Amicus Curiae Brief — Cable News Network, Inc. v. CSC Holdings, Inc. (No. 08-448)

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OFFICE OF THE CLERK

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Supreme Court of the Anited States

CABLE NEWS NETWORK, INC., et ai.,

Petitioners.

CSC HOLDINGS, INC,, et al.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Second Circuit

BRIEF OF THE NATIONAL MUSIC PUBLISHERS’

ASSOCIATION, INC. AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

BrETH S. BRINKMANN

Counsel of Record

JAY A. ROSENTHAL SETH M. GALANTER

Senior Vice President MORRISON & FOERSTER LLP

& General Counsel 2000 Pennsylvania Ave., N.W.

NATIONAL Music Suite 5500

PUBLISHERS’ ASSOCIATION Washington, D.C. 20006 |

101 Constitution Ave., N.W. (202) 887-1544

Suite 705 East

Washington, D.C. 20001

(202) 742-4375

PAUL GOLDSTEIN

MORRISON & FOERSTER LLP

425 Market Street

San Francisco, CA 94104

(415) 268-7000

JACQUELINE C. CHARLESWORTH

MORRISON & FOERSTER LLP

1290 Avenue of the Americas

New York, NY 10104

(212) 468-8000

November 5, 2008

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2531

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................. epee nanenerenl ill

INTEREST OF AMICUS CURIAE...................0005. 1

SUMMARY OF ABRGFOMEINT ......cccsccsrescovessnessssecee 2

PNET Bix pukka isaatuad hd vasdissensiactacrnmaienaaate 9

I. THE RULING BELOw TuHat A “BUFFER Copy”

Is IMMUNE FROM CopyRIGHT LIABILITY IN

THE CABLE TELEVISION INDUSTRY HAS

CREATED A STATE OF UNCERTAINTY IN THE

SS SG widens dctaviidawkndecamnneks 10

A. Interactive Streaming Of Music Relies

On “Buffer Copies” And Thus Could

Be Adversely Impacted By The Second

Circuit’s Decision Involving Cable

WUBI aneesccssvicictncsss EU MEN Pe ereyy nn 11

B. The Decision Below Has Disrupted

Rulemaking By The Copyright Office

Regarding Copyright Licenses’ For

Interactive Music Streaming That Was

Coming To A Conclusion After Eight

Years Of Study And Deliberation.......... 16

C. The Second Circuit’s Decision May

Affect Copynght Infringement Litigation

Pending In The Second Circuit, And

Will Lead To Forum Shopping.............. 22

TABLE OF CONTENTS — Continued

Page

Il. THE CourRT OF APPEALS REACHED A WRONG

CONCLUSION AND Dip So IN A MANNER THAT

Casts A SHADOW OF UNCERTAINTY OVER

NECESSARY PRIVATE NEGOTIATIONS IN THE

Music INDUSTRY 23

CONCLUSION | 26

iN]

TABLE OF AUTHORITIES

Page

CASES:

Football Ass’n Premier League Limited ov.

YouTube, Inc., No. 07-03582 (S.D.N.Y. filed

SOE Sc TIT Rica nacineca sani eennateertae edie nae eee 22

MAI Systems Corp. v. Peak Computer, Inc., 991

Brae PAR. COREE Sal Re Pisce ni cnsuiosisainannchssnacacunatacanetins 24

Marobie-FL, Inc. v. National Ass’n of Fire

Equipment Distributors, 983 F. Supp. 1167

CRW Rant ROET Dinh siuicueniuhsvatcaaus dateckuetaunes hadi 24

Stenograph L.L.C. v. Bossard Associates, Inc.,

SOG FG OO CRG... CR Bi eitvscscrechansccnceinexsetiots 24

STATUTES & REGULATORY MATERIALS:

BPS sesh vixeanavishaciaie oes nae passim

Oe Ri kccctahsvsndeccecaxeacn cic a ee a ee passim

Be PE 5.0y enna tenss sstivecaccecasecanei ean aL eat eee 14

FRAC PMD ied ciciacevsiss cen see tee Sauer 14

Oe ee Dinca rence ts he cap cc cenk he es haben ae eet 20

CCW FRO pes snnccensasvoknad dp ndensiedeasieaabubececaae 21

Bre Sc © RAIS sacccrctccacanctn ch ht eee 7, 23

Digital Performance Right in Sound Recordings

Act, Pub. L. No. 104-39, 109 Stat. 336 (1995)........ 14

TABLE OF AUTHORITIES — Continued

Page

Adjustment or Determination of Compulsory

License Rates for Making and Distributing

Phonorecords, 71 Fed. Reg. 1454 (Jan. 6,

MAE Andiind creche tans aucunabiagucumuniesseuvisausks toebeesareneurenecases on 20

Compulsory License for Making and Distributing

Phonorecords, Including Digital Phonorecord

Deliveries, 73 Fed. Reg. 40,802 (July 16,

MINNIE incu knee su thats chsaeeccadnaeuithchekwesbnck ban santas ieee 6, 12, 17, 18

Compulsory License for Making and Distributing

Phonorecords, Including Digital Phonorecord

Deliveries, 73 Fed. Reg. 47,113 (Aug. 13,

2008) .....cceeecceccee: So AD a NA ee 6, 18-19

Mechanical and Digital Phonorecord Delivery

Rate Adjustment Preceeding, 73 Fed. Reg.

