Large ISP & Silicon Valley CEOs Were Too Afraid To Publicly Testify On Net Neutrality

Spotify Finally Realizes That Streaming Isn't Reproduction Or Distribution

from the copyright-conundrums dept

Wed, Sep 6th 2017 9:33am — Mike Masnick

Hold on tight: we're going to get down into the weeds a bit on a copyright issue. In early 2016, we wrote about the "insanity of music licensing" as it related to streaming music, and Spotify in particular. This was in response to a series of class action lawsuits filed against Spotify by songwriters, claiming a failure to properly license so-called "mechanical rights." As I noted at the time, I talked the case over with a large number of copyright lawyers -- and many were left scratching their heads regarding what the lawsuit was actually about. Spotify, of course, is famous because it's a licensed music streaming service. That's it's whole thing. But, as we discussed, part of the problem is that there are a ridiculous number of different possible licenses out there -- many of which were designed for different types of technologies, and, when it comes to internet services, some people seem to assume that the services need to license roughly "all of them."

So, it was always known that a company like Spotify needed to secure negotiated license to use the sound recordings (that's from whoever holds the copyright on the actual recording -- not the composition). And they had to get public performance licenses from Performance Rights Organizations (PROs). But the question in these lawsuits was about an entirely different license -- the "mechanical" license. As you may have guessed from the name, a "mechanical" license comes from way back in the day, when the companies manufacturing records needed to get a license from the composer for the sake of reproducing and distributing the songs which those songwriters wrote.

And here's where we do some copyright 101. Section 106 of the Copyright Act includes a definitive list of six rights that copyright may grant the holder an exclusive right to (absent something such as fair use). These then are the specific exclusive rights under copyright law:

to reproduce the copyrighted work in copies or phonorecords;
to prepare derivative works based upon the copyrighted work;
to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

So, when Spotify is licensing sound recordings from copyright holders, it's licensing #6. And when it's getting PRO licenses, it's covering #4. So, here's where things get trickier. The mechanical license -- usually granted by the composers to whoever is manufacturing, say, a record or a CD, and done via someone like the Harry Fox Agency (HFA), covers the rights for #1 and #3 -- to "reproduce" and to "distribute." That makes sense in an age of vinyl records, tapes or CDs.

As we noted back when these lawsuits first came out, some of the copyright lawyers we spoke to couldn't figure out why Spotify would even need a mechanical license in the first place. After all, it's just "streaming" music. It's not "reproducing" the work, nor is it "distributing" the work. Or is it? That question gets pretty murky, pretty fast. You can argue that the process of streaming involves bits being "reproduced" and "distributed" -- but a counter to that is that that's happening in such an ephemeral way, in which the "recipient" ends up with nothing, that it's not at all the same thing. Indeed, this issue came up in an important case a few years ago, concerning the "transitory copies" that were made by Cablevision with its remote DVR. In that case, it was determined by the appeals court that transitory copies are not "copies" under #1 above. That is, they are not "reproductions." Here's from the ruling:

"Copies," as defined in the Copyright Act, "are material objects ... in which a work is fixed by any method ... and from which the work can be ... reproduced." ...The Act also provides that a work is "`fixed' in a tangible medium of expression when its embodiment ... is sufficiently permanent or stable to permit it to be ... reproduced ... for a period of more than transitory duration."... We believe that this language plainly imposes two distinct but related requirements: the work must be embodied in a medium, i.e., placed in a medium such that it can be perceived, reproduced, etc., from that medium (the "embodiment requirement"), and it must remain thus embodied "for a period of more than transitory duration" (the "duration requirement").... Unless both requirements are met, the work is not "fixed" in the buffer, and, as a result, the buffer data is not a "copy" of the original work whose data is buffered.

That said, it did appear that Spotify had made (via HFA) at least a half-hearted effort to secure mechanical licenses anyway, often using the "Notice of Intent" process, which allows for compulsory mechanical licenses if certain rules are followed. Of course, the half-hearted nature of this appeared to have some significant gaps (gaps that HFA later started scrambling to fill).

Either way, earlier this year, we wrote about Spotify settling the big class action lawsuits it was facing, and agreeing to pay out a bunch of money. As we pointed out when that happened, it appeared that no one seemed to really want to fight out the issue in court of whether or not Spotify even needed to pay mechanicals, noting that such a fight would, undoubtedly, get messy.

