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Copyright and Internet Music Transmissions:

Existing Law, Major Controversies,
Possible Solutions
R. ANTHONY REESE*

Accessing music over the Internet has become a significant activity

for many Internet users. Although there is little agreement on which
new models will emerge as predominant in the music industry, Internet
music transmissions are likely to reshape the ways in which music is
both created and delivered to consumers. Possible models include (1)
providing music in encrypted or watermarked formats, in order to
limit or detect unauthorized transmissions; (2) making music available
on a pay per listen or subscription basis;1 (3) using revenue from
advertising (either displayed on a music Web site or embedded in a
music file and displayed or heard when the file is played back) to sup-
port music dissemination; and (4) giving away digital music in order to
attract customers for related services and merchandise.2
No matter which new models emerge for producing and distribut-
ing music, copyright law is likely to remain important in regulating such
activities. For example, making money by disseminating music in
encrypted format will require the ability to stop others from circulating
unencrypted copies that they have produced themselves.3 Similarly,
effectively charging customers a subscription or per-listen fee for listen-

* Assistant Professor, School of Law, The University of Texas at Austin. B.A., Yale
University, J.D., Stanford Law School. An earlier version of this paper was presented at the
TPRC 28th Annual Research Conference on Communication, Information and Internet Policy,
September 2000. I would like to thank Paul Goldstein, Doug Laycock, Christopher Leslie, Neil
Netanel, and Margaret Jane Radin for helpful comments and suggestions on earlier drafts of the
article. I would like to thank Gretchen Hoffman and the staff of the Tarlton Law Library for
research assistance. I am, of course, solely responsible for the content of the paper. 2001 R.
Anthony Reese.
1. For example, at least three major U.S. record labels have announced plans to sell Internet
subscription access to their music. Matt Richtel, Record Companies Explore Online Music
Subscriptions, N.Y. TIMES, Aug. 2, 2000, at C5.
2. For a discussion of these and other technological and business models, see THE DIGITAL
DILEMMA: INTELLECTUAL PROPERTY IN THE INFORMATION AGE 76-95 (National Academy Press,
2000); William Fisher, Digital Music: Problems and Possibilities, at [Link]
Academic_Affairs/coursepages/tfisher/[Link] (last visited July 31, 2000).
3. Copyright and legal protections for technological measures may work in tandem. For
example, if a copyright owner makes a piece of recorded music available in an encrypted digital
format, user A may circumvent the encryption to gain access to the work in order to make an
unencrypted copy, which could violate federal anticircumvention law, see 17 U.S.C. 1201
(1998). Once user A posts the unencrypted file on her Web site, user B might download a copy of

237
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238 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

ing to music requires stopping unauthorized services from providing

such music to listeners at a lower cost or for free. Virtually all of the
possibilities are likely to rely to some extent on copyright protection,
perhaps in combination with technological measures, to allow the own-
ers of music rights to generate revenue from disseminating that music.
Copyright law in the digital era should attempt to facilitate the
development of legitimate dissemination of music over the Internet
because this promises to significantly increase public access to copy-
righted music. Making music available for purchase and delivery online
means that consumers are not limited to choosing among the items that a
physical record store can stock or a mail-order catalog can list. Web-
casting can provide listeners with a far greater variety of music than
can traditional broadcasters. Because the Web does not have the spec-
trum scarcity problems of broadcast radio, many more transmitters can
play music for the public, giving listeners a wider selection.4 Over-the-
air broadcasters typically need to appeal to a large enough audience to
generate significant advertising revenues; on the other hand, Webcasters
may be able to target much smaller niche audiences, thus offering music
that would not generally be accessible through radio broadcasting.5 The
Internet may vastly improve the ease with which a listener can locate a
particular piece of music by facilitating searches of enormous collec-
tions of songs to find those that match a specific lyrical or melodic
phrase. In addition, Internet dissemination may create entirely new
music markets. In the past, to hear a particular song when one wanted
to, one had to either buy a record of the song (usually available only as
part of an album, requiring one to pay for several other recordings possi-
bly not wanted) or wait until a radio station played the song, if it ever
did. With the Internet, however, one might pay a small amount to hear
the song once, on demand. Copyright law, which has as a fundamental
goal the accessibility of creative works, should help, rather than hinder,

the file and post it to Bs Web site. User B would not have circumvented any encryption measure,
but could be liable for copyright infringement.
4. A typical American city has 20 to 50 broadcast radio stations. According to BRS Media,
which has been compiling a directory of Internet radio stations since 1995, the online listener now
has access to more than 13,000 sites. Sue Cummings, Internet Radio Offers a Wide Choice to a
Slim Audience, N.Y. TIMES, Oct. 25, 2000, at 35.
5. In general . . . the [Web] user has a huge amount of genres and stations to choose from
that far exceed what is currently available on over-the-air analog radio. Hearing Before the
Courts & Intellectual Prop. Subcomm. of the House Comm. on the Judiciary, 106th Cong. (2000)
(statement of Hilary Rosen, President, RIAA, Inc.) available at [Link]
[Link] (last visited July 10, 2000) [hereinafter Rosen Statement]. See also Clea Simon,
Niche Radio Finds Its Footing on the Internet, N.Y. TIMES, Oct. 9, 2000, at C13.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 239

circulation of music over the Internet due to its potential for increasing
the availability of music to users.6
Part I of this Article explains current copyright law governing
music transmissions over the Internet. Congress has amended the law
several times in the last decade to address challenges that new digital
and digital-networked technologies pose to traditional intellectual prop-
erty rights in music. As a result, the current framework of copyright law
governing Internet music dissemination is a very complex patchwork of
overlapping and interacting provisions. These provisions have been
shaped by a century of legislation and business practices, many of which
developed in an era of traditional, non-networked exploitation of music.
Copyright specialists and others familiar with the details of digital music
copyright law may wish to skip Part I, but for others it provides a
descriptive analysis of the current legal regime that is unavailable else-
where and necessary for understanding Parts II and III.7
Part II examines how applying copyright law to downloading and
streaming audiothe two major types of Internet music transmissions
todaymakes it extremely difficult for Internet transmitters to make
such transmissions legally, even if their activities come within a copy-
right exemption or compulsory license. Current copyright law poses
two main types of problems for those who wish to legitimately dissemi-
nate music over the Internet. First, there are problems of transaction
costs. The transaction costs involved in obtaining permission to transmit
any volume of recorded music over the Internet can be significant
because any single piece of recorded music usually embodies two sepa-
rate copyrighted works, and transmitting may involve two separate
rights in each of those works, and each right in each work may be owned
by a different entity. For example, securing reproduction licenses from
two separate copyright owners to cover the temporary RAM storage of
every song that is transmitted in streaming audio presents an enormous
hurdle for those who transmit music, since so many different works can

6. See, e.g., Hearing Before the Senate Comm. on the Judiciary, 106th Cong. (2000),
(statement of Sen. Orrin G. Hatch) available at [Link]
htm (last visited July 12, 2000) (We must protect the rights of the creator. But we cannot, in the
name of copyright, unduly burden consumers and the promising technology the Internet presents
to all of us.). For discussion of other advantages of Internet music dissemination, see generally
Fisher, supra note 2.
7. One excellent overview of that legal regime is Bob Kohn, A Primer on the Law of
Webcasting and Digital Music Delivery, 20 ENT. L. REP. 4, Sept. 1998, but that article does not
reflect the changes finally enacted as part of the Digital Millennium Copyright Act in October
1998. For much more detailed explanations limited to the digital transmission performance right
in sound recordings see David Nimmer, Ignoring the Public, Part I: On the Absurd Complexity of
the Digital Audio Transmission Right, 7 UCLA ENT. L. REV. 189 (2000); Eric D. Leach,
Everything You Always Wanted to Know About Digital Performance Rights But Were Afraid to
Ask, 48 J. COPR. SOCY 191 (2000).
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240 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

be transmitted in the course of just a few hours. Furthermore, if every

Internet music transmission potentially requires permission from four
separate rightsholders, the potential for hold out problems is
significant.
Second, although Congress has crafted a number of copyright
exemptions and compulsory licenses in order to encourage activities that
it concluded should not be under the exclusive control of copyright own-
ers, Internet transmissionsby simultaneously implicating more than
one right of the copyright ownersmay make it impossible to engage in
such congressionally sanctioned activities without obtaining additional
permission from a copyright owner. This would reduce the usefulness
of, or entirely nullify, the licenses and exemptions Congress granted.
Part III suggests and evaluates possible solutions to these problems
that would continue to protect copyright owners ability to exploit their
works, yet make legitimate Internet music transmissions more feasible
for users of those works.
One final notethis Article does not address the currently-debated
questions of whether current copyright law gives music copyright own-
ers too much control over uses of their works or whether digital network
technologies (such as peer-to-peer sharing software including Napster,
Gnutella, and Freenet) will, as a practical matter, effectively undermine
whatever degree of legal control the law gives to copyright owners.
Instead, the Article takes current copyright law as a given, assesses how
difficult that law makes legitimate Internet exploitation of music under
current conditions, and considers how adjustments to current law might
facilitate such legitimate exploitation. This focus on working within and
making adjustments to the existing system (rather than trying to over-
haul it entirely) may be particularly appropriate now, since music copy-
right owners may have only a relatively short window of opportunity in
which to establish legitimate models for Internet music dissemination
before users become accustomed to obtaining unauthorized Internet
music access with no remuneration to artists or copyright owners.

