Congress first addressed copyright and digital information in the 1992 Audio Home Recording Act (AHRA). {FN32: 17 U.S.C. §1001 et seq.} The AHRA was the result of years of discussions and hearings on how to address digital copies of sound recordings, which could provide the perfect copies feared by the record companies. As with most copyright legislation, the result was a grand compromise, with Congress trying to address the legitimate concerns of every party in the negotiations.

What the copyright owners got was a mandatory copy management system that had to be included on every digital audio recording device or digital audio interface device. {FN33: 17 U.S.C. §1002} The Serial Copy Management System allows the making of unlimited copies from an original digital recording but prevents any copies being made from those copies. To compensate copyright owners and featured performers, a royalty is required for every digital audio recording device and digital audio recording medium sold. {FN34: 17 U.S.C. §1003}

The computer industry got left alone. The definition of a digital audio recording device requires that it be “designed and marketed for the primary purpose of . . . making a digital audio copied recording for private use,” {FN35: 17 U.S.C. §1001(3)} and digital audio recording medium excluded any medium primarily marketed or used “for the purpose of making copies of nonmusical literary works, including computer programs and databases.” {FN36: 17 U.S.C. §1001(4)}

Consumers got a statement regarding their rights to make copies of musical recordings, although the user provision of Section 1008 certainly isn’t a model of clarity:

No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings or analog musical recordings. {FN37: 17 U.S.C. §1008}

Because of the exceptions given the computer industry, Section 1008 does not apply to most copying on a personal computer (PC) of a music compact disc (CD). The user provision applies only to copying using “such a device or medium,” which limits the provision to an act where “a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium” is employed. In the CD copying neither an analog recording device nor an analog recording medium is used.

Section 1001 gives some non-intuitive definitions, but it is clear that a “digital audio recording device” is not a PC, since a PC is not “designed or marketed for the primary purpose of . . . making a digital audio copied recording for private use.” {FN38: See Recording Industry Association of America v. Diamond Multimedia, 180 F.3d 1072, 51 USPQ2d 1115 (9th Cir. 1999)} The original CD is not a “digital audio recording medium” because it “embodies a sound recording at the time it is first distributed by the importer or manufacturer.” Neither is the output CD, if it is one of the normal ones you buy at a computer or office supply store because it is “primarily marketed and most commonly used by consumers . . . for the purpose of making copies of nonmusical literary works, including computer programs or data bases.” There are blank CD media sold for making digital audio recordings, where the required royalty has been paid, and their use would bring a user within the protection against an infringement suit if the copy that is made is for noncommercial use.

The Serial Copy Management System is a part of every digital audio tape (DAT) drive, and also any CD writer that is not part of a computer system. But because neither of those devices achieved any consumer popularity, the Audio Home Recording Act didn’t meet the expectations of the copyright owners, although it did clarify that analog copies of musical recordings made for a noncommercial use were not copyright infringements.

II.B. The White Paper

While the Audio Home Recording Act addressed physical devices and media for making copies of musical works, the advent of the Internet required a new look at the copyright laws to determine whether changes were necessary.

Early in his administration, President Clinton formed the Information Infrastructure Task Force to determine what a National Information Infrastructure should look like. (In reality, the privatization of the National Science Foundation’s NSFnet to become the Internet had a far greater influence than any government direction.) One of the components of the Task Force was the Working Group on Intellectual Property, chaired by Bruce Lehman, the Assistant Secretary of Commerce and Commissioner of Patents and Trademarks and a key adviser to President Clinton on intellectual property. Lehman had worked on the Copyright Act of 1976 as the principal legal adviser to the House Committee on the Judiciary.

In September 1995, the Working Group released a “white paper,” Intellectual Property and the National Information Infrastructure, {FN39: Intellectual Property and the National Information Infrastructure (“NII White Paper”), http://www.uspto.gov/web/offices/com/doc/ipnii/ (Sept. 1995)} that expressed concerned that the current copyright law did not adequately protect valuable digital works from infringement over computer networks and that more works would become available in digital form if proper protection existed. They suggested amendments to the copyright law to accommodate digital works. In particular, they proposed amending the distribution right, Section 106(3), {FN40: 17 U.S.C. §106(3)} to read:

to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, by rental, lease, or lending, or by transmission. {FN41: NII White Paper, Appendix 2 at 1}

and to add to the definition of “transmission” in Section 101: {FN42: 17 U.S.C. §101}

