Advanced Copyright Issues on the Internet - Fenwick & West LLP

to stream copyrighted music over the Internet. The new rates abandoned the existingpercentage-of-revenue scheme in favor of an annual flat per-station rate structure up to aspecified cap, coupled with a per-performance rate for services that exceed the cap, where“performance” is defined as the streaming of one song to one listener. The annual per-channeland per-station rate for non-commercial webcasters not exceeding 159,140 aggregate tuninghours per month and for Commercial Webcasters was set at $500 per year. The per-performancerates for transmissions in excess of that limit by non-commercial webcasters, and for anytransmissions by Commercial Webcasters, retroactive to Jan. 1, 2006, were set at:$0.0008 for 2006$0.0011 for 2007$0.0014 for 2008$0.0018 for 2009$0.0019 for 2010These rates were inclusive of both the Section 114 license fees and the royalty payable underSection 112 for ephemeral recordings used solely to facilitate transmissions for which it paidroyalties. 2225The CRB’s decision caused great controversy and protest, particularly among smallwebcasters, who claimed the rates were so high that they would put the webcasters out ofbusiness. Several bills were introduced in Congress and negotiations with SoundExchange tookplace to reduce the rates for small webcasters. On May 22, 2007 SoundExchange announcedthat it would extend for another three years (through 2010) the previous, lower rates under theSWSA for small webcasters (i.e., 10% of gross revenue up to $250,000 and 12% of revenueexceeding that amount). 2226 On Aug. 21, 2007, SoundExchange set out certain conditions thathad to be met by a small webcaster to qualify for the favorable rates – the webcaster had to earnless than $1.2 million in total annual revenue and could not exceed a total of 5 million aggregatetuning hours each month. Should the threshold be exceeded, the webcaster would be required topay the CRB’s published rates. SoundExchange announced that the agreement would apply onlyto performance royalties collected on behalf of the 20,000 recording artists and 3,500 recordlabels represented by the collective – royalties due to other artists and labels would be payableunder the CRB’s rates. Interested webcasters had until Sept. 14, 2007 to accept the offer. 22272225 72 Fed. Reg. 24084, 24111 (May 1, 2007). The CRB’s decision was initially set forth in a report published onits web site on Mar. 2, 2007. Representatives of the Intercollegiate Broadcasting System Inc., DiMA, NationalPublic Radio, the Radio Broadcasters, Royalty Logic Inc., WHRB (FM), SoundExchange, and many smallcommercial webcasters filed a series of motions seeking a rehearing on the royalty scheme. On April 16, 2007,the CRB rejected the motions. On July 11, 2007, the U.S. Court of Appeals for the D.C. Circuit denied apetition filed by webcasters seeking to stay the CRB’s determination. “SoundExchange Offers WebcastersReprieve After D.C. Court Denies Petition to Stay,” BNA’s Patent, Trademark & <strong>Copyright</strong> Journal (July 20,2007) at 345.2226 Id.2227 “SoundExchange Agrees to Separate Royalty Deals Between Large and Small Webcasters,” BNA’s Patent,Trademark & <strong>Copyright</strong> Journal (Aug. 31, 2007) at 530.- 484 -