Well, things are getting messy.

After that settlement, not all composers were happy. Some of them, including Bob Gaudio, from the Four Seasons, sued Spotify over the same issue -- and argued that the settlement of the previous lawsuits was an "empty gesture" given just how massive the copyright infringement was on Spotify. In other words, these new cases seemed a lot less willing to settle. And that means, the issue we never thought was going to get tested in court... is looking like it's going to get tested in court. As first covered by Eriq Gardner at the Hollywood Reporter, Spotify has now directly argued that its service does not reproduce or distribute the songs it streams. From the filing:\

Plaintiffs allege that Spotify “reproduce[s]” and “distribute[s]” Plaintiffs’ works..., thereby facilely checking the boxes to plead an infringement of the reproduction and distribution rights. But Plaintiffs leave Spotify guessing as to what activity Plaintiffs actually believe entails “reproduction” or “distribution.” The only activity of Spotify’s that Plaintiffs identify as infringing is its “streaming” of sound recordings embodying Plaintiffs’ copyrighted musical compositions.... But “streaming” – by its very definition – cannot infringe upon either the reproduction right under 17 U.S.C. § 106(1) or the distribution right under 17 U.S.C. § 106(3). As a consequence, Plaintiffs’ allegations simply do not inform Spotify how Spotify is alleged to have violated the law.

As Spotify's lawyers admit (as we described above), it's clear that streaming implicates #4 and #6 of copyright's exclusive rights -- and it has licenses to cover both of those areas -- but not #1 and #3:

In short, the act of streaming does not reproduce copies of sound recordings or musical compositions, and equally does not distribute copies of either sound recordings or compositions. This is not to say that streaming has no copyright consequence. Streaming does result in a public performance of both sound recordings and musical compositions. See 17 U.S.C. § 106(4) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of musical works) and § 106(6) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of sound recordings).... But Plaintiffs do not allege that Spotify has violated their public performance rights, and such an allegation would be futile. Spotify has paid hundreds of millions of dollars to license the public performances of the musical compositions it streams, including those allegedly owned by Plaintiffs, through negotiated licenses administered via ASCAP, BMI, SESAC, and GMR – a group of licensing agents known collectively as “performance rights organizations” or “PROs.” In sum, Plaintiffs’ Complaint, which rests upon Spotify’s “streaming,” leaves Spotify guessing about what it has done that, in Plaintiffs’ view, constitutes a violation of Plaintiffs’ reproduction and distribution rights.

If Plaintiffs are indeed alleging an instance of copying (as opposed to streaming) that allegedly violates Plaintiffs’ reproduction and/or distribution rights, they can amend their Complaint to say so. Depending on what that allegation is, Spotify will advance a number of defenses. If Plaintiffs’ real complaint is with, for example, a particular instance of alleged temporary copying, then, among other things, Spotify may assert a defense of fair use. Spotify may also assert defenses of compulsory license, implied license, negotiated license with copyright owner or co-owner, statute of limitations, and others, depending on the nature of the specific allegations. But Spotify should not be forced to guess and aim its defenses at an unknown claim. Spotify believes that every element of its service is either fully licensed or otherwise permitted by law, and Plaintiffs’ Complaint offers no notice as to what Spotify conduct it thinks violates its copyrights or what conduct would require additional licenses.

Spotify also argues that the point of this lawsuit is really to try to convince composers to opt-out of the settlement from earlier this year, and to join in this action, which may explain why Spotify is taking an aggressive stance here. But this case, should it move forward, could become quite important. Because if a court somehow goes against earlier precedents and argues that streaming actually impacts four out of the six different exclusive rights granted under copyright law, that would be quite amazing.

As we've noted many times in the past, one of the problems with copyright law is that each time a new technology comes along that threatens "the old way" of doing things, rather than rethinking copyright itself, Congress tends to just duct tape on a new right that requires licensing. And that works fine until the next innovation comes along. Now, in the internet age, where things look a little like their analog predecessors, but also with other features, it's no surprise that some copyright holders are trying to argue that ALL THE LICENSES must apply. But if you actually look closely at what Spotify does, what copyright law covers in terms of those six exclusive rights, and what previous cases have held, it does seem likely that streaming should really only implicate two of the exclusive rights.