Fe re a eg ED eran Gas nceistce voscticaninienss chien ccuiasitte 20

MISCELLANEOUS:

Comments of the CTIA-The Wireless

Association and The National Association of

Broadcasters, Docket No. 2006-3 (Copyright

ce eS 5 i) ene ee 21

Brad Cook, TMO_ Reports—Analyst Sees

Subscription-Based Music Services Eclipsing

Pay-Per-Download, Mac Observer (May 17,

MUP hiisinitnnss citi Cancinvin<chcecinssakensd tngdsananintndrsaseminesinideaviis 13

Jefferson Graham, Music service Rhapsody’s

not afraid to take on iPod, USA Today (Aug.

ig RET ei teas ce iis whch cuanenn toebn ea cawlaseaat cane waree aero ianiis 13

TABLE OF AUTHORITIES — Continued

PEee, BeOe. INO. 204-774 (LOGS) ......0.000..cc..cesecscesevanes

CeCe HOHE HHH EME HEHEHE HEHEHE SEES

S. Rep. No. 104-128 (1995)

United States Copyright Office, Library of

Congress, DMCA Section 104 Report: A

Report of the Register of Copyrights Pursuant

to $ 104 of the Digital Millennium Copyright

PE SI Ts oad eccrine is tek eues

12, 38,

Page

soees 16

24-25

BRIEF OF THE NATIONAL MUSIC PUBLISHERS’

ASSOCIATION, INC. AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS

The National Music Publishers’ Association, Inc.

(NMPA) respectfully submits this brief as amicus

curiae in support of petitioners.’

INTEREST OF AMICUS CURIAE

Amicus NMPA is a trade association representing

the interests of music publishers in the United

States. The approximately 800 music publisher

members of NMPA, along with their subsidiaries and

affiliates, own or administer the majority of United

States copyrighted musical works. For nine decades,

NMPA has served as the leading voice of the

American music publishing industry in Congress and

in the courts.

The licensing affiliate of NMPA—The Harry Fox

Agency, Inc.—acts as licensing agent for nearly

35,000 music publishers, which in turn represent the

‘ Pursuant to Rule 37.2(a), letters from the parties

consenting to the filing of this brief have been filed with the

Clerk of the Court, and counsel for amicus curiae timely notified

each party’s counsel of amicus curiae’s intention to file this brief.

No counsel for a party authored this brief in whole or in part

and no party or counsel for a party made a monetary

contribution intended to fund the preparation or submission of

the brief. No person other than amicus curiae, its members, or

its counsel made a monetary contribution to the preparation or

submission of this brief.

interests of more than 160,000 songwriters, in

connection with the licensing of copyrighted musical

works to make and distribute phonorecords in both

physical and digital formats.

The court of appeals’ ruling in this case, if not

reviewed immediately, may profoundly disrupt the

music industry. In particular, the decision below

creates uncertainty in the place of widely shared

expectations among copyright owners and

distributors of musical works regarding the Copyright

Act’s application to interactive music services that

are delivered through computers and other digital

devices. Many view such digital services as the future

of the music industry.

Accordingly, amicus and its members have a

strong interest in this Court’s review and reversal of

the decision below to ensure that the still-nascent

digital music industry is not irreversibly damaged

in lhght of the court of appeals’ destabilizing

interpretation of the Copyright Act.

SUMMARY OF ARGUMENT

The effects of the erroneous interpretation by the

court of appeals of the Copyright Act in this case are

being felt, and will continue to be felt, far beyond the

cable television industry that is litigating this case.

In particular, the decision creates uncertainty in the

field of interactive streaming of music to consumers

over the Internet, which is a growing part of a billion

dollar digital music industry. Review by this Court

and reversal of that erroneous interpretation is

critical to ensure confidence and continued growth

in the digital music industry.

A. From the perspective of a music listener,

interactive streaming of music can be analogized to

a traditional jukebox. Music listeners use their

computers to access online music services and select

particular songs (or artists or genres of music) that

they would like to hear, and their selections are

immediately transmitted over the Internet and

played for them on their computers through the use

of streaming technology.

In order to allow the user to listen to the song,

the entire musical work is transmitted by the

interactive music service to the user’s computer,

where it is reproduced as a “buffer copy” composed of

packets of data deposited in temporary computer data

storage, such as RAM. The computer uses the buffer

copy to play the song for the listener. Unlike

downloading, streaming technology allows the song

to begin playing even before all data comprising

the song have been received by the user’s computer.