I. COPYRIGHT LAW RELEVANT TO INTERNET MUSIC TRANSMISSIONS

A. Musical Works and Sound Recordings: Two Separate Copyrights
Every musical recording involves two separate copyrightable
works: a musical work and a sound recording.8 A musical work is
the sequence of notes, and often words, that a songwriter or composer
creates. For example, when Cole Porter sat down at a piano and wrote
the lyrics and music to the song Evry Time We Say Goodbye, he

8. 17 U.S.C. 102(a)(2) & (7) (1998).

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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 241

created a musical work protectible by copyright law. That work can be

recorded in many ways, including in printed sheet music that a musician
can use to play or sing the song. A sound recording, in contrast, is a
fixation of sounds, including a fixation of a performance of someone
playing and singing a musical work.9 For instance, when Ella Fitzgerald
and her accompanists went into a studio in the 1950s and performed
Cole Porters song Evry Time We Say Goodbye, the recording of that
performance resulted in a sound recording. When Annie Lennox
recorded the same song in the 1990s, her recorded performance was
another sound recording of Porters musical work. Transmitting
recorded musical performances over the Internet involves transmitting
both the sound recording and the musical work embodied in the record-
ing.10 U.S. copyright law grants different rights and limitations to musi-
cal works and sound recordings, increasing the complexity of the
copyright implications of such transmissions, particularly when the cop-
yright rights in those works are owned or administered by different
parties.

B. The Copyright Owners Relevant Rights: Reproduction and

Public Performance
1. THE REPRODUCTION RIGHT
Copyright law grants copyright owners the right to control certain
uses of their works, including the exclusive rights to reproduce and to
publicly perform copyrighted works.11 These are the rights most rele-
vant to Internet music transmissions. The right to reproduce a copy-
righted work is the oldest right of the copyright owner and applies to
both musical works and sound recordings.12 Copyright owners of musi-
cal works and sound recordings have the exclusive right to reproduce
their works in phonorecords, which are material objects in which
sounds . . . are fixed . . . and from which the sounds can be perceived,
reproduced, or otherwise communicated, either directly or with the aid
of a machine or device.13 A phonorecord can be a vinyl LP, a cassette

9. Id. 101 (sound recordings).

10. Transmitting live musical performances would generally involve only the copyright in the
musical work, since a live, unfixed performance is not protected by copyright, which extends only
to fixed works. Unauthorized transmission of a live performance, however, may violate 17 U.S.C.
1101(a)(2) (1998).
11. While the copyright owners rights are exclusive, they are not absolute. Rather, they
are subject to a variety of limitations, exemptions, and compulsory licenses that allow other
parties, in certain circumstances and under certain conditions, to engage in activity that would
otherwise be reserved to the copyright owner.
12. 17 U.S.C. 106(1) (1994).
13. Id. 101 (phonorecords). Musical work copyright owners also have the exclusive right
to reproduce their works in copies, such as sheet music. See id. (copies).
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242 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

tape, a compact disc, or a hard drive or floppy diskette containing an

MP314 file. These are all tangible objects in which sounds are fixed and
from which, given the proper hardware (and, in some cases, software),
those sounds can be made audible. The reproduction right generally
encompasses making any phonorecord of a copyrighted work.
Any single phonorecord of music is a phonorecord of both the
sound recording fixed in the phonorecord and any musical work per-
formed in that sound recording. For example, a compact disc of Ella
Fitzgeralds album The Cole Porter Songbook constitutes a phonorecord
of Cole Porters musical work Evry Time We Say Goodbye and a
phonorecord of Ella Fitzgeralds sound recording of that musical work.
Someone who makes a tape of that compact disc therefore produces a
new phonorecord, the tape, of both the musical work and the sound
recording. The same is true of someone who rips an MP3 version of
the song from a compact disc, or who downloads such a version from a
Web site and stores the MP3 file on a hard drive or other storage
medium.

2. LIMITATIONS ON THE REPRODUCTION RIGHT IN MUSICAL WORKS:

THE COMPULSORY MECHANICAL LICENSE AND DIGITAL
PHONORECORD DELIVERIES
The compulsory mechanical license limits the copyright owners
exclusive right to make phonorecords of most musical works.15 Once
the owner allows someone to make and sell phonorecords of a musical
work, anyone else can make his or her own phonorecords of that work.
This requires compliance with certain procedural requirements and pay-
ing a fee established by the Copyright Office.16 This license essentially
allows the making of so-called cover recordings, where a performer
records a song that another performer previously recorded. As long as
the compulsory license requirements are complied with, one can go into
a recording studio and record, for example, a performance of the song
Yesterday as it was written by John Lennon and Paul McCartney17
and sell compact discs of the recording without the permission of the
copyright owner of that musical work. In fact, most performers who

14. Music can be stored digitally in a variety of file formats. For convenience sake, this
article generally uses the MP3 format in its examples, but the principles apply equally to other
music storage formats.
15. 17 U.S.C. 115 (1998). The compulsory license extends to nondramatic musical
works. Id.
16. The current rate is usually 7.55 cents for each phonorecord. For the full schedule of rates,
see 37 C.F.R. 255.2, 255.3 (1999). For an album containing several copyrighted musical
works, the royalty would be payable for each phonorecord of each work.
17. Yesterday is reportedly the most recorded song ever. Linda Stasi, Inside New York,
NEWSDAY, Sept. 24, 1992, at 13.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 243

make cover recordings do not actually get a compulsory license from the
Copyright Office. Instead, they usually obtain a license from the Harry
Fox Agency, which acts as licensing agent for the U.S. copyright owners
(usually music publishing companies) of most musical works.18
The compulsory mechanical license grants reproduction and distri-
bution rights only for musical works, not sound recordings. The license
would not allow one to record and sell compact discs of the Beatles
original recording of Yesterday (instead of recording and selling com-
pact discs of ones own performance of the song). Every compact disc
made would be a phonorecord of both the Lennon and McCartney musi-
cal work Yesterday and of the Beatles sound recording of Yester-
day. The compulsory license confers only a reproduction privilege in
the musical work. In order to make the compact discs, one would need
permission from the copyright owner of the Beatles sound recording,
who would be free to refuse permission or to charge any price for that
permission.19 The compulsory mechanical license therefore primarily
assists recording artists and record companies who want to make and
sell their own recordings of songs by other songwriters.
In 1995, Congress amended the compulsory mechanical license to
allow reproducing and distributing musical works by means of digital
phonorecord delivery (hereinafter DPD). A DPD is a digital trans-
mission of a sound recording that results in a specifically identifiable
reproduction by or for any transmission recipient of a phonorecord.20
For example, if one connects to a Web site such as [Link] or
[Link] and downloads an MP3 file of the song Yesterday, the
Web site digitally transmits a sound recording of a performance of Yes-
terday. At the end of the transmission that MP3 file is stored on that
individuals hard drivea phonorecord. Thus, the Web site has made a
digital phonorecord delivery. If the site has obtained a compulsory
mechanical license for the composition Yesterday and pays the speci-
fied royalty rate, then its transmission will not infringe the composi-

18. The rates and terms of the Harry Fox license are, of course, substantially dictated by the
rates and terms of the compulsory license available through the Copyright Office. See AL KOHN
& BOB KOHN, KOHN ON MUSIC LICENSING 657-58 (2d ed. 1996) ([N]early all mechanical
licenses are negotiated directly between the copyright owners and the licensees but compulsory
license terms generally provide an outline for those of negotiated licenses and the statutory rate
effects a maximum effective limit on the mechanical license fees charged by copyright owners
under negotiated licenses.). While the Harry Fox Agency is the largest agency administering
mechanical reproduction rights, some musical work copyright owners are represented by other
agencies, including the Songwriters Guild of America. Id. at 670.
19. Indeed, the compulsory mechanical license for the musical work is not available for
making phonorecords of another partys sound recording unless the licensee has authorization for
reproduction from the owner of the rights in the sound recording. 17 U.S.C. 115(a)(1) (1998).
20. Id. 115(d).
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244 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

tions copyright. The royalty rate, currently identical to the rate for
making and selling a physical compact disc or cassette, is set every two
years by a two-step process that encourages voluntary, industry-wide
negotiations to establish rates to be adopted by the Copyright Office. If
negotiations fail, any interested party can petition the Copyright Office
to hold an arbitration proceeding to set the fees.21 The compulsory
license only confers the right to make DPDs of the musical work, not
any particular sound recording. If a little-known band tries to drum up
interest in its music by allowing people to download its cover version of
Yesterday from its Web site, the band itself will likely own the copy-
right in the sound recording of its performance. Therefore, the band will
have the right to digitally deliver phonorecords of the sound recording,
in addition to the right to digitally deliver phonorecords of the Lennon
and McCartney musical work given by the compulsory mechanical
license. If a Web site allows users to download the Beatles recording of
Yesterday, then the Web site will need the permission of the owner of
the copyright in that sound recording.