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Filed Under: bob gaudio, copyright, distribution, mechanical rights, music licensing, reproduction, streaming
Companies: spotify

30 Comments

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Ninja (profile), 6 Sep 2017 @ 7:50am

And while they keep bickering over the amount of money they *want* to get, not the amount that is fair, people blissfully pirate the songs and nobody gets a penny. Gotta love how IP freaks leave tons of money on the table because of slice of the slice they are already getting.
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TheResidentSkeptic (profile), 6 Sep 2017 @ 8:07am

Terminology doesn't fit...
Seems that the "mechanical" aspect is a major issue, along with understanding "fixed in a TANGIBLE medium". The old school "hardware" based rules (records with phycial record players, cassettes with tape players) just don't fit the "software" model of today. An "Ephemeral" copy (i.e. - streamed) is a one-shot for the listener - it is not "fixed" into a physical good which can be replayed over and over as many times as the listener so desires.

Yes, the "distribution" part is confusing - as the old school which meant pressing vinyl, packaging, trucking, placing on a shelf, purchasing and taking home for use is similar to an electronic based digital file being sent from supplier to customer; but only *if* it can be stored (fixed) onto a storage device which a player can re-play many times over a long period of time.

The "add-on" rules upon rules upon rules really need to be erased and started over with digital as the basis.

Otherwise, there will continue to be too many interpretations and the only people making money will be the lawyers.

After all, the "artists" still haven't recouped yet...
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TechDescartes (profile), 6 Sep 2017 @ 8:18am

Troll-kien
One license to rule them all,
one license to find them,
One license to bring them all
and in the darkness bind them.
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aerinai (profile), 6 Sep 2017 @ 8:43am

Isn't Streaming the same as Over-the-Air/Cable television?
So I have a question that I hope someone can answer for me... What copyrights do Over-the-Air television broadcasts need? Going down the list, I'd assume:

#1 would not apply since it isn't making a copy
#2 would not apply since it isn't a derivative
#3 doubtful if you would need that given the transitory nature
#4 yes because it is giving the public access via the OTA/Cable medium (is that the right interpretation?)
#5 yes? Seems similar to #4 so having a hard time parsing that one
#6 yes, obviously.

So just because this is music and you get to 'pick' what you want, how does that differ from multiple channels?

I really think people need to realize just because 'it is done on a computer' doesn't mean this stuff is brand new...
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afn29129 (profile), 6 Sep 2017 @ 10:13am

Re: Isn't Streaming the same as Over-the-Air/Cable television?
That was the point I was about to make. What is the difference between broadcast radios stations playing music and internet radio stations playing music.... I really can't find a difference.
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Kal Zekdor (profile), 6 Sep 2017 @ 10:14am

Re: Terminology doesn't fit...
I'd imagine #3 might apply if they offered the songs as downloads, not just streams. The medium is still digital, but the intent switches to distributing a "permanent" copy.
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NeghVar (profile), 6 Sep 2017 @ 10:23am

Re: Isn't Streaming the same as Over-the-Air/Cable television?
It like how the courts determine whether to write up a whole new set of rules for every new medium that comes around, or follow the principle of the original ruling. For instance, it is legal to record audio and video from radios and TV/ Cable. However, the legality of using software to rip the audio track from a music video on youtube is still up in the air. By principle, I believe these two acts are the same. Only difference is that a different device is being used. Originally is was the tape recorder and the VCR. Now it is software on a computer. Both allow the user to capture the content and save it to a storage medium for later playback.
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Anonymous Coward, 6 Sep 2017 @ 10:26am

It's not the stream that is the reproduction. That makes no sense. That's a performance. The reproduction occurs when the copy is made on the server that the stream then comes from. Spotify needs to license those copies. The copies that users make when they download for offline listening also need to be licensed. This isn't rocket science.
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DB (profile), 6 Sep 2017 @ 10:40am

Re:
There used to be arguments over what constituted a "copy" sufficient to implicate copyright law, but that has long been decided. Ephemeral copies are not covered.