The launch and development of interactive

streaming services has been facilitated by industry

understandings concerning the licensing of such buffer

copies under the Copyright Act. At the same time,

however, the lack of formal regulations by the

for interactive streaming activities under Section 115

of the Copyright Act, the compulsory license provision

for musical works, has been a significant impediment

to the growth of interactive streaming services.

Under the Copyright Act, “phonorecords” are

reproductions in the form of sound recordings (the Act

uses the analogous term “copy” to refer to other types

of reproductions). The Copyright Act defines

“phonorecords” as “material objects in which sounds

** * are fixed by any method now known or later

developed, and from which the sounds can be

perceived, reproduced, or otherwise communicated,

either directly or with the aid of a machine or device.”

17 U.S.C. § 101. In similar fashion, the Copyright Act

defines “copies” as “material objects, other than

phonorecords, in which a work is fixed by any method

now known or later developed, and from which the

work can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a

machine or device.” Jbid. The Copyright Act further

provides that a work is “fixed” in a tangible medium

of expression when “its embodiment in a copy or

phonorecord * * * is sufficiently permanent or stable

to permit it to be perceived, reproduced, or otherwise

communicated for a period of more than transitory

duration.” Jbid.

The court of appeals below adopted a novel and

flawed interpretation of the definition of “fixed” to

hold that respondents’ creation of buffer copies of

petitioners’ copyrighted television works did not

constitute the reproduction of copyrighted works “in

copies.” Pet. App. 10a-11la. The court appears to have

ruled that data held in a computer buffer for 1.2

seconds are too “transitory” in “duration” to create

“copies,” Pet. App. 17a-18a, and that apparent ruling

has been and will inevitably continue to be invoked to

cast doubt on the status of buffer copies used to

deliver “phonorecords” as well. That interpretation

of the Copyright Act has the potential effect of

excluding interactive music streaming from the scope

of Section 115 of the Act, which provides a compulsory

license for making and distributing phonorecords

of nondramatic musical works. If a streamed buffer

copy is not considered “fixed,” mechanical licensing

revenues, l.e., revenues derived from licenses to make

and distribute phonorecords in physical and digital

formats, are directly threatened, and such revenues

are an essential source of income for music creators.

B. Immediate review of the decision below is

necessary to eliminate uncertainty that it has caused

in pending proceedings concerning the application of

the Section 115 compulsory license of the Copyright

Act to digital uses in the music industry.

1. The Copyright Office has stated that it views

the decision in this cable television case to be

relevant to a currently pending and long awaited

rulemaking in the music industry. The question of

how interactive music streaming should be treated

under the compulsory license provision of Section 115

of the Copyright Act has been studied by the

the Copyright Office issued a notice of proposed

rulemaking in which it concluded, after an analysis of

the statutory language, case law, and its own prior

interpretations, that “buffer copies meet the statutory

definition of phonorecords” and therefore fit within

the scope of the Section 115 license. Compulsory

License for Making and Distributing Phonorecords,

Including Digital Phonorecord Deliveries, 73 Fed.

Reg. 40,802, 40,809 (July 16, 2008).

The court of appeals’ decision in this case was

issued less than a month after the Copyright Office’s

proposed rulemaking. The decision caused the

comments on its proposed rulemaking because that

Office concluded that the ruling below “may be

pertinent to the issues raised in this rulemaking.”

Compulsory License for Making and Distributing

Phonorecords, Including Digital Phonorecord

Deliveries, 73 Fed. Reg. 47,113, 47,114 (Aug. 13,

2008). The Copyright Office subsequently held a

public hearing oa the proposed regulations, where the

decision in this case is in tension with the Copyright

Office’s rationale for the proposed rule. Moreover,

major Internet companies outside of the music

industry, and others, invoked the decision below in

their comments on the proposed music industry

rulemaking to urge the Copyright Office to reverse its

long-considered proposed regulations.

2. The ruling below also could have an adverse

impact on a= groundbreaking music industry

settlement, achieved after years of costly litigation

and negotiation. The Copyright Royalty Board (CRB),

which is tasked under Section 115 with setting the

“reasonable rates and terms” for the Section 115

compulsory license, is currently poised to adopt the

settlement, which addresses the appropriate royalty

rates and terms for interactive music streaming.

Nonetheless, even with the consent of all the

relevant parties and the concurrence of the CRB, the

court of appeals’ decision could interfere with the

conclusive nature of the settlement. Wireless carriers

and others have challenged the settlement based on

the decision below, and even if such royalty rates are

finally adopted by the CRB, legal uncertainty could

embolden some to disregard them as ineffective.