3. THE PUBLIC PERFORMANCE RIGHT: MUSICAL WORKS

The second exclusive right relevant to Internet music transmissions
is the right to publicly perform a copyrighted work. The Copyright Act
defines performing a work very broadly.22 One performs Cole
Porters song, Evry Time We Say Goodbye, if one sings the lyrics to
the song, plays the song on a piano, plays a compact disc of the song on
a stereo, or plays an MP3 file of the song on a personal computer or a
portable playback device. Although all of those activities perform the
musical work, they infringe the copyright only if done publicly. A
performance can be public in two ways. First, one publicly performs a
work by performing it in a public or semi-public place, such as by sing-
ing Evry Time We Say Goodbye in a nightclub. Second, and more
important for music on the Internet, transmitting a performance is a pub-
lic performance if the transmission is to the public, by means of any
device or process, whether the members of the public capable of receiv-
ing the performance . . . receive it in the same place or in separate places
and at the same time or at different times.23 A radio station that broad-
casts a performance of Evry Time We Say Goodbye publicly per-

21. The procedure for setting license rates for DPDs is set forth in 17 U.S.C. 115(c)(3)(B)-
(F) (1998), and the rate schedules are set forth in 37 C.F.R. 255.5 (1999).
22. 17 U.S.C. 101 (1994) (defining perform as to recite, render, play, dance, or act the
work, either directly or using a device or process).
23. Id. 101 (publicly). The Copyright Act defines transmit quite broadly: To
transmit a performance . . . is to communicate it by any device or process whereby . . . sounds
are received beyond the place from which they are sent. Id.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 245

forms the musical work by transmitting a performance to the public.

Similarly, a Web site that transmits the recording to users in streaming
audio publicly performs the musical work by transmitting a performance
to the public. This is true even if each listener is located alone in her
own home and only one listener hears the song at any given time. Even
if the Web site limits its transmissions to subscribing users who pay a
monthly fee, its transmissions will be to the public.24
No general compulsory license exists for the public performance
right in musical works; to publicly perform such a work requires the
permission of the copyright owner. Because public performances of
musical works are fleeting and occur in widely dispersed locations,
enforcement of the public performance right has challenged copyright
owners. In response, copyright owners created collective rights societies
to administer and enforce the public performance right. The principal
societies in the United States are the American Society of Composers,
Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI),
and SESAC, Inc. (formerly the Society of European State Authors and
Composers). The societies are made up of copyright owners (usually
songwriters and music publishers) who grant the society the nonexclu-
sive right to license public performances of their musical works. The
societies, in turn, grant blanket licenses to entities that engage in public
performances, such as radio and television stations, nightclubs and con-
cert halls, restaurants and retail establishments. In return for a license
fee (generally calculated as a percentage of the licensees revenue), the
licensee obtains the right to perform publicly any work in the societys
repertoire, and the ASCAP, BMI, and SESAC repertoires collectively
include virtually all copyrighted American music.25

4. SOUND RECORDINGS: THE DIGITAL TRANSMISSION

PERFORMANCE RIGHT
Congress granted the exclusive public performance right to copy-
right owners of musical works, but not to copyright owners of sound
recordings.26 As a result, a nightclub or radio station that plays a com-
pact disc of Annie Lennox singing Evry Time We Say Goodbye pub-
licly performs both Cole Porters musical work and Annie Lennoxs
sound recording but needs permission only from the copyright owner of

24. See H.R. REP. NO. 94-1476, at 65 (1976) (stating that transmission is to the public
whenever the potential recipients of the transmission represent a limited segment of the public,
such as . . . the subscribers of a cable television service).
25. In addition, the U.S.-based societies generally administer performing rights in the United
States for musical works written and owned by foreign nationals. AL KOHN & BOB KOHN, KOHN
ON MUSIC LICENSING 872-73 and 300-01 (2d ed. 1996).
26. 17 U.S.C. 106(4) (1995).
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246 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

Porters music and lyrics and not from the copyright owner of Lennoxs
sound recording.
In 1995, Congress granted sound recording copyright owners a lim-
ited public performance right: the right to perform their sound record-
ings publicly by means of a digital audio transmission.27 A Web site
that streams a recording of Annie Lennox singing Evry Time We Say
Goodbye to listeners over the Internet publicly performs the sound
recording by means of a digital audio transmission. That activity would
be covered by the digital transmission performance right.
Congress also enacted significant limitations on the digital trans-
mission performance right. The scope of the copyright owners right
varies with the type of digital transmission. There are four basic types.
The first is a transmission made by an interactive service that either
transmits a particular sound recording requested by the recipient or
transmits a program specially created for the recipient. Several kinds of
transmissions are interactive. The archetypal interactive service is the
much-prophesied celestial jukebox, an on-demand service that allows
a recipient (who pays a monthly subscription fee or a per-use charge) to
connect to a repository of sound recordings and select a particular
recording that is immediately transmitted to the recipients speakers.
[Link] has entered into agreements with all of the major record
labels to provide, by subscription, on-demand streaming access to all of
the recordings in the labels catalogs.28 MusicBank will be offering an
interactive service, because the subscriber will receive, on request, the
transmission of a particular sound recording that she selected.29 Trans-

27. 17 U.S.C. 106(6) (1995). Essentially, a digital audio transmission is a transmission in

any non-analog format that embodies a sound recording. 17 U.S.C. 114(j)(5) (1994 & Supp. IV
1998).
28. MusicBank in Deal with EMI, N.Y. TIMES, Dec. 14, 2000, at C4. The service, much like
the [Link] service, will stream to a user only recordings from compact discs that the user
already owns.
29. Another example of an interactive service is a Web site that promotes a band by
encouraging visitors to listen to the bands new recording with the expectation that some of the
visitors will then purchase a compact disc or a concert ticket. If the visitor clicks a button on the
site, the site streams a transmission of the recording to the visitor.
The boundaries of what constitutes an interactive service are not entirely clear. Some Web
sites currently survey each user about her musical tastes, and based on her responses stream
performances of sound recordings that the Web sites software predicts she will like. Some sites
allow the user to rate the songs that she receives, as a method of fine-tuning the predictions about
which recordings the user will like. Web sites that engage in this type of activity are potentially
transmitting a program specially created for the recipient. The Copyright Office recently denied
a petition that sought an amendment to the definition of interactive services in the Offices
regulations. Public Performance of Sound Recordings: Definition of a Service, 65 Fed. Reg.
77,330 (Dec. 11, 2000). The Office concluded that a service does not become interactive merely
because consumers may have some influence on the music programming offered by the service.
Id. at 77,332. While acknowledging that uncertainty remained over how much influence a
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 247

missions by an interactive service are subject to the sound recording

copyright owners digital transmission performance right, so the trans-
mitter needs the permission of the copyright owner prior to making
transmissions of the subject recording. The sound recording copyright
owner is entitled to charge any price for such permission or to deny
permission entirely.30
Noninteractive service transmissions basically fall into three cate-
gories. First, there are nonsubscription broadcast transmissions.31 Such
transmissions are entirely exempt from a copyright owners digital trans-
mission performance right, so obtaining permission from the sound
recording copyright owner is not necessary.32 Permission for the public
performance of any musical work would be required, though.33 Many
radio stations, in addition to broadcasting over the radio airwaves, now
have Web sites where they simultaneously transmit identical program-
ming in streaming audio format.34 For example, public radio station
KUT in Austin, Texas, has a Web site ([Link]) that allows users
to hear in real time the programming that KUT is broadcasting over the
airwaves to central Texas. Despite this trend, a dispute currently exists
over whether the exemption for nonsubscription broadcast transmis-
sions includes a transmission over the Internet of an AM or FM radio
stations over-the-air programming. In response to a petition by the
Recording Industry Association of America (RIAA), the trade associa-
tion for the major recording labels, the Copyright Office recently
amended its regulations to provide that an Internet simulcast by a
licensed AM or FM broadcaster is not within the nonsubscription
broadcast transmission exemption from the digital transmission per-

consumer can have on the programming offered by a transmitting entity before that activity must
be characterized as interactive, the Copyright Office concluded that it was not necessary,
desirable, or feasible to attempt to resolve the uncertainty by regulation at the current time. Id.
30. In fact, 17 U.S.C. 114(d)(3) and 114(h) (1994 & Supp. IV 1998) impose some limits
on the ability of sound recording copyright owners to grant exclusive licenses to interactive
services and require, in certain circumstances, that owners who license the digital transmission
right to affiliates make licenses available to similar services on no-less-favorable terms.
31. These are transmission[s] made by a terrestrial broadcast station licensed as such by the
FCC. 17 U.S.C. 114(j)(3).
32. Id. 114(d)(1)(A). Certain other types of transmissions are also exempt. Id.
114(d)(1)(B), (C).
33. Id. 114(d)(4)(B)(i).
34. Roughly 2,000 of the nations 12,500 radio stations broadcast via Web sites. Pete
Barlas, Radio Stations Find Web A Good Delivery Channel, INVESTORS BUSINESS DAILY, July 25,
2000.
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248 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

formance right.35 The National Association of Broadcasters has filed a

suit challenging the regulation.36
Second, certain noninteractive transmissions other than broadcast
transmissions, although not exempt from the digital transmission per-
formance right, are eligible for a compulsory license of the digital trans-
mission performance right.37 For example, a hypothetical Web site,
WebJazz, that runs a jazz Web radio station and streams jazz music to
those who visit the site, just as a radio station would broadcast jazz
music over the airwaves, would be eligible for such a license.38 The
transmissions are not interactive because WebJazzs programmers, not
the sites listeners, select which songs are played. A noninteractive
transmitter like WebJazz must adhere to a long list of detailed conditions
to qualify for the compulsory license.39 Those conditions seek to limit
the license to those transmissions thought least likely to substitute for
the sale of records. Therefore, the conditions attempt to prevent listen-
ers from getting advance notice of which songs are to be transmitted so
that they could record them or listen to them on demand.40 Some
conditions concern the programming that is transmitted. For example,
WebJazz cannot transmit, during any three-hour period, more than three
different tracks from any one compact disc or more than four different
tracks by the same recording artist.41 Other conditions govern the tech-

