Vol-ume 20, Issue 8 with the following article:

Jurisdiction Over Cross Border Internet Infringementsby Shlomo Cohen, 20 European Intellectual Property



Review 294 (1998) (for address, see above) [ELR20:4:36]



a primer on the law of webcasting and digital music delivery by

Documents