To ‘transmit’ a reproduction is to distribute it by any device or process whereby a copy or phonorecord of the work is fixed beyond the place from which it was sent. {FN43: NII White Paper, Appendix 2 at 1}

There was a fundamental difficulty with this proposal. While the act that causes the transmission clearly occurs at the sending machine, whether it is a transmission or not depends on what occurs at the receiving machine. If the bits are written to a disk or otherwise fixed in some medium for more than a transitory duration, then, according to the proposed amendment, there is a transmission and the proposed distribution right is infringed. However, if the bits are not fixed at the receiving end but are instead converted to an audio or video signal without storing them for more than a transitory duration, as would be the case with streaming audio or video, then there is no fixation, no transmission, and no infringement of the proposed distribution right. And for digital information that can be either stored or immediately reproduced without storage, that means that whether a particular sending is an infringement depends not on what the sender does but on what the receiver does – something that is generally beyond the control of the sender.

Although the White Paper’s proposed amendments were introduced as a bill in Congress, they were never passed into law. Internet service providers, which routinely transmitted information from one machine to another for their users, were concerned that they would end up being the “defendant of last resort” for any infringing transmissions made by their users, since copyright infringement is a strict liability offense that does not require willfulness, or even knowledge, of the infringement. Internet backbone carriers were particularly concerned, since they transmit packets from one router to another but do not have the ability to determine whether the packets contain infringing information. Early in the negotiations for an amendment to the copyright laws to address digital material, the service providers made it clear that they would fight any change that could make them liable for copyright infringement that is without their direct knowledge.

The White Paper’s proposal also did not address the problem of the intermediate copies made by a user as a necessary part of using a work.

II.C. Digital Sound Recordings

In 1995, at the same time the White Paper was being developed, Congress took a small step toward addressing digital copyrights when it extended the public performance right to digital audio transmissions of sound recordings by adding a new exclusive right to Section 106. {FN44: 17 U.S.C. §106} Prior to that time, the public performance right did not apply to sound recordings, although it did apply to any underlying musical composition or lyrics.

II.C.1. The New Exclusive Right

It is important to note that the new right pertains only to “sound recordings,” which are defined in Section 101 as:

works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied. {FN45: 17 U.S.C. §101}

So even if there is music in a movie on a DVD, that DVD is not a sound recording. And the new right pertains only to public performances by means of digital transmissions. No other type of public performance of a sound recording, such as playing a record to crowd, is covered, although it could be an infringement of the copyright in the musical work being performed.

Congress’ concern was about services that would transmit sound recordings to a user on demand.

Even more recently, a small number of services have begun to make digital transmissions of recordings to subscribers. Trends within the music industry, as well as the telecommunications and information services industries, suggest that digital transmission of sound recordings is likely to become a very important outlet for the performance of recorded music in the near future. Some digital transmission services, such as so-called ‘‘celestial jukebox,’’ ‘‘pay-per-listen’’ or ‘‘audio-on-demand’’ services, will be interactive services that enable a member of the public to receive, on request, a digital transmission of the particular recording that person wants to hear. {FN46: Sen. Rep. No. 104-128 at 14}

This certainly hasn’t happened as Congress expected. In place of subscription services providing a rich inventory of recorded music to consumers at their request, file-sharing systems like Napster, where individuals converted analog or digital recordings to the standard MP3 format and made them available to anyone in the world, became immensely popular. With such systems, the work is being reproduced on users machines through an electronic distribution but is not being publicly performed, so the new digital sound recording public performance right does not address this problem.

Congress expressed further concerns:

However, in the absence of appropriate copyright protection in the digital environment, the creation of new sound recordings and musical works could be discouraged, ultimately denying the public some of the potential benefits of the new digital transmission technologies. The Committee believes that current copyright law is inadequate to address all of the issues raised by these new technologies dealing with the digital transmission of sound recordings and musical works and, thus, to protect the livelihoods of the recording artists, songwriters, record companies, music publishers and others who depend upon revenues derived from traditional record sales. {FN47: Sen. Rep. No. 104-128 at 14}

Although many had wanted Congress to adopt a general transmission right, such as proposed in the White Paper, Congress was much more cautious.