35. See Public Performance of Sound Recordings: Definition of a Service, 65 Fed. Reg.
77,292 (Dec. 11, 2000). The regulation makes clear that the compulsory license for Web
transmissions of sound recordings, discussed in the next paragraph, is available to over-the-air
broadcasters for their Internet simulcasts if they meet the statutes detailed conditions for the
license.
36. Bonneville International Corp. v. Peters (E.D. Penn. filed Jan. 25, 2001), complaint
available at [Link] (last visited Feb. 10, 2001); see CNET
News, Radio stations sue to overturn Webcasting fees, Jan 26, 2001, [Link]
[Link] (last visited Jan. 29, 2001). Before the Copyright Office issued its new
rule, the NAB had brought a declaratory judgment suit on the question. Natl Assn of
Broadcasters v. Recording Indus. Assn of Am., No. 00-2330 (S.D.N.Y. filed Mar. 27, 2000).
37. 17 U.S.C. 114(d)(2).
38. Both subscription and nonsubscription transmissions are eligible for the license, so the
site might support itself either by limiting access to subscribers or by transmitting advertising to
its listeners. See id. 114(j)(9), (14). If the transmission is nonsubscription, it must, in order to
qualify for the statutory license, be part of a service whose primary purpose is to provide audio
or entertainment programming to the public and not to sell or promote particular products or
services. Id. 114(j)(6).
39. The conditions are set forth in id. 114(d)(2)(A), (C).
40. Jane C. Ginsburg, Copyright Legislation for the Digital Millennium, 23 COLUM.-VLA
J.L. & ARTS 137, 169 (1999) (conditions . . . primarily endeavor to ensure that the transmitting
organization does not facilitate a users substitution of the recorded performance for purchase of a
copy).
41. 17 U.S.C. 114(d)(2)(C)(i) and 114(j)(13). Other programming-related conditions
include a ban on advance publication of program schedules or specific titles to be played,
114(d)(2)(C)(ii), minimum time limits for the program of which a transmission of a sound
recording is a part, 114(d)(2)(C)(iii), a requirement to transmit recordings from lawfully made
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 249

nology and interfaces used for the transmission.42 If WebJazz meets all
the conditions, then it can obtain a compulsory license to transmit any
sound recording by complying with Copyright Office procedures and
paying the license fee. As with the compulsory mechanical license for
DPDs, the license fee is to be determined every two years by voluntary
negotiations among the parties to establish an industry-wide consensus
on rates that would then be adopted by the Copyright Office. Failing
that, rates would be set by an arbitration proceeding in the Copyright
Office.43 Rates have not yet been set for the generally available compul-
sory license for eligible noninteractive transmissions. The compulsory
license, like the broadcast exemption, applies only to the digital trans-
mission performance right in sound recordings and not to the public per-
formance right in musical works. A transmitter that qualifies for the
compulsory license will therefore still need to obtain musical work per-
formance licenses, usually from ASCAP, BMI, and SESAC.
Third, noninteractive transmissions that are not broadcast transmis-
sions and that do not meet the conditions for the compulsory license are
fully subject to the digital transmission performance right. Persons mak-
ing such transmissions must generally obtain the permission of the copy-
right owner. If WebJazz wanted to program all Ella Fitzgerald, all the
time, it would not be able to comply with the limit of four tracks by one
artist in three hours. Thus, it would not qualify for the compulsory
license. WebJazz would therefore need permission for its digital trans-
mission of each sound recording from the copyright owners.
Table 1 summarizes the relevant reproduction and performance
rights of copyright owners of musical works and sound recordings, and
the limitations on those rights.

phonorecords and not from bootleg recordings, 114(d)(2)(C)(vii), and a bar on transmitting
visual images along with the audio transmission in a way likely to confuse recipients as to the
endorsement or affiliation of the recording artist or copyright owner, 114(d)(2)(C)(iv).
42. For example, the transmitter must identify, in text displayed to the recipient during the
performance, the title of the recording, the title of the record from which it comes, and the name of
the recording artist. 17 U.S.C. 114(d)(2)(C)(ix). Other conditions of this type include not
causing the receiving equipment to change channel, 114(d)(2)(A)(ii), transmitting any
identifying information encoded in the sound recording by the copyright owner,
114(d)(2)(A)(iii), accommodating and not interfering with technical measures used by copyright
owners to identify or protect their works, 114(d)(2)(C)(viii), not taking any affirmative steps to
cause the making of a phonorecord by the recipient of the transmission and setting the
transmission equipment to limit such recording if possible, 114(d)(2)(C)(vi), and cooperating to
prevent the scanning of transmissions in order to select a particular recording to be transmitted,
114(d)(2)(C)(v).
43. 17 U.S.C. 114(f)(2).
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250 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

TABLE 1
Reproduction Right Public Performance Right
General Exclusive Right of General Exclusive Right of
Copyright Owner Copyright Owner
Musical Work Compulsory Mechanical Blanket License available
License available for Digital through ASCAP, BMI, and
Phonorecord Deliveries SESAC
No general exclusive right in
General Exclusive Right of copyright owner
Sound Recording Copyright Owner Limited right to public
No compulsory license performance by means of
available digital audio transmission
(see Table 2)

Table 2 summarizes the basic structure of the limitations on the

digital transmission performance right.

TABLE 2
Public Performance Right by
Type of Transmission means of Digital Audio
Transmission
Nonsubscription Broadcast Exempt from exclusive right
Transmissions
Compliant Subscription
Noninteractive Transmissions
Compulsory License available
Transmission Compliant Eligible
Nonsubscription Transmissions
All Other Noninteractive Exclusive Right of Copyright
Transmissions Owner
Transmission By Interactive Service Exclusive Right of Copyright
Owner

II. APPLICATION OF COPYRIGHT LAW TO STREAMING AND

DOWNLOAD TRANSMISSIONS

A. Streaming Transmissions

The provisions of U.S. copyright law outlined in Part I govern the

two major types of music transmissions available over the Internet
today: streaming and downloading musical files. A digital music file
can be streamed to a user. Over the World Wide Web, for example, a
user might connect to the Web site of the Red Hot Organization44 and
find a streaming audio file of Annie Lennoxs recording of Evry Time
We Say Goodbye from the album Red, Hot + Blue. The user might

44. [Link].
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 251

then request that the Web site transmit that file. As the site transmits the
information in the file, the users computer makes the recording audible
through the computers speakers. During the transmission, the users
computer temporarily stores or buffers segments of the recording
before making them audible, in order to allow (usually) uninterrupted
playback of the recording even if network congestion slows the trans-
mission. As the recording is played, however, the part of the file that is
played is removed from the buffer and replaced with subsequent por-
tions of the recording. At the end of the transmission, the user has heard
the entire recording. Generally, no copy of the recording remains stored
on the computer.45 If the user wishes to hear the streamed recording
again, she must again connect to the Red Hot Web site and request that
it transmit the file again.
Such streaming transmissions may fit a wide variety of Internet
music business models. A user might hear streaming transmissions from
the Web site of a particular musician or record label that wishes to pro-
mote particular recordings, from a Web radio station that transmits a
variety of music in the same way that over-the-air radio stations do, or
from a music locker service that stores particular songs selected (and
possibly purchased) by the user to provide the user access to those songs
from any Internet-connected computer.
A streaming transmission over the Internet clearly constitutes a dig-
ital transmission performance of the sound recording transmitted and of
any musical work embodied in that sound recording. Such a transmis-
sion will infringe the public performance rights unless the person mak-
ing it has permission or is otherwise excused. For example, WebJazz
may want to transmit Annie Lennoxs recording of Evry Time We Say
Goodbye in streaming audio as part of its Webcast. With respect to
Annie Lennoxs sound recording, WebJazz will either be exempt from
the digital transmission right entirely (if it makes a nonsubscription
broadcast transmission), be entitled to transmit the stream under the a
compulsory license (if the transmission is noninteractive and meets all
the license conditions), or be required to obtain permission from the cop-
yright owner (if the stream is available to listeners on demand). The
transmitter will need to obtain permission to perform Cole Porters
musical work publicly. ASCAP, BMI, and SESAC each provide blanket
licenses for such transmissions of the works in their respective
repertoires.46

45. Indeed, the commonly used RealAudio streaming software is designed to allow a
transmitter to specify that the receiving users RealPlayer software may not record a copy of the
transmitted file. See RealNetworks, Inc. v. Streambox, Inc., 2000 U.S. Dist. LEXIS 1889, at *5
(W.D. Wash. Jan. 18, 2000).
46. See [Link] (last visited Feb. 10, 2001), http://
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252 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