C. Significant current and future copyright

litigation may be directly affected by the Second

Circuit’s erroneous decision in this case, particularly

because the decision now governs in a jurisdiction

that includes a major commercial center for

copyrighted works. For example, a significant class

action suit is pending in district court in the Second

Circuit and alleges that YouTube LLC and its parent

company Google Inc. have engaged in copyright

infringement through their operation of a service

that streams unlicensed videos that incorporate

copyrighted songs. Moreover, because ef the liberal

venue provisions applicable to copyright actions, 28

U.S.C. § 1400(a), potenvial defendants would be able

to engage in forum shopping, and select district

courts in the Second Circuit as the venue in which to

bring actions for declaratory judgment that their

buffer copies do not constitute fixed works that

trigger copyright liability. The Second Circuit’s

decision could thus unfairly immunize interactive

streamers from having to pay copyright holders the

royalties that are required under the correctly

interpreted Copyright Act.

Il.

The decision below is based on an incorrect

reading of the statute. Under the correct statutory

definition of “fixed,” it is the work—not “bits” of data

that may comprise the work—that is the key to

determining whether the work is fixed. A work that

remains perceptible is considered to be fixed even if

some of its bits have already passed through a buffer.

Indeed, the overwhelming weight of authority agrees

with the Copyright Office’s interpretation of “fixed,”

most recently reflected in its notice of proposed

rulemaking, which adheres to the functional

definition of Section 101 of the Copyright Act in

considering the ability to perceive, reproduce, or

communicate a copyrighted work.

Just as importantly, the Second Circuit has

created an uncertainty that will undermine existing

music licensing practices and_ hinder private

resolution of disputes as digital music distribution

technologies continue to evolve. The court of appeals

adopted a novel reading of the statute and failed to

limit its open-ended interpretation. This Court's

immediate review is necessary to establish an

acceptable degree of predictability for the digital

music industry.

ARGUMENT

The court of appeals’ erroneous interpretation of

the Copyright Act in this case is creating uncertainty

in the nascent field of interactive streaming of music

to consumers over the Internet. Amicus curiae NMPA

urges the Court to grant review of the three questions

presented in the petition for a writ of certiorart,

because each presents an issue that will have a

significant and potentially irreparable impact on the

future of the music industry. This amicus brief

focuses, however, on an aspect of the second question

presented which has particular importance for digital

music streaming and the future of the digital music

industry, t.e., the repercussions of leaving unreviewed

the Second Circuit’s legal determination that the

“buffer copies” created by respondents are not works

that are “fixed,” and are therefore immune from

hability under the Copyright Act.

I. THE RULING BELOW THAT A “BUFFER Copy” Is

IMMUNE FROM COPYRIGHT LIABILITY IN THE

CABLE TELEVISION INDUSTRY HAS CREATED A

STATE OF UNCERTAINTY IN THE MUSIC

INDUSTRY

Digital music businesses must have access to a

reliable, industry-wide copyright licensing framework

that will allow them to grow their businesses. It is

equally vital for music publishers and the songwriters

they represent to have a means to be paid for the use

by digital services of publishers’ and songwriters’

copyrighted musical works. The uncertainty produced

by the decision below on whether “buffer copies”

are immune from copyright lability threatens to

undermine any licensing framework for interactive

streaming, and that could have an irreversible

negative impact on the legitimate music marketplace.

Immediate review of the decision below is

necessary to eliminate the uncertainty it has caused

in pending proceedings to determine the application

of Section 115 of the Copyright Act, which is the

compulsory licensing mechanism for those making

and distributing copyrighted nondramatic musical

works in both physical and digital form. 17 U.S.C.

§ 115. Major providers of Internet services, and

others, are attempting to rely on the decision below to

urge the Copyright Office to reverse a long-considered

proposed regulation and to undermine the settled

industry understandings of the role of Section 115

compulsory licensing in the digital music industry.

A. Interactive Streaming Of Music Relies

On “Buffer Copies” And Thus Could

Be Adversely Impacted By The Second

Circuit’s Decision Involving Cable

Television

Interactive streaming is an increasingly important

means for connecting consumers to music through

the Internet. The opportunity to distribute music to

individual listeners has expanded enormously with

the technological innovations of the past decade,

particularly with the increase of access to high-speed

Internet in the home. The music industry has

responded by offering a variety of methods by which

individuals can obtain and listen to music through

their computers and other digital devices.

Currently, the dominant model of digital delivery

of music is to download a permanent digital file, for

use on a computer or portable device (such as the

iPod). In 2006, about 81 percent of the approximately

$1.1 billion in online music services came from

download services.

But there are other competing industry models

for offering music to individual listeners, one of which

is interactive streaming, which is usually offered on a

subscriber basis. Interactive streaming of musical

works based upon subscriber request is a substitute

for, and displaces, the purchase of music, whether in

physical formats such as compact discs, or as digital

downloads. An interactive music streaming service

earns income by charging a monthly fee for access to

its collection of music and/or by selling advertising

space to third parties, which is displayed while a song

is being heard.

