Advanced Copyright Issues on the Internet - Fenwick & West LLP

If so, whether streaming involves incidental DPDs or general DPDs;Whether limited downloads should be classified as incidental DPDs or general DPDs;Whether the interim copies generated in the course of streaming or limited downloads constitutea fair use or instead require a mechanical license;Whether the interim copies produced in the course of streaming and limited downloads aresubject to the compulsory mechanical license of Section 115; andWhat royalties should be paid for the copies of works generated in the course of streaming andlimited downloads.The foregoing issues have come to the fore in recent times with the rise of online musicdistribution systems, both “free” services such as Napster, Music City, Grokster, and Kazaa, aswell as the various nascent subscription online music services such as Pressplay, MusicNet,Listen.com, and MP3.com. The issues have been fought in a variety of forums, as described inthe next subsections.Streaming(a) Applicability of the Section 115 Compulsory License toOnly one case to date has addressed the issue of whether the compulsory mechanicallicense of Section 115 applies to streaming. In Rodgers & Hammerstein Org’n v. UMGRecordings, Inc., 2258 a number of songwriters and music publishers brought an action forcopyright infringement against the defendants, UMG Recordings, Inc. and The Farm ClubOnline, Inc., for copyright infringement. The Farm Club was a subsidiary of UMG that streamedrecordings over the Internet. The plaintiffs alleged that such streaming was being conductedwithout proper licenses under the musical composition copyrights held by the plaintiffs. Thedefendants claimed that, if a mechanical license were required at all for streaming, they wereentitled to the compulsory license under Section 115. 2259The court ruled that the Section 115 compulsory mechanical license did not permit thedefendants to stream the copyrighted works at issue over the Internet. 2260 The court pointed toSection 115(a)(1), which provides that a “person may obtain a compulsory license only if his orher primary purpose in making phonorecords is to distribute them to the public for private use.”The court noted that the defendants did not fall within this language because they did not sellcopies of records to their users, but rather merely placed copies of recordings on their servers to2258 60 U.S.P.Q.2d 1354 (S.D.N.Y. 2001).2259 Id. at 1355-57.2260 The court also held that an existing license from the Harry Fox Agency (HFA) held by the defendants did notcover the streaming because that license was limited by its terms to a specific phonorecord number, and theHFA license did not constitute a compulsory license under Section 115. Id. at 1357-59.- 492 -