The major copyright question with respect to streaming audio trans-

missions is whether every such transmission constitutes not only a pub-
lic performance of the works transmitted but also a reproduction of those
works. The reproduction and performance rights are independent of one
another. The statutory language and legislative history contemplate that
a single transmission could involve the exercise of both reproduction
and public performance rights.47 Such a transmission occurs where the
recipient can both hear the song received and store a copy of it.
The more significant aspect of the question is whether every
streaming audio transmission reproduces both the musical work and the
sound recording transmitted, even if the recipient does not retain any
copy of the music at the end of the transmission, as is the case with an
ordinary streaming transmission. This possibility arises largely because
of the temporary storage in random-access memory (hereinafter
RAM) that occurs in essentially every computer.48 As a streaming
audio transmission is received, the digits that represent the sounds to be
played back by the recipients streaming audio software will temporarily
be stored in the RAM of the recipients computer, until they are
processed by the software, played back, and replaced in RAM by subse-
quently transmitted digits.49 In cases not involving streaming transmis-
sions, at least two federal appellate courts have held that storing a
copyrightable work in RAM constitutes reproduction of the work in vio-
lation of the copyright owners exclusive reproduction right.50 Many
have criticized these decisions as inconsistent with the statutory lan-
guage and the legislative history of the Copyright Act.51 Some lower

[Link]/iama/webcaster/automated/[Link] (last visited Feb. 10, 2001), http://

[Link]/licensing/internet_newmedia.htm (last visited Feb. 10, 2001).
47. See, e.g., 17 U.S.C. 114(d)(4)(B), (C) (exemptions from and licenses of the digital
transmission performance right do not limit reproduction rights in musical work or sound
recording). See also S. REP. NO. 104-128 at 27 (1995) (if digital audio transmission is also a
digital phonorecord delivery, exemptions and licenses of digital transmission performance right in
114 do not limit copyright owners rights of reproduction and distribution).
48. In the operation of a computer, all data is processed by being stored temporarily in the
random-access memory or RAM of the computer. See, e.g., THE DIGITAL DILEMMA, supra note
2, at 28-31. Such storage is usually quite temporary both because the material stored in RAM is
often quickly replaced with new material and because this type of memory is generally volatile
so that material stored in RAM disappears when the power supply to the RAM is turned off or
interrupted.
49. Reproduction may also occur because the streaming software may temporarily store (or
cache) the received data on the hard drive of the recipients computer, where it may remain until it
is written over by other data. There is little doubt that such storage technically constitutes the
reproduction of the stored work in a phonorecord.
50. Stenograph L.L.C. v. Bossard Assocs., 144 F.3d 96 (D.C. Cir. 1998); MAI Systems Corp.
v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993).
51. See, e.g., Jessica Litman, The Exclusive Right to Read, 13 CARDOZO ARTS & ENT. L.J. 29,
41-43 (1994); Mark A. Lemley, Dealing with Overlapping Copyrights on the Internet, 22 U.
DAYTON L. REV. 547, 550-52 (1997).
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 253

courts52 and government officials53 have, however, adopted this view,

suggesting that courts may rule that temporary RAM storage that occurs
automatically in the course of every streaming audio transmission con-
stitutes a reproduction of the copyrighted works transmitted.
The legislative history of the compulsory DPD license indicates
that at least some RAM storage as part of a streaming transmission will
constitute the reproduction of a phonorecord.54 For purposes of license
rates, the statute distinguishes between ordinary DPDs and incidental
DPDs.55 The legislative history provides the following example to
explain the distinction:
[I]f a transmission system was designed to allow transmission
recipients to hear sound recordings substantially at the time of trans-
mission, but the sound recording was transmitted in a high-speed
burst of data and stored in a computer memory for prompt playback
(such storage being technically the making of a phonorecord), and the
transmission recipient could not retain the phonorecord for playback
on subsequent occasions (or for any other purpose), delivering the
phonorecord to the transmission recipient would be incidental to the
transmission.56
Thus, at least streaming transmissions where the entire transmitted
sound recording is stored at one time in the RAM of the recipients
computer for playback would appear to involve the making of a DPD. It
is not clear, however, whether the temporary RAM storage of small por-
tions of a sound recording involved in the buffering typically done by
streaming software today would constitute a DPD.
Some evidence also indicates that the drafters did not intend for all
streaming transmissions to implicate the reproduction right.57 The statu-
tory definition of digital phonorecord delivery expressly exempts any
real-time, noninteractive subscription transmission of a sound recording
where no reproduction of the sound recording or the musical work

52. See, e.g., Tiffany Design, Inc. v. Reno-Tahoe Specialty, Inc., 51 U.S.P.Q.2d 1651 (D.
Nev. 1999); Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, 74 F. Supp. 2d 1290 (D. Utah
1999).
53. See, e.g., INFORMATION INFRASTRUCTURE TASK FORCE, INTELLECTUAL PROPERTY AND THE
NATIONAL INFORMATION INFRASTRUCTURE: THE REPORT OF THE WORKING GROUP ON
INTELLECTUAL PROPERTY RIGHTS (1995) [hereinafter White Paper]; Hearing Before the Subcomm.
on Courts and Intellectual Prop. of the House Judiciary Comm., 106th Cong. (2000) (statement of
the Register of Copyrights) available at [Link]
(last visited June 29, 2000) (Internet retransmissions require the making of temporary copies
within computer systems delivering the retransmissions, which allow the audio or video
programming to appear to be played in real time to the end user.).
54. See S. REP. NO. 104-128 at 39.
55. 17 U.S.C. 115(c)(3)(C), (D).
56. S. REP. NO. 104-128 at 39.
57. See 17 U.S.C. 115(d).
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254 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

embodied therein is made from the inception of the transmission through

to its receipt by the transmission recipient in order to make the sound
recording audible.58 If, however, temporary storage in RAM consti-
tutes a reproduction, then no streaming transmission will fall within the
carveout to the definition, since a RAM reproduction will be made in
every case by the recipients computer in order to make the transmission
audible. The Harry Fox Agency appears to be taking the position that
essentially every streaming transmission involves a reproduction for
which payment must be made.59
The practical implications of treating the RAM storage that occurs
during streaming audio transmissions as a phonorecord are extremely
significant. Every streaming audio transmission would need to be
authorized not only as a public performance of both the sound recording
transmitted and the musical work embodied in that sound recording, but
also as a reproduction of each of those works.60
With respect to the musical work involved, ASCAP, BMI, and
SESAC licenses would authorize only the public performance of those
works, and not any reproduction. Permission for the RAM storage
involved in the streaming transmission might be available by means of a
compulsory mechanical license, but that license is not particularly useful
to streaming audio transmitters. For one thing the cost of such licenses
could make streaming transmissions prohibitively expensive. The com-
pulsory license rates must by statute distinguish between DPDs in gen-
eral and DPDs that are incidental.61 Although no rate has yet been
set for incidental DPDs, the general DPD rate is 7.55 cents per musical
work per transmission.62 To take one example, it is extremely unlikely
that a Web radio station that does not charge for its transmissions (cur-
rently the predominant business model) could afford to pay license pay-
ments of over seven cents per song each time it transmits a song to each
user, in addition to payments to copyright owners for publicly perform-
ing the sound recording and the musical work embodied therein. Impos-

58. Id.
59. See Jon OHara, Look Out, Napster: Here Come the Music Publishers, June 27, 2000, at
[Link] (last visited July 12, 2000)
(quoting general counsel of National Music Publishers Association stating that NMPA suit against
[Link] service gives us the opportunity to obtain a court ruling that streaming is a
mechanical reproduction and distribution for which publishers and songwriters should be entitled
to royalties). See also Kohn, supra note 7, at 4, 12.
60. See, e.g., Hearings Before the Senate Comm. on the Judiciary, [Link], 106th Cong.
(2000) (statement of Michael Robertson) available at [Link]
7112000_mr.htm (last visited July 12, 2000) [hereinafter Robertson Statement] (lamenting the
multiple licenses necessary to stream a single song under simultaneous rights positions).
61. 17 U.S.C. 115(c)(3)(C), (D).
62. 37 C.F.R. 255.6.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 255

ing a substantially lower rate for incidental DPDs might make such
transmissions more feasible, but the administrative costs of obtaining the
necessary DPD licenses would nonetheless likely be prohibitive. Unlike
the blanket licenses issued by ASCAP, BMI, and SESAC, the compul-
sory mechanical license is available on a per work basis. In order to
obtain the license, the prospective licensee must serve notice of its inten-
tion to reproduce on the copyright owner of each musical work to be
reproduced.63 Thus, a streaming transmitter that wished to use the com-
pulsory incidental DPD license to authorize RAM storage in the course
of its transmissions would have to secure a separate compulsory license
for each musical work that it wishes to transmit. For an entity that trans-
mits any volume or variety of recorded musicfor example, a Web
radio station or a music locker servicethe administrative costs of
securing such compulsory licenses would be enormous and in many
cases prohibitive. Consider a subscription music service that WebJazz
might offer that allows listeners who pay ten dollars per month to listen
to a continuous stream of jazz music. The Web site could get blanket
musical work performance licenses from ASCAP, BMI, and SESAC for
any song it wishes to transmit, but would also have to obtain individual
mechanical licenses in advance through the Harry Fox Agency (or the
Copyright Office) for each and every song it transmits. The compulsory
license might be helpful (assuming the incidental DPD license rate is
affordable) to sites that stream a limited number of songs with sufficient
advance notice to obtain the license, but at the moment that seems to
describe few, if any, likely Internet music business models.64
Substantial problems also are presented by considering streaming
transmissions to be reproductions of the transmitted sound recordings by
virtue of their temporary storage in RAM. This approach would render
essentially irrelevant the extremely detailed provisions allowing exemp-
tions fromand mandating compulsory licensing ofthe digital trans-
mission performance right.65 These provisions limit only the sound