Notwithstanding the views of the Copyright Office and the Patent and Trademark Office that it is appropriate to create a comprehensive performance right for sound recordings, the Committee has sought to address the concerns of record producers and performers regarding the effects that new digital technology and distribution systems might have on their core business without upsetting the longstanding business and contractual relationships among record producers and performers, music composers and publishers and broadcasters that have served all of these industries well for decades. Accordingly, the Committee has chosen to create a carefully crafted and narrow performance right, applicable only to certain digital transmissions of sound recordings. {FN48: Sen. Rep. No. 104-128 at 13}

II.C.2. Exceptions

At the same time that it added the sixth exclusive right of public performance by digital transmission of sound recordings, Congress amended Section 114 {FN49: See Pub. L. 104-39, 109 Stat. 336} in a way that excluded virtually every digital transmission of a sound recording at that time. These exclusions were tightened, restructured, and changed by an amendment included in the Digital Millennium Copyright Act. {FN50: Pub. L. 105-304, 112 Stat. 2860}

As presently constituted, Section 114 {FN51: 17 U.S.C. §114} differentiates public performances by digital transmission primarily by whether they are “subscription” and whether they are “interactive.” A subscription service is one in which the users pay for the privilege of receiving the performance, as would be the case for digital cable television or satellite. In an interactive service the user requests that a particular sound record be performed, although Congress specifically excepted the playing of requests made by individuals if they are performed for the public at large, such as requests made to a radio station to play a favorite song. In the language of the statute, an interactive service is one that “enables a member of the public to receive a transmission of a program specially created for the recipient.” {FN52: 17 U.S.C. §114(j)(7)}

In Section 114(d)(1), a number of transmissions are exempted from the exclusive public performance by digital transmission right, including nonsubscription broadcast transmissions and broadcast retransmissions within 150 miles of the broadcast transmitter.

In Section 114(d)(2), a statutory licensing scheme is established for non-interactive services that are not otherwise exempt. That means that the owner of a copyright in a sound recording cannot stop the public performance of that sound recording by the non-interactive service, but a royalty must be paid through a system administered by the Copyright Office.

Finally, Section 114(d)(3) sets requirements for any licenses for interactive services, including limitations on exclusive licenses.

As with most recent additions to the copyright laws, there are particular tests that must be met for each of these rules to apply, set forth in the same mind-numbing detail that one expects in the tax code.

II.C.3. Webcasting

Webcasting is the delivery of programming via the Internet that is similar to what would be found on a broadcast radio station. In most instances, the material being webcast consists of recordings of musical works, so the public performance involves the copyrights in both the sound recording of the performance and the musical work being performed. Although it appears to listeners as if they are tuning into a broadcast, for technical reasons having to do with how the Internet actually transfers digital information, there is generally a separate digital pathway from the webcaster to each listener.

The Librarian of Congress, under his authority under Sections 112 {FN53: 17 U.S.C. §112} and 114, {FN54: 17 U.S.C. §114} has recently set the royalties for a statutory license for webcasting and other uses. {FN55: 37 C.F.R. 261} In particular, a webcaster must pay 7/100 of a cent for each song sent to each listener, so if 10 songs are sent to 100 listeners, a royalty of 70 cents is due. In addition, there is a minimum yearly royalty of $500. {FN56: See http://www.copyright.gov/carp/webcasting_rates.html} While this is a reduction by half from the royalty that was proposed by a Copyright Arbitration Royalty Panel (CARP), many webcasters claim that they will not be able to continue operation if they have to pay the royalty, because they don’t have sufficient income. Not surprisingly, many content providers feel that the royalty is too low.

Radio stations were not overly concerned when the Digital Performance Rights in Sound Recordings Act {FN57: Pub. L. 104-39, 109 Stat. 336} was being drafted because they were using analog transmissions (AM or FM) and felt that if they did go digital, they would be exempted under 114(d)(1)(A) {FN58: 17 U.S.C. §114(d)(1)(A)} as “a nonsubscription broadcast transmission.” However, much to their chagrin, the Copyright Office determined {FN59: 65 Fed. Reg. 77292 (Dec. 11, 2000)} that the simultaneous streaming of a radio station’s programming over the Internet was not a “broadcast transmission” and was subject to royalty payments to the performers and copyright owners of the sound recording, something the radio stations never had to pay before. The authority of the Copyright Office to make this determination was confirmed in Bonneville International v. Peters. {FN60: 153 F.Supp.2d 763, 59 USPQ2d 1622 (E.D. Penn. 2001)}

Next section: What Not to Protect