From the perspective of a music listener,

interactive streaming of music can be analogized to a

traditional jukebox. Listeners use their computer to

access online music services and select particular

songs (or artists or genres of music) that they would

like to hear, and their selections are immediately

transmitted over the Internet and played for them

through the use of streaming technology.

In order to allow the user to listen to the song,

the entire musical work is transmitted by the

interactive music service to the user’s computer,

where it is reproduced in a “buffer copy” composed

of packets of data deposited in temporary computer

data storage, such as RAM. The computer uses the

buffer copy to play the song for the listener. Unlike

downloading, streaming technology allows the song to

begin playing before all data comprising the song

have been received by the user’s computer. See

Compulsory License for Making and Distributing

Phonorecords, Including Digital Phonorecord

Deliveries, 73 Fed. Reg. 40,802, 40,808 (July 16,

2008); United States Copyright Office, Library of

Congress, DMCA Section 104 Report: A Report of the

Millennium Copyright Act 108 (Aug. 2001).

Leading American companies that operate

interactive music streaming’ services’ include

RealNetworks, Inc., MediaNet Digital and Napster,

Inc. (recently acquired by Best Buy). Interactive

music streaming and other types of digital music

services are expected to grow dramatically in the

coming years.”

The launch and development of interactive

streaming services has been facilitated by industry

understandings that the buffer copies made by such

services in the streaming process are “digital

phonorecord deliveries” subject to compulsory

licensing under Section 115 of the Copyright Act. The

lack of confirmation of such industry practice through

formal rulemaking by the Copyright Office, however,

has been an impediment to the rapid growth of such

services, owing to lingering doubts concerning the

applicability of the Section 115 license.

Under the Copyright Act, “phonorecords” are

reproductions in the form of sound recordings (the Act

uses the analogous term “copy” to refer to other types

* See, e.g., Jefferson Graham, Music service Rhapsody’s not

afraid to take on iPod, USA Today (Aug. 5, 2008), available

at http://www.usatoday.com/tech/products/2008-08-05-rhapsody-

music-online_N.htm (analyst “forecasts $600 million in U.S.

subscription sales by 2012,” of which interactive streaming is a

subset “up from $235 million in 2007”); Brad Cook, TMO

Reports—Analyst Sees Subscription-Based Music Services

Eclipsing Pay-Per-Download, Mac Observer (May 17, 2005),

avatlabie at http://www.macobserver.com/article/2005/05/17. i2.

shtml.

of reproductions). Section 115 provides that once

phonorecords of a nondramatic musical work have

been distributed to the public under the authority

of the copyright owner, any other person may obtain

a compulsory license to make and _ distribute

phonorecords of the work at a statutorily prescribed

royalty rate so long as that person’s primary purpose

is to distribute them to the public for private use. 17

U.S.C. § 115(a). As amended by Congress in the

Digital Performance Right in Sound Recordings Act

of 1995, Pub. L. No. 104-39, § 4, 109 Stat. 336,

344-345, the Section 115 compulsory license includes

the right to make and distribute not just physical

phonorecord products such as compact discs, but also

phonorecords “by means of a digital transmission

which constitutes a digital phonorecord delivery.” 17

U.S.C. § 115(c3)(A).

“Phonorecords” are defined as “material objects

in which sounds” are “fixed” by any method “now

known or later developed,” and “from which the

sounds can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a

machine or device.” 17 U.S.C. § 101. In similar

fashion, the Copyright Act defines “copies” as

“material objects, other than phonorecords, in which

a work is fixed by any method now known or later

developed, and from which the work can be perceived,

reproduced, or otherwise communicated, either

directly or with the aid of a machine or device.” Jbid.

The Copyright Act further provides that a work is

“fixed” in a tangible medium of expression when “its

embodiment in a copy or phonorecord *** is

sufficiently permanent or stable to permit it to be

perceived, reproduced, or otherwise communicated for

a period of more than transitory duration.” Jbid.

The Second Circuit in the decision below applied

a novel and flawed interpretation of the definition

of “fixed” to hold that respondents’ creation of

buffer copies of petitioners’ copyrighted television

programming did not’ constitute reproduction

of copyrighted works “in copies” and was thus

immune from liability under the Copyright Act. Pet.

App. 10a-lla. The court appears to have ruled that

data held in a computer buffer for 1.2 seconds are too

“transitory” in “duration” to create such “copies.” Pet.

App. 17a-18a. That apparent ruling has been and will

inevitably continue to be invoked to cast doubt on the

status of buffer copies used to deliver music

“phonorecords” for purposes of excluding them from

the Section 115 compulsory license altogether.

