US court orders music download licence fee review

Tue Sep 28, 2010 5:54pm BST

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* Appeals panel decides two Internet music issues

* Sends lower court ruling on fees back for recalculation

* Affirms music download is not a public performance

By Grant McCool

NEW YORK, Sept 28 (Reuters) - The fees paid by Yahoo Inc (YHOO.O) and RealNetworks Inc (RNWK.O) for licenses to play music over the Internet should be recalculated, a U.S. appeals court ruled on Tuesday.

Ruling on a separate issue, the court, a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York, agreed with a lower court's 2007 decision "that a download of a musical work does not constitute a public performance of that work" under copyright law.

Yahoo! and RealNetworks had sought separate blanket licenses to publicly play the entire repertory of the American Society of Composers, Authors and Publishers (ASCAP) on some of their websites and services.

ASCAP appealed the ruling that a music download does not constitute a public performance, and the Internet companies appealed the lower court's assessment of fees for the blanket licenses.

More than 390,000 composers, songwriters, lyricists, and music publishers in the United States exclusively license their music through ASCAP, according to the not-for-profit organization. ASCAP licenses about 45 percent of all of the musical works that are played online, according to the court record.

The panel said the analysis by a U.S. district court in Manhattan in determining the fees in 2008 was flawed in two major respects and sent it back for reconsideration.

Representatives of the two companies and ASCAP could not immediately be reached to comment.

"First, the district court did not adequately support the reasonableness of its method for measuring the value of the Internet companies' music use," said the written opinion by the appeals panel.

It added that the lower court "did not adequately support the reasonableness" of applying a uniform royalty rate of 2.5 percent to the Internet companies' music-use revenue.

The calculation was made by multiplying the total revenue from licensed services by a music-use-adjustment factor, a fraction that reflected the amount of time users spent streaming performances of music relative to their overall time on the website, according to the court record.

A dispute also arose between the parties over whether digital downloads, or copies of the music, are also public performances for which the copyright owners must be compensated.

In agreeing with the lower court ruling on that issue, the panel cited a section of the Copyright Act stating that to "perform" means to recite, render, play, dance or act it either directly or through a device or process.

"Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener," the panel's opinion said.

The case is USA v American Society of Composers, Authors and Publishers et al, U.S. Court of Appeals for the 2nd Circuit No. 09-0539. (Reporting by Grant McCool; Editing by Steve Orlofsky)

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