Music Downloads Not Subject to Performance Royalties, Judge Rules

AOL and other online services do not have to pay royalties to members of one of the major U.S. performance-rights management organizations on music downloaded over the Internet, a New York federal judge has ruled in a case of first impression.

The judge found that downloads were not "publicly performed" music under copyright law.

The decision came in a rate-setting proceeding under a longtime consent decree between the federal government and the American Society of Composers, Authors & Publishers.

ASCAP has some 285,000 members in the United States who are composers, songwriters, lyricists and music publishers.

The organization licenses and collects royalties on all public performances of its members' works and distributes the money to the appropriate individuals or entities.

The U.S. government sued the organization in 1941 for alleged antitrust violations. The case eventually settled with a consent decree that set out the terms under which ASCAP could continue operating.

The U.S. District Court for the Southern District of New York, where the case was filed, retained jurisdiction to oversee the decree's implementation.

The decree has been amended several times, most recently in 2001 to add provisions related to the Internet. Afterward, AOL, Yahoo and RealNetworks Inc. entered into negotiations with ASCAP over license fees; the three firms wanted to offer music to their users via the Internet, either through downloading or streaming.

The parties were unable to agree on the amount of the license fee, so AOL and the other companies asked the District Court to determine a reasonable figure.

Both sides moved for partial summary judgment on the question of whether Internet downloads of music constitute "performance" of the music under the Copyright Act.

The law gives copyright owners exclusive rights to copy, transmit, perform and display their material.

The rights can be licensed separately, so an owner can allow one person or entity to make copies of a work, while permitting someone else to perform or display it.

U.S. District Judge William C. Conner, ruling in favor of the companies, said a download involves copying a file from one computer to another. The file is stored permanently on the recipient's hard drive and can usually be copied to other devices such as digital music players.

By contrast, he said, "streaming" occurs when a song is transmitted over the Internet to be listened to in real time. The file is not stored on the recipient's computer and must be "streamed" again each time the recipient wants to listen to it.

He said the companies have conceded that streaming does meet the Copyright Act's definition of "public performance."

The definition includes situations in which the performance is available to the public "by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

Downloading, on the other hand, equates to reproduction of a copyrighted work, which is separate from the public performance right, Judge Conner said.

The judge cited statements from the U.S. Copyright Office and the U.S. Department of Commerce, which have taken the position that digital downloads of music are not public performances of those works.

Judge Conner also said his decision is consistent with other courts' rulings that illegal music downloads from online file-sharing services are reproductions of those music files.

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