63. See 17 U.S.C. 115(b); 37 C.F.R. 201.18(a)(2).

64. The compulsory license would also be of little to use to a transmitter who streams live
performances from concert halls or nightclubs (see, e.g., [Link]) unless the
performers are able to notify the transmitter in advance which songs they will perform and are
willing not to deviate from that selection.
65. Cf. MELVILLE B. NIMMER AND DAVID NIMMER, 2 NIMMER ON COPYRIGHT 8.24 n. 26
(If parties exist who can block one right or the other, then the whole statute would be reduced to
a tragic waste.). The impact on transmitters, such as those making interactive transmissions,
whose activity is not exempted or licensed under 114 would be much less. Those transmitters
will already need to obtain a license of the sound recording performance right directly from the
copyright owner, who remains free to deny the license or charge whatever price it chooses for the
license. So long as the public performance and reproduction rights are not owned separately by
different entities, the need to acquire both performance and reproduction rights would not seem
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256 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

recording copyright owners performance right, not the reproduction

right. A streaming transmission that is exempt or licensed under the
Copyright Act would not infringe the digital transmission performance
right, but the inherent RAM storage necessary to make that streaming
transmission would infringe the reproduction right unless otherwise
authorized. When enacting and amending the digital transmission per-
formance right, Congress determined that sound recording copyright
owners should not be able to prevent certain kinds of digital music trans-
missions, such as broadcast transmissions and noninteractive Webcasts
that are not likely to substitute for sales of phonorecords. Instead, Con-
gress chose to allow such transmissions on a blanket basis without the
copyright owners permission and with either no compensation or com-
pensation at an externally determined rate. If every streaming transmis-
sion requires a license of the reproduction right, however, the copyright
owner will be able to prevent music transmissions that otherwise would
be allowed under the congressional scheme. No general compulsory
license is available for reproduction of sound recordings; the compul-
sory mechanical license extends only to musical works. Thus, sound
recording copyright owners could simply deny reproduction licenses for
transmissions made by broadcasters or by license-eligible noninteractive
Webcasters and thereby prevent transmissions that otherwise would be
permissible digital transmission performances.
Even if sound recording copyright owners were willing to grant
reproduction licenses to such exempt or statutorily licensed transmitters,
the need to obtain reproduction licenses would impose significant trans-
action costs on transmitters because no entity currently issues blanket
licenses for such reproductions. Instead, transmitters would have to
obtain permission from each copyright owner.66 In addition, the cost for
such reproduction licenses would be on top of the cost that the transmit-
ter would have to pay for the performance license, and it is not clear that
Congress intended such transmitters to have to pay sound recording
owners more than the price provided in the statute in order to engage in
the permitted activities. Indeed, Congress expressly provided that more

likely to impose additional transaction costs or to give copyright owners any opportunity to extract
additional compensation from these transmitters.
66. To transmit recordings owned by major labels, one would need to obtain licenses only
from the major-label companies; however, transmitting recordings owned by smaller labels would
require obtaining permission from many independent labels. See, e.g., The Use of Copyright
Programming over the Internet: Hearing Before the Subcomm. on Courts & Intellectual Prop. of
the House Comm. on the Judiciary, 106th Cong. (2000) (testimony of Charles P. Moore, Vice
President of Business Development, Radio Active Media Partners), available at http://
[Link]/judiciary/[Link] (How would a start-up webcaster with minimal
financial capital negotiate licenses with hundreds of jazz labels whose music is necessary to
satisfy jazz-lovers eclectic tastes?).
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 257

permanent reproductions made by a transmitter in order to facilitate its

transmissionsfor example, the phonorecord made by copying a
recording from a compact disc onto the hard drive of a Web sites
servereither do not infringe reproduction rights or can be made under
a compulsory license,67 suggesting that imposing additional costs for
necessary and incidental RAM storage in the course of performance
transmissions is inconsistent with congressional intent.
Therefore, treating RAM storage in streaming transmissions as
reproduction would have very significant implications for the ability of
users to make such transmissions. This approach would impose transac-
tion costs that may make most Internet streaming transmissions impossi-
ble and would allow copyright owners to prevent activities that Congress
chose to permit. Consider again the WebJazz subscription service and
its situation if streaming transmissions are considered to be reproduc-
tions. Even if WebJazz buys ASCAP, BMI, and SESAC licenses, and
even if WebJazz conforms its transmissions to the conditions of the
compulsory license of the digital transmission right (and pays the com-
pulsory license fee), WebJazz will still have to obtain and pay for indi-
vidual reproduction licenses for each musical work it transmits and
individual reproduction licenses for each sound recording it transmits.
Few Internet streaming music business models seem likely to flourish in
the face of such costs.

B. Download Transmissions
The other major type of Internet music transmission, aside from
streaming audio, is the downloading of a file of recorded music. Over
the World Wide Web, for example, a user might connect to the Red Hot
Organizations Web site and find an MP3 file of Annie Lennoxs record-
ing of Evry Time We Say Goodbye.68 The user can direct the Web
site to transmit the music file to her, and the users computer will store
the received file, typically on the computers hard drive. At the end of
the transmission, the user has her own copy of the file on her computer
hard drive, and she can listen to the recording embodied in that file
whenever she wants, without any need to be connected to the Web site
that originally transmitted it. With appropriate equipment, the user can
copy the file onto a compact disc or onto the storage device of a porta-
ble, Walkman-like player that will allow her to listen to the recording
away from her computer.

67. 17 U.S.C. 112(a), (e) (Supp. IV 1998).

68. In fact, as of August 2000, the Red Hot Organizations Web site featured one
downloadable MP3 track per week on a rotating basis from the recordings on the various AIDS
benefit albums produced by the organization.
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258 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

Download transmissions may be provided by various types of

Internet entities. A user might download a music file from the Web site
of a recording artist or record label which provides downloads for pro-
motional purposes. The user might also download a file from a Web site
specializing in downloadable music by many artists, such as
[Link] (which has over 100,000 tracks available for download for
ninety-nine cents each),69 [Link] (where music files from thousands
of artists can be downloaded, many for free),70 or DownloadsDirect
(which features both free and pay downloadable files).71 Or, instead of
downloading from a Web site, the user might download a music file
directly from the hard drive of another users computer using file-shar-
ing software such as Napster or Gnutella.
A user who downloads an MP3 file of Annie Lennoxs recording of
Evry Time We Say Goodbye reproduces in a phonorecordthe new
file on the users hard driveboth Lennoxs sound recording and Cole
Porters musical work. To make that phonorecord without infringing
those copyrights will generally require permission from both copyright
owners. Permission to reproduce Annie Lennoxs sound recording can
only be obtained from the owner of the copyright in that sound record-
ingusually the record label that originally issued the recording. Once
the sound recording copyright owner has authorized the reproduction,
permission to make a phonorecord of Cole Porters musical work by
means of a digital phonorecord delivery can be obtained in the form of
the compulsory mechanical license or a mechanical license from the
Harry Fox Agency. Some question may exist as to who exactly is com-
mitting the act of reproduction.72 Under any view, however, the party
transmitting the file probably faces liability for copyright infringement,
either direct or contributory, if the transmission is not authorized.73 As a

69. The Future of Digital Music: Is There an Upside to Downloading?, Hearing Before the
Senate Comm. on the Judiciary, 106th Cong. (2000) (statement of Gene Hoffman, Jr., Founder,
President & CEO, [Link], Inc.,) available at [Link]
7112000_ghj.htm (last visited July 12, 2000).
70. Robertson Statement, supra note 60 (stating that more than 469,000 audio files by more
than 74,000 artists are posted to [Link] and that an average of over 100 artists and more than
1000 audio files are added daily).
71. See [Link]
72. One possibility would be to view the downloading end user as the party who is making
the new phonorecord. The user, after all, has instructed her computer to connect to the computer
where the digital musical file is stored, to request that the file be transmitted to her computer, and
to store the transmitted file as it is received. Another possibility would be to view the party that
transmits the file to the end user as making the reproduction: the transmission of the data from the
transmitters computer to the receiving computers hard drive results in the new copy of the file.
A third possibility would be to view both the transmitter and the downloading user as acting
jointly to reproduce the file; therefore, they would be jointly liable for any infringement involved.
73. If the transmitter is considered to be the party making the new phonorecord, then the
transmitter will be directly liable. If the end user is considered to be the party making the
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 259

result, no matter who is seen, as a technical matter, to be making the

new phonorecord on the download recipients hard drive, the entity
transmitting the file likely will need reproduction licenses.
The major copyright question regarding download transmissions is
the flip side of the question about streaming transmissions as reproduc-
tions: do download transmissions constitute not only a reproduction of
the transmitted music but also a public performance by digital transmis-
sion, such that the transmitter will need permission from the owners of
the public performance rights as well? Again, the statutory language
contemplates that a transmission resulting in a DPDa download
might also be a public performance of the works delivered74 and makes
clear that the compulsory DPD license does not grant the licensee any
public performance rights.75 The statutory framework, however, does
not answer the question of whether any particular download transmis-
sion is a public performance.
It is easy to conceive of a download transmission that clearly would
be a public performance of the works transmitted. For example, a Web
site could transmit a music file to a user so that the users computer, as it
receives the transmitted information, both stores that information on the
users hard drive and makes the transmitted recording audible through
the computers speakers. Such a transmission would be both a reproduc-
tion of the sound recording and the musical work embodied in the file
(by means of a digital phonorecord delivery) and a public performance
of those works (by means of a digital audio transmission to the public).
Thus, the transmitter would need permission to reproduce and to pub-
licly perform both works.
Currently, however, typical download transmissions do not allow
the end user to hear the song as the digital musical file is being received.
Instead, the recipients computer stores the received file, and the recipi-
ent can then, at her leisure, choose to play back the file in order to hear
the recording.76 Although widely perceived as extremely generous to