The century-old compulsory copyright license

embodied in Section 115 that requires payment for

use of copyrighted nondramatic musical works

represents a careful and unique balancing of interests

among musical work owners, music distributors and

music consumers that Congress has entrusted the

displacement of traditional music sales by interactive

music streaming services, a reading of the Copyright

Act that would have the potential effect of excluding

interactive music streaming from the scope of Section

115 because a streamed buffer copy used to play a

musical work is somehow not considered “fixed” poses

a substantial threat to mechanical licensing

revenues, l.e., revenues derived from licenses to make

and distribute phonorecords in physical and digital

formats, which are an essential source of income for

music creators.”

B. The Decision Below Has Disrupted

Rulemaking By The Copyright Office

Regarding Copyright Licenses’ For

Interactive Music Streaming That Was

Coming To A Conclusion After Eight

Years Of Study And Deliberation

The question of how interactive music streaming

should be treated for purpose of the compulsory

license embodied in Section 115 of the Copyright Act

has been studied by the Copyright Office for eight

years. The absence of an express rule confirming that

licenses are available under Section 115 for the use of

musical works by digital services offering interactive

streams and the attendant uncertainty about that

licensing availability has been detrimental to the

* The preservation of mechanical licensing revenues was a

primary concern of Congress in amending Section 115 to extend

to digital transmissions of musical works. See, e.g., S. Rep. No.

104-128, at 17 (1995) (in amending Section 115 to include DPDs,

Congress wished to avoid “even a perception of uncertainty,” and

thus sought to “clarify[ ] and confirm|[ ]” the mechanical rights of

music copyright owners in the digital environment); H.R. Rep.

No. 104-274, at 28 (1995) (purpose of DPD amendments was to

“confirm” mechanical rights in context of digital transmissions).

music industry. An industry consensus has emerged,

however, and it is supported by the Copyright Office,

which has a long-standing interpretation of “fixed” on

which it has relied to propose critical regulations for

the music industry. The Second Circuit’s opinion, if

unreviewed, could unsettle all of that.

1. The Copyright Office first began considering

the issue of what types of digital! transmissions

of prerecorded music are “digital phonorecord

deliveries” subject to a compulsory license under

Section 115 of the Copyright Act in 2000. See 73 Fed.

Reg. at 40,803 (discussing history of proceedings).

The Copyright Office issued two notices of inquiry in

2001 to collect evidence regarding technology and

industry practices. See id. at 40,805. Following a

series of significant industry developments, the

June 2007 to refresh the record in anticipation

of issuing a rule concerning the scope of the Section

115 compulsory license in relation to digital music

services. Ibid. More than 20 organizations and

companies representing copyright owners, songwriters,

record companies, online music services and others

participated in the 2007 roundtable. Ibid.

Finally, in July 2008, the Copyright Office issued

a Notice of Proposed Rulemaking. The Copyright

Office explained that “the continued legal uncertainty

associated with operating music services in the

current marketplace * ** highlight{s] the need to

resolve the outstanding questions concerning which

reproductions of phonorecords made during the

course of a stream fall within the scope of the

statutory license and which, if any, do not.” /d. at

40,806. The Copyright Office noted that such

uncertainty “contributed to the current crisis in the

music industry, due to the difficulty of obtaining

licenses for all the rights required in order to offer

various online music services in an environment in

which it is not always apparent which rights must be

cleared and how one can obtain them.” Jbid. The

Office concluded, after an analysis of the statutory

language, case law, and its own prior interpretations,

that “buffer copies meet the statutory definition of

phonorecords” and thus fit within the scope of the

Section 115 license. Id. at 40,809.

The intervening court of appeals’ decision in this

case has substantially undermined that progress on

the Copyright Office’s resolution of those issues. The

circuits that treat temporary computer reproductions

as sufficiently fixed to constitute copies under the

104 Report, supra, at 107-129 (collecting judicial

authorities)). But after issuance of the decision in

this case, the Copyright Office extended the time

for filing comments because it concluded that the

ruling of the court below “may be pertinent to the

issues raised in this rulemaking.” Compulsory License

for Making and Distributing Phonorecords, Including

Digital Phonorecord Deliveries, 73 Fed. Reg. 47,113,

47,114 (Aug. 128, 2008).

The Copyright Office then held a public hearing

on its proposed regulations, where the Register of

Copyrights noted that the Second Circuit decision

was in tension with the Copyright Office’s proposed

approach. Transcript of Copyright Hearing at 5 (Sept.

19, 2008), available at http://www.copyright.gov/docs/

section 115/2008/rm_2000-7_hearing_transcript_9.19.08.

pdf; see also id. at 2 (decision “put into question some

of the premises on which our proposed rule was

based”). Accordingly, despite its determination that

regulatory clarification about the applicability of the

compulsory license to digital music streaming would

benefit the industry, the Copyright Office has yet to

issue a final rule.