There might be thousands of identifiable "copies" along the distribution chain, but legally that counts as Zero Copies. Not one of the copies from the master tapes, through storage, memory and registers of uncounted servers and routers counts. You don't need a separate license for DRAM chip, swap disk, flip-flop and transistor along the way.
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Anonymous Anonymous Coward (profile), 6 Sep 2017 @ 10:41am

Re: Re: Isn't Streaming the same as Over-the-Air/Cable television?
This is what I am thinking as well. The only thing I can discern is what license do TV and/or radio stations pay? Is there something different that then allows the OTA/cable recording?

For that matter, didn't Record Labels give away records to radio stations in order to get them to play their recordings? There was a big to do over that, and it had a name (that I cannot think of right now). Even though the stations were given copies of the works for airing, and the recording was legal, they still made money because the sale of original 'hard copies' (aka Vinyl) were better quality, I guess.
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DB (profile), 6 Sep 2017 @ 10:46am

I'm sure many companies would be happy to rip up the rules and start over.

Not because they want clarity and fairness, but because they expect that they will be able to grab a bigger piece of the pie.

Even if that happens, licensing of existing content will continue under the current rules, so deciding what those rules actually mean is important. And once the rules are clarified, there might be little reason to make new ones.
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kallethen, 6 Sep 2017 @ 10:46am

Re: Re: Re: Isn't Streaming the same as Over-the-Air/Cable television?
Are you thinking of 'payola'? If so, it's even more than just recording companies giving records to have played. The companies would also give kickbacks for playing the artists that they wanted promoted.
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ryuugami, 6 Sep 2017 @ 10:46am

Re:

This isn't rocket science.

No, it's copyright licensing, which is closer to quantum physics, with Schrödinger's licenses and all that.
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Anonymous Coward, 6 Sep 2017 @ 10:49am

Re: Re:
Haha! It's not *that* bad, but it can be pretty confusing. I read this brief asking for clarification as an excuse for the lawyers who wrote it to rack up more billable hours. The idea that Spotify operates without any copies being made is silly.
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Ryunosuke (profile), 6 Sep 2017 @ 10:57am

Re: Troll-kien
- Three Licenses for the Record Labels, Their music fills the sky
- Eight for the Film Studios, In their halls of gold.
- Five for the Networks on cable, doomed to die.
- And one for the Dark Judge, on his Dark Throne.
- In the land of East Texas, where the Copyrights lie...
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orbitalinsertion (profile), 6 Sep 2017 @ 11:01am

Well, duct taping an addition to copyright seems a fair bit better than having "confusion" which some want to take as a opening, or leaves others feeling slighted.

For instance, parents in the car at the drive-thru maintain that that Streaming only gets a #6, no supersized anything or extra fries with that. Maybe they would like them healthy apples better.
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orbitalinsertion (profile), 6 Sep 2017 @ 11:09am

Re: Terminology doesn't fit...
It's only confusing had radio been defined as distribution for terms of recorded music airplay for the last eighty years or whatever.

Some people are easily confused. Or make a living counting on others being easily confused.
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Anonymous Anonymous Coward (profile), 6 Sep 2017 @ 11:14am

Re: Re: Re: Re: Isn't Streaming the same as Over-the-Air/Cable television?
Yes, that was it, and the recording of those airings is legal. Now they want to be paid many times for the same thing because different formats, different technology, and, well reasons.
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That Anonymous Coward (profile), 6 Sep 2017 @ 11:26am

“to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

Since limited is approaching 200 years, I think its perhaps time they stop screwing around and fix copyright & clear up all of these issues once and for all.

Society is being held back, because now you can face court cases from the ggggg grandchildren of someone who wrote a song that sort of sounds like what you created, even if you never heard it before.