reproduction, then the transmitter will likely face liability for contributory infringement. Under
U.S. law, someone who does not directly infringe a copyright can be liable for copyright
infringement if she materially contributes to another persons infringing activity and if she does so
knowing, or having reason to know, of that activity. See, e.g., Sony Corp. of Am. v. Universal
City Studios, 464 U.S. 417, 439 (1984). Someone who transmits a musical file to an end user is
clearly materially contributing to the end users receipt and storage of that file, and it seems
difficult to argue that someone who posts a musical file on a Web site does not have reason to
know that users are likely to download the file.
74. 17 U.S.C. 115(d) (Supp. IV 1998).
75. Id. 115(c)(3)(K)(i) (Supp. IV 1998).
76. When the user plays back the recording, she will be performing the sound recording and
the musical work it embodies, but unless she plays the song in a public or semi-public place, her
performance will not infringe because it is a not a public performance.
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260 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

copyright owners in its interpretation of copyright law in the Internet

context, the Clinton Administrations White Paper addressing intellec-
tual property rights and computer networks nevertheless took the posi-
tion that such a transmission, without the capability of simultaneous
rendering of the work, rather clearly did not constitute a public
performance.77 ASCAP and BMI have asserted, however, that every
transmission of a musical work to the public, whether or not the trans-
mission allows the user to hear the work in the course of the transmis-
sion, is a public performance for which permission of the copyright
owner is neededgenerally in the form of an ASCAP or BMI blanket
license.78
Neither the language of the Copyright Act, nor its legislative his-
tory, appears to resolve this question conclusively, and policy arguments
exist on both sides of the matter. But answering the question of whether
a download transmission constitutes a public performance may not, at
the moment, be of particular urgency because the answer may make lit-
tle practical difference in the business operations of most transmitters.
For performances of musical works, the practical impact turns on
whether Web sites that provide download transmissions also provide
streaming transmissions. For example, many download sites offer users
the chance to listen to a songor an excerpt of a songbefore deciding
whether to download it. Some of these sites might not hold performance
licenses in the belief that the fair use doctrine excuses their public per-
formances. Their reliance on the fair use doctrine, though, is probably
misplaced because the streaming of any large-scale selectioneven of
thirty-second excerpts from songswould not likely qualify as fair
use.79 To comply with copyright law, sites that offer such streaming
transmissions are likely to need a performance license. If most
download sites also engage in some streaming transmissions, those
sitesregardless of any download transmissionswill be publicly per-
forming musical works and will already need licenses from the relevant
performing rights societies.
Performance licenses are readily available to operators of these
sites because the repertoires of ASCAP, BMI, and SESAC cover the
vast majority of copyrighted music, these societies grant blanket licenses
that allow the performance of any work in their respective repertoire for

77. White Paper, supra note 53, at 71.

78. Several commentators have weighed in on this dispute as well. See, e.g., AL KOHN &
BOB KOHN, KOHN ON MUSIC LICENSING 104-110 (2d ed. 1996 & Supp. 2000); KENT D. STUCKEY,
INTERNET AND ONLINE LAW 6.08[4] (1996); David L. Hayes, Advanced Copyright Issues on the
Internet, 7 TEX. INTELL. PROP. L.J. 1, 29-31 (1998).
79. Determining whether a use is fair under copyright law is notoriously difficult because the
doctrine is so uncertain.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 261

the same fee, and at least ASCAP and BMI must, under the antitrust
consent decrees that govern their operations, grant licenses to any user
willing to pay a reasonable license fee.80 Thus, applying the perform-
ance right to downloads does not raise issues regarding the availability
of a performance license but rather raises issues regarding the cost of
such a license.
Because ASCAP, BMI, and SESAC grant blanket performance
licenses that cover both streaming and download transmissions of all
compositions in their repertories,81 a Web site that already needs per-
formance licenses for its streaming transmissions will not incur any sig-
nificant additional transaction costs in securing performance licenses for
its download transmissions. The cost of the licenses also should not
depend on whether a license is needed only for streaming transmissions
or for both streaming and download transmissions. Whatever total price
the licensor and the licensee are willing to agree to for the performance
license can be spread over either the licensees total transmissions
(streams and downloads) or over a subset of those transmissions
(streams only). For example, if all transmissions were to be considered
performances and if the parties agreed on a rate of one cent per transmis-
sion, then a site that makes a thousand transmissions (both streaming
and download) would incur a license fee of ten dollars. If, however,
only streaming transmissions are required to be licensed, and if only one
half of the licensees transmissions are streams, then a price of two cents
per transmission yields the same total price of ten dollars for one thou-
sand total transmissions.
Thus, with respect to musical works, whether considering
downloads to be performances has any practical impact on transmitters
depends on whether sites that provide downloads also engage in stream-
ing transmissions and therefore already require performance licenses. If
they do engage in streaming, the impact would seem to be minimal; if
they do not, then the impact is potentially greater. Currently, the larger

80. See United States v. Broad. Music, Inc., 1996-1 Trade Cas. (CCH) 71,378, at 76, 891
(S.D.N.Y. Nov. 18, 1994); United States v. The Am. Socy of Composers, Authors & Publishers
1950-51 Trade Cas. (CCH) 62,595, at 63, 754 (S.D.N.Y. Mar. 14, 1950). The amount of the
reasonable license fee is subject to determination by the District Court, Southern District of New
York. Id.
81. See, e.g., ASCAP Experimental License Agreement for Internet Sites on the World Wide
Web Release 3.0 (granting license to make Web Site Transmissions, defined as all
transmissions of content to Web Site Users), at [Link]
BMI Web Site Music Performance Agreement, Para. 2 (granting license for streaming and
download transmissions), at [Link] SESAC
Internet/New Media License 3 (granting right to publicly perform SESAC composiitions by
transmission on or through the LICENSEES Web Site), at [Link]
print_license.htm.
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262 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

download sites, such as [Link], [Link], [Link],

[Link], [Link], and Virgin Jamcast, do engage in both
streaming and download transmissions.82 At the other end of the spec-
trum, individual Web users who use software such as Napster or
Gnutella to make musical files on their hard drives available to other
people may be engaged only in downloading and not streaming, so that
they would not need a performance license unless their download trans-
missions constitute public performances. But those users download
transmissions are not licensed even under the reproduction right, which
clearly applies to download transmissions, so at least at the moment con-
sidering such download transmissions to be performances seems
unlikely to have any practical impact on those activities.83 In between
the major music sites and the individual Napster user are a wide range of
possible music Web sites, some of which may offer only download and
not streaming transmissions.84 Sites that do not stream any music would
not need performance licenses unless downloads are considered public
performances; thus, requiring a performance license for download trans-
missions could impose additional costs on these sites that they otherwise
would not face.85

82. At least some of these sites already have performance licenses: [Link] is licensed
by all three performing rights societies. [Link] Fact Sheet at [Link]
s=20581396f3cca439b32;/about/[Link] (last visited Sept. 22, 2000). [Link] is licensed by
at least ASCAP. Lisa Napoli, Music Licenser Announces Agreement with Web Site, N.Y. TIMES,
June 19, 1999, at C2; [Link] and ASCAP, at [Link] (last
visited Oct. 13, 2000).
83. If the activities of such transmitters are held to be noninfringing, as some have argued,
their transmissions would likely violate neither the reproduction nor the public performance right.
If their activities are held to infringe, selling reproduction licenses to individual Web users at 7.55
cents per song (the basic compulsory DPD license rate) for each download transmission (with
administrative requirements to secure advance permission for each song to be transmitted) surely
will not be successfulordinary Web users seem highly unlikely to obtain and pay for such
licenses. If such uses are to be licensed, significant changes in industry practices will be
necessary beyond resolving the issue of whether performance licenses are needed for download
transmissions.
84. Some such sites may be personal Web pages that make one or two favorite songs
available. These sites might be deemed noninfringing as making fair or de minimis use, in which
case no copyright owner of any right in the song would be entitled to compensation. If such sites
are deemed to be infringing, they are unlikely to be licensed at all because the site would have to
pay the compulsory DPD license rate (7.55 cents) as well as whatever price the sound recording
copyright owner would charge for each reproduction, entirely apart from any performance license
that might be required.
85. Requiring performance licenses would not have a significant impact on all music Web
sites, however. For example, if those who run such sites make available their own recordings of
their own compositions, then no third-party licenses will be required whatsoever. The same holds
true if a third-party site makes such works available at the request of a performer because the
performer will herself be able to license the reproduction and performance rights in both the sound
recording and the musical work. Transmitting recordings of other peoples musical works, on the
other hand, will require a mechanical DPD license at a typical cost of 7.55 cents per work per
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 263

