Recent Digital Media Copyright Developments
June marked the one-year anniversary of the Supreme Court’s landmark decision in MGM v. Grokster. In Grokster, the Court announced its “inducement” theory for digital copyright liability for peer-to-peer (“P2P”) network providers, holding that any person who distributes a device or technology promoting through clear expression its infringing uses and taking steps to foster infringement is liable for copyright infringement. The, Court, however, did not modify its 1984 ruling in the Sony Corp. v. Universal Pictures ruling (the “Betamax” case) that analog copying via a VCR for time-shifting is a fair use. Recent developments reveal the continuing and complicated tension between networks and carriers, consumer device manufacturers, and content owners over storage and recording in the digital context.
Network digital video recorders
Several studios and cable networks filed suit against Cablevision Systems challenging the cable operator’s planned deployment of a network-based digital video recording service (“RS-DVR” or “network DVR”) for its subscribers (20th Century Fox Film Corp. v. Cablevision Systems Corp; The Cartoon Network, LP v. CSC Holdings, Inc.). The RS-DVR has the same functionality as a set-top box (“STB”) DVR or TiVo device, except that storage of the programming is centralized on servers at Cablevision’s data centers. The customer, using the electronic program guide resident on the STB, initiates copying/playback through the remote control. The STB then interacts with the server to store and return programming at the subscriber’s request.
At issue in the case is who controls the storage at the network level. According to the plaintiffs, Cablevision’s RS-DVR is not a DVR device but rather an unauthorized and unlicensed video-on-demand service that is not covered by any statutory license. The studios and program networks claim that Cablevision controls the network storage system and therefore directly infringes their exclusive reproduction rights under the Copyright Act and that the network playback to the customer constitutes an unauthorized performance in violation of §106 of the Copyright Act. Cablevision argues, however, that the location of the digital storage at the network level or STB is irrelevant and that the RS-DVR customers who choose to record and time-shift cable programs are entitled to the same fair-use protections as VCR users under the Betamax case—namely to record programming for later viewing that they already have a right to receive and view. The case is set for summary judgment hearings in late October.
Satellite radio portable music recorders
The major record labels have sued XM Satellite Radio for its deployment of the “Inno” device, an XM portable satellite radio receiver and MP3 player/recorder that allows users to store up to 50 hours of music (or 1,000 songs) captured from XM radio streams as well as to store MP3 music files from their PC or other devices. The music industry asserts various direct and secondary copyright infringement claims, as well as a Grokster inducement claim alleging that XM is actively marketing a device intended to be used for infringing purposes and encouraging its customers to use it for those infringing purposes. The copyright claims are based on the theory that XM’s statutory license (Sec. 114 of the Copyright Act) authorizes it only to transmit digital music streams via satellite (essentially a performance right) and that by allowing users to store and playback music from the XM service in the Inno, XM is violating the plaintiffs’ exclusive distribution (Sec. 106(3)) and reproduction (Sec. 106(1)) rights by, in effect, creating an iPod-like downloading service.
XM Satellite received an extension of time to respond to the complaint and will shortly be filing a motion to dismiss the suit. It claims the Inno is protected under the Audio Home Recording Act of 1992. Section 1008 of the AHRA immunizes copyright infringement “based on the … distribution of a digital audio recording device, a digital audio recording medium … or based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings…”
Network and computer-based intermediate storage
In June, a Subcommittee of the House Judiciary Committee approved the Section 115 Reform Act ("S1RA") and sent it on to the full Committee for consideration. Section 115 of the Copyright Act establishes a compulsory license for the reproduction and distribution of copyrighted nondramatic musical works. S1RA purports to clarify and reduce the licensing red tape currently applicable to digital music stores (Yahoo! MusicMatch, Rhapsody, Amazon, etc.). Although there is a statutory license available for certain types of music webcasters, there is no copyright clearance mechanism for these distributors other than through licensing negotiations with each label and the performing rights organizations (ASCAP, BMI, and SESAC). The bill would create a statutory license for these digital music stores with a royalty payment scheme established by regulation.
S1RA, however, is strongly opposed by groups such as Electronic Frontier Foundation, Consumer Electronics Association, the computer industry, the satellite radio industry, BellSouth, and others. Their concern is that the bill could require that every incidental, server, cache, network, and buffer copy made in the process of digital transmission by digital networks, computers, and other personal consumer equipment would be subject to the bill’s licensing requirements. There is also concern that the bill could blur the line between the public performance right (Sec. 106(4)) on the one hand and the rights of reproduction and distribution on the other (Sec. 106(1) and (3)), thereby diminishing the rights that consumers currently have to listen to and store music.
The common thread weaving these developments together is the issue of control over the storage of digital content along the digital distribution stream from content owner to consumer. Although it is not expected that S1RA will be enacted into law this year, the court cases discussed above could profoundly impact future developments in digital content distribution models, innovation in consumer electronics devices and consumer usage of digital content.
Please contact us if you would like more information regarding the developments discussed above or concerning any other copyright-related issues.