In addition, opponents of the Copyright

Office’s proposed regulation—including Verizon

Communications, CTIA-The Wireless Association, the

National Association of Broadcasters, the Ad Hoc

Coalition of Streamed Content Providers (which is, in

reality, Google, Inc., and its subsidiary YouTube

LLC)—relied heavily on the decision below in written

comments to oppose the _ proposed _ regulation’s

treatment of interactive music. streaming for

compulsory licensing.* By contrast, like the Copyright

Office, all of the key stakeholders within the music

industry—music publishers and songwriters, record

* These comments are available on the Copyright Office’s

website at http://www.copyright.gov/ducs/section115/comments-3

and http://www.copyright.gov/docs/section115/comments-3/reply.

labels and digital music companies—support the

treatment of interactive streams as “digital

phonorecord deliveries” within the Section 115

license.

2. The ruling below also may have an adverse

impact on a-_- groundbreaking music industry

settlement, achieved after years of costly litigation

and negotiation.

The Copyright Royalty Board (CRB), which

consists of Copyright Royalty Judges appointed by

the Librarian of Congress, is charged under Section

115 with setting the “reasonable rates and terms” for

the Section 115 compulsory license, including for

digital uses. 17 U.S.C. § 115(c)3)(D). The CRB

commenced a proceeding in January 2006 to

determine such rates and terms. See Adjustment or

Determination of Compulsory License Rates for

Making and Distributing Phonorecords, 71 Fed. Reg.

1454 (Jan. 6, 2006). Amicus NMPA is a participant in

those proceedings. After all of the participants had

submitted written statements and oral testimony, and

following a lengthy and intensive’ process’ of

negotiation, NMPA and the other parties informed

the CRB that they had reached a groundbreaking

settlement regarding the appropriate royalty rates

and terms for interactive music streaming. See

Mechanical and Digital Phonorecord Delivery Rate

Adjustment Proceeding, 73 Fed. Reg. 57,033 (Oct. 1,

2008) (proposed to be codified at 37 C.F.R. pt. 385).

This settlement represents the culmination of

a long series of industry negotiations and

understandings to clarify and resolve concerns

surrounding the treatment of interactive streaming

under the Section 115 compulsory license, as well as

the intermediate copies required to facilitate these

types of digital transmissions. Notably, the royalty

rates and terms to which the parties agreed and

which are embodied in the settlement are consistent

with and would be supported by the Copyright

Office’s proposed regulations.

The Copyright Act authorizes the CRB to adopt

such negotiated rates and terms on an industry-wide

basis so long as the CRB concludes, based on the

record before it and after a period of notice and

comment, that the agreement provides . reasonable

basis for setting statutory terms and rates. 17 U.S.C.

§ 801(b) 7 AIG) & (i). After the conclusion of the

notice and comment period, the CRB is expected to

issue a final regulation containing the royalty rates

and terms for interactive music streaming.

Nonetheless, even with the consent of all the

relevant parties and the concurrence of the CRB, the

Second Circuit’s decision could interfere with the

conclusive nature of the settlement. Wireless carriers

and broadcasters who were not parties to the CRB

proceeding have challenged the settlement based on

the decision below. See Comments of the CTIA-The

Wireless Association and The National Association of

Royaity Bd. Oct. 31, 2008). Further, even if such rates

are finally adopted by the CRB, the legal uncertainty

could embolden some to disregard them as ineffective.

By contrast, reversal of the Second Circuit’s

erroneous interpretation of the Copyright Act would

remove any residual doubts about the broad

availability of compulsory licenses for interactive

streaming of musical works under Section 115.

C. The Second Circuit’s Decision May

Affect Cepyright Infringement Litigation

Pending In The Second Circuit, And

Will Lead To Forum Shopping

Current and future copyright litigation may also

be directly affected by the Second Circuit’s decision,

particularly because the decision now governs in a

jurisdiction that includes a major commercial center

for copyrighted works.

Amicus NMPA is a plaintiff representing its

music publisher members in a pending class action

suit alleging that YouTube LLC and its parent Google

Inc. have engaged in massive copyright infringement

through their operation of a service that streams

unlicensed videos that incorporate copyrighted songs.

See Football Ass’n Premier League Limited ov.

YouTube, Inc., No. 07-03582 (S.D.N.Y. filed May 4,

2007), available at http://‘www.youtubeclassaction.com/

courtdox/2VU07-11-O7YTAmdCplt.pdf. This enormous

class action, in which copyright holders from the

music, sports, news, and entertainment industries

have come _ together to prohibit unauthorized

reproduction and performance of their copyrighted

works through YouTube, could potentially be affected

by the Second Circuit’s erroneous holding in ways

that would never be undone.