Perhaps its time to stop letting the gatekeepers set the rules, and make sure that the artists everyone likes to hold up as a prop when discussing how technology is robbing them blind actually get what they deserve. The gatekeepers (and there are literally 1000's of them) are all taking a cut & blaming the internet... we live in the future, perhaps we don't need a dedicated staff of 200 relatives managing 3x5 cards of information for the lions share of the cash their collection society takes in.
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NeghVar (profile), 6 Sep 2017 @ 11:56am

Re: Isn't Streaming the same as Over-the-Air/Cable television?
It like how the courts determine whether to write up a whole new set of rules for every new medium that comes around, or follow the principle of the original ruling. For instance, it is legal to record audio and video from radios and TV/ Cable. However, the legality of using software to rip the audio track from a music video on youtube is still up in the air. By principle, I believe these two acts are the same. Only difference is that a different device is being used. Originally is was the tape recorder and the VCR. Now it is software on a computer. Both allow the user to capture the content and save it to a storage medium for later playback.
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hegemon13, 6 Sep 2017 @ 12:13pm

Re: Re: Re:
And the idea that you read this whole article and still thought you were raising an original point is even sillier. Re-read that whole section about the precedent set by the Cablevision DVR case, and try again. Server copies do not count.
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Anonymous Coward, 6 Sep 2017 @ 1:09pm

Re: Isn't Streaming the same as Over-the-Air/Cable television?
So just because this is music and you get to 'pick' what you want, how does that differ from multiple channels?

The channels are owned and distributed by older (and therefore more politically connected) companies whose profits are being impacted by the newer internet based services such as Spotify. Very different things.
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stderric (profile), 6 Sep 2017 @ 4:34pm

Re: Re: Terminology doesn't fit...
I was wondering if I was oversimplifying things in my mental model... it seems like streaming is conceptually equivalent to radio broadcasting where this licensing issue is concerned. The only difference is 1's & 0's instead of peaks & troughs. If playing a song on the radio isn't distribution, neither is streaming.
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afn29129 (profile), 6 Sep 2017 @ 6:04pm

Re:
I face the problems that caused by ridiculously long copyrights every day. This is genealogical research. Whenever I need to find an obituary it's generally only available on a microfilm copy that's held in a reach library located hundreds of miles away or in original paper form sitting in a humid warehouse somewhere moldering into dust. In a world with reasonable copyright lengths these old newspapers would be digitized and on the Internet. History will be permanently lost when those documents are gone.
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Anonymous Coward, 6 Sep 2017 @ 6:37pm

Re: Re: Re: Re:
Well, he's a copyright-type. Anything to milk more money off unwitting saps. If he could demand a license for every time your brain recalls a memory of a show, he would.
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JMT (profile), 6 Sep 2017 @ 7:46pm

Re:
"This isn't rocket science."

You're right. It's greedy record companies, and a few greedy artists, who want to get paid multiple times for the same thing.
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Arkoden, 6 Sep 2017 @ 7:50pm

Streaming intangible yes, offline copies no.
Their whole suit to avoid the mechanical licensing balances on the point that streaming doesn't leave a physical asset on the consumer device, as once the stream is over there is no file left behind.

But Spotify also has options to download offline copies of a file for temporary use while the end user subscription is valid. does this offline data file not count as a replication of the quite tangible audio data file?
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Alasdair Fox (profile), 7 Sep 2017 @ 2:08am

Re: Streaming intangible yes, offline copies no.
But Spotify also has options to download offline copies of a file for temporary use while the end user subscription is valid. does this offline data file not count as a replication of the quite tangible audio data file?

Yes, was about to point this out. I would still consider it 'temporary', as these downloaded files are encrypted, and can only be played from within the spotify app. Also, these files cannot be used to create other copies, at least without great effort to break the encyption.(i.e. they are not just an .mp3 file) In my mind, they are best considered as 'offline streaming', and should have the same licences applied as 'online' streaming. Then again, I'm neither a lawyer nor a copyright expert, and if Spotify has a weakness in it's case, it's probably this.
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pouar (profile), 9 Sep 2017 @ 1:06pm

Re: Re: Streaming intangible yes, offline copies no.
Technically this argument could be applied to any DRM encrypted media
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evanhr (profile), 11 Sep 2017 @ 6:56am

Re: Re: Re: Streaming intangible yes, offline copies no.
There's obviously a practical difference between DRM files that can be played without additional payment and those that require an ongoing subscription (and presumably continue to pay-per-play to the rightsholders).

But I agree that the offline files are the soft ground of Spotify's argument. I'd be very surprised if back in the days of selling DRM'd downloads of music, iTunes et al didn't think they needed to cover mechanical licenses for each download, and I don't know that any courts have dealt with the difference noted above yet.
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