Further, because of the liberal venue provisions

applicable to copyright infringement actions, 28

U.S.C. § 1400(a), potential defendants will be able to

forum shop and select district courts in the Second

Circuit to bring actions for declaratory judgment that

their RAM buffer copies do not constitute fixed works

that trigger copyright liability, in the hope that they

will benefit from the uncertain boundaries of the new

requirements for a work to be considered fixed. Aside

from the enormous toll it would take on music

publishers and songwriters to litigate such actions,

the Second Circuit’s decision could unfairly immunize

interactive streamers from having to pay copyright

holders the royalties that are required under a correct

interpretation of Section 115 compulsory license.

If. THe Court OF APPEALS REACHED A WRONG

CONCLUSION AND Dip So IN A MANNER THAT

Casts A SHADOW OF UNCERTAINTY OVER

NECESSARY PRIVATE NEGOTIATIONS IN THE

Music INDUSTRY

The decision below is based on an incorrect

reading of the statute. And that erroneous

interpretation creates uncertainty that will

undermine existing licensing practices and hinder

private resolution of current and anticipated disputes

as digital distribution technologies continue to evolve.

This Court’s immediate review is necessary to

establish an acceptable degree of predictability for

the legitimate digital music industry, which is

already severely tested by the challenges of online

piracy.

RAM buffer copies created by interactive

streaming services in order to play back musical

works for users are “phonorecords” as defined by

Section 101 of the Copyright Act because the buffer

copies are material objects in which sounds are

“fixed” and “from which the sounds can be perceived,

reproduced, or otherwise communicated, either with

the aid of a machine or device.” 17 U.S.C. § 101.

Such buffer copies manifestly meet the definition

of “fixed” in Section 101, because the musical work

exists in a sufficiently stable form to be perceived,

reproduced, and communicated in its entirety. This

interpretation is consistent with the overwhelming

weight of authority, which agrees with the Copyright

Office’s interpretation of “fixed,” and which adheres

to the functional definition of Section 101 in

considering the ability to perceive, reproduce or

communicate a copyrighted work. See, e.g., MAI Sys.

Corp. v. Peak Computer, Inc., 991 F.2d 511, 519 (9th

Cir. 1993); Stenograph L.L.C. v. Bossard Assocs., Inc.,

144 F.3d 96, 100 (D.C. Cir. 1998); Marobie-FL, Inc. v.

National Ass’n of Fire Equip. Distribs., 983 F. Supp.

1167, 1177-1178 (N.D. Ill. 1997); DMCA Section 104

Report, supra, at 118-122 (collecting additional

judicial authorities).

The court of appeals below rejected that

consistent interpretation of other courts and the

longstanding interpretation of the Copyright Office,

on which the Copyright Office has relied most

recently to propose critical regulations for the music

industry on compulsory licensing in the digital music

streaming context. Further, in adopting its novel

reading of the Copyright Act, the court of appeals

failed to establish any principles to limit its

unsettling and open-ended ruling.

In determining that data held in a computer

buffer for 1.2 seconds cannot give rise to an

actionable “copy,” the court of appeals misconstrued

the statutory definition of “fixed” on which it relied.

Section 101 provides that “[a] work is ‘fixed’ in a

tangible medium of expression when its embodiment

in a copy or phonorecord *** is sufficiently

permanent or stable to permit it to be perceived,

reproduced or otherwise communicated for a period of

more than transitory duration.” 17 U.S.C. § 101.

Under the statutory definition of “fixed,” it is the

work—not any “bits” of data that may comprise the

work—that is the key to determining whether the

work is fixed. A work that remains perceptible is

considered to be “fixed” even if some of its “bits” have

already passed through a buffer.

The Second Circuit’s contrary interpretation has

left the music industry in an untenable position. A

lack of certainty concerning the ready availability of

licenses for the reproductions required for the process

of interactive streaming will inhibit the growth of

legitimate digital music services and threaten the

livelihood of music creators. The court of appeals’

suggestion that its ruling is somehow fact specific,

Pet. App. 17a, provides no useful guidance and only

highhghts the uncertainty engendered by the decision

that will surely impede the private resolution of

licensing issues in the digital music industry.

CONCLUSION

For the reasons set forth above and in the

petition for a writ of certiorari, the petition should be

granted.

Respectfully submitted,

BETH S. BRINKMANN

Counsel of Record

JAY A. ROSENTHAL SETH M. GALANTER

Senior Vice President MORRISON & FOERSTER LLP

& General Counsel 2000 Pennsylvania Ave., N.W.

NATIONAL MUSIC Suite 5500

PUBLISHERS’ ASSOCIATION Washington, D.C. 20006

101 Constitution Ave., N.W. (202) 887-1544

Suite 705 East

. PAUL GOLDSTEIN

Washington, D.C. 20001 ‘ ae

(202) 742-4375 MORRISON & FOERSTER LLP

425 Market Street

San Francisco, CA 94104

(415) 268-7000

JACQUELINE C. CHARLESWORTH

MORRISON & FOERSTER LLP

1290 Avenue of the Americas

New York, NY 10104

(212) 468-8000

November 5, 2008

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.