Of course, the public performance question affects sound recording

copyrights as well. If a download transmission is a public performance
of the musical work, then it is also a digital transmission performance of
the sound recording. Here again, under current conditions, characteriz-
ing a download to be a performance seems unlikely to have a significant
economic impact on download Web sites. Because the download results
in a reproduction of the sound recording that is transmitted, the transmit-
ter will already need a reproduction license for the transmission. The
compulsory DPD license covers only musical works, so the transmitter
will have to obtain permission to transmit the sound recording directly
from the copyright owner of that work. Where reproduction and digital
transmission performance rights in sound recordings are owned by the
same entity, as is currently the case for most sound recordings, the copy-
right ownerwith whom the download transmitter will already have to
negotiatewill be able to grant the transmitter permission to make the
download under both the reproduction and performance rights. No addi-
tional transaction costs will be incurred in locating the relevant copy-
right owner and negotiating permission to perform. Moreover,
permission is likely to be equally available (or equally unavailable)
whether a download is just a reproduction or is both a reproduction and
a performance because no compulsory reproduction license is available
for sound recordings. And in the absence of divided ownership and any
compulsory license, the price the download transmitter would pay for a
reproduction and performance license for a download transmission
should not be any greater than the price for a reproduction license alone
for the same transmission. If the parties can agree on a price for the
license, it will make little difference to either party whether that entire
price is designated as the cost for a reproduction license or whether a
portion is designated as the cost for a reproduction license and the
remainder is designated as the cost for a performance license.86 It
appears that ownership of the reproduction and digital transmission per-

transmission, and if the site transmits recordings of those works by performers other than the site
owner, then a reproduction license for the sound recording (at whatever price the copyright owner
charges) will also be necessary. A Web site that can afford to pay for the necessary reproduction
licenses may be able to pay the cost of a performance license. Requiring a performance license
for download transmissions therefore may not necessarily make download transmissions by such
sites so costly that they will not be made, but instead may raise the cost of the transmission to the
end user, change the allocation of revenue from the transmission between the transmitter and the
copyright owner, or both.
86. If ownership of the performance and reproduction rights were divided, then the impact on
a download site could be significant. The transmitters transaction costs would be greater because
it would have to negotiate with two separate owners. Because compulsory and blanket licenses
are not currently available, the transmitter might not be able to obtain the necessary permission at
all. For example, the owner of the performance right might choose not to grant a license even
where the owner of the reproduction right would be willing to do so.
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264 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

formance rights is not currently divided.87 Therefore, a transmitter gen-

erally will be able to obtain both rights from a single party.
In summary, unless a significant number of download-only sites
would need performance licenses which they could not afford, the ques-
tion of whether a download transmission is a public performance per-
haps can await resolution until it becomes clear that answering the
question will make a difference. Experience already has shown that leg-
islation in this area can be quickly overtaken by technologythe provi-
sions granting the digital transmission performance right in sound
recordings in 1995 were substantially revised in 1998, and some com-
mentators have targeted the Internet service provider safe harbor provi-
sions of the Digital Millennium Copyright Act for revision less than two
years after their enactment.88 In the absence of a pressing practical need
to settle the issue, it seems prudent to delay resolution. The speed of
developments in Internet technology and business arrangementsand
the difficulties of crafting copyright laws to deal in any nuanced way
with future technological developmentscounsel waiting until resolu-
tion is necessary and then resolving the issue as appropriate for the tech-
nological and business context that has developed.
Leaving the issue unresolved obviously could have consequences
as well. If the Internet music industry develops under licenses from per-
forming rights organizations that purport to cover downloads as per-
formances, this treatment might be taken as evidence of industry
practice recognizing downloads as performances, although a users
agreement to take a license should not have any precedential or estoppel
effect on the user later asserting that no license is necessary.89 Another
consequence of waiting is that if the issue ever does need to be resolved,
positions on both sides may have become entrenched, making resolution
more difficult.90
Thus, some balance must be struck between enacting legislative
solutions to the copyright problems arising from new technologies
before such technologies have developed fully, and waiting to enact leg-

87. E-mail message from John L. Simpson, Executive Director of Artist and Label Relations,
SoundExchange, to author (Mar. 12, 2001) (on file with author).
88. E.g., Shane Ham & Robert D. Atkinson, Napster and Online Piracy: The Need to Revisit
the Digital Millennium Copyright Act, PROGRESSIVE POLY INST. POLY REP., May 1, 2000,
available at [Link]
126 (last visited Oct. 3, 2000).
89. Cf. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 585 n.18 (1994).
90. See PAUL GOLDSTEIN, COPYRIGHTS HIGHWAY 134 (1994) ([I]f you wait until the
problem is mature, the industrial interests that are posed one against another may be so
significant that it is much harder to override them, thereby destroying one party commercially or
financially, than it would be had you anticipated the problem years before.) (quoting Robert
Kastenmeier, former chair of the House Intellectual Property subcommittee).
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 265

islation until such technologies already have become so widely adopted

that the political costs of settling disputes over applying copyright law to
the new technology have become extremely high. We appear to be in
the very earliest stages of the development of the Internet music indus-
try, and therefore may have some time to wait before acting, if action
indeed proves necessary.

III. POSSIBLE SOLUTIONS

The possible simultaneous application of the reproduction and pub-
lic performance rights in download and streaming transmissions presents
two types of problems. First, there are transaction costs problems. For
example, securing a reproduction licensefrom both the musical work
copyright owner and the sound recording copyright ownerto cover the
temporary RAM storage of every song that is transmitted by streaming
audio presents an enormous hurdle for those who transmit music
because many different works can be transmitted in the course of a few
hours. In addition, if every Internet music transmission potentially
requires permission from four separate rightsholders (musical work
reproduction right, musical work performance right, sound recording
reproduction right, and sound recording digital transmission perform-
ance right), the potential for hold-out problems greatly increases. Sec-
ond, extending simultaneous reproduction and performance rights
threatens in some cases to reduce the usefulness ofor entirely nul-
lifythe compulsory licenses and exemptions that Congress expressly
granted.

A. Collective Licensing
Two main types of solutions to these problems seem possible.
First, copyright owners could create new collective licensing mecha-
nisms. Such a solution could take either a radical or an incremental
form. A radical change from existing practice would be for a new col-
lective licensing agency to emerge. This agency would have the author-
ity to license Internet transmissions under all exclusive rights of the
copyright owner (including both reproduction and public performance)
for any type of Internet transmission. Such an agency could function
much like the existing performing rights societies: music copyright
owners could grant the agency the nonexclusive right to authorize any
Internet transmission of their works, and the agency could grant blanket
and per-work licenses to all types of Internet transmitters. If the agency
represented copyright owners of both musical works and sound record-
ings, it would essentially provide one-stop shopping for an Internet
transmitter seeking the necessary copyright permissions; even if separate
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266 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

agencies developed for musical works and sound recordings, two-stop

shopping would exist. Licenses could be tailored and priced depending
on the nature of the transmission. For example, download and interac-
tive streaming transmissions, which seem most likely to substitute for
the traditional purchase of phonorecords, could be licensed at a higher
rate than noninteractive streaming transmissions, which seem more akin
to radio broadcasts and thus likely to displace only the musical work
copyright owners income from licensing public performance by tradi-
tional broadcast. This new collective licensing agency need not displace
current collective licensing organizations for musical works, which
would still grant licenses for non-Internet uses and which could still
grant licenses for Internet uses under the particular rights they have.
Nonetheless, existing licensors may perceive the development of a new
collective licensing agency for Internet transmissions as a threat, given
the possibility that a substantial portion of all music performances and
reproductions may shift to the Internet in the not-too-distant future and
the appeal of one-stop shopping that such an agency would offer.91
A second, less radical, collective licensing solution would be for
existing collective licensing agencies to expand the scope of their
licenses. For example, ASCAP, BMI, and SESAC might obtain from
their member copyright owners not only the nonexclusive right to
license public performances, as they currently do, but also the nonexclu-
sive right to license any temporary RAM storage that is incidental to
such a public performance.92 Then, a Web radio station like WebJazz
could obtain blanket performance licenses from ASCAP, BMI, and
SESAC for its streaming transmissions and be entitled to stream those
musical works regardless of whether any RAM storage of the transmit-
ted works constitutes a reproduction. Similarly, the Harry Fox Agency
might change its procedures so that its standard mechanical license not
only authorizes digital phonorecord deliveries but also allows any public
performance of the musical work necessary to make such deliveries.
Thus, a download site that obtained a DPD mechanical license from the
agency would not need a separate performance license from ASCAP,
BMI, or SESAC for its download transmissions. In addition, the Harry
Fox Agency might move to granting blanket licenses of reproduction
rights in the Internet context in order to reduce the enormous administra-
tive cost that would be required to license any significant volume of
musical works on an individual basis. Indeed, Harry Fox has started to

91. The existence of such a collective licensing agency might raise antitrust issues, although it
is not clear that antitrust law would prohibit such blanket collective licensing. See, e.g., Broad.
Music, Inc. v. CBS, 441 U.S. 1, 24 (1979).
92. This change might require modification of the existing antitrust consent decrees
governing the activities of ASCAP and BMI.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 267

make mechanical licensing for Internet uses more expeditious. Some of

these efforts concern interactive streaming transmissions and, although
the precise terms of the license do not appear to be publicly available,
the terms appear to involve either blanket licenses or streamlined admin-
istrative procedures for individual licensing.93 This more incremental
approach, however, would address only the licensing of musical works
because no collective licensing mechanism currently exists for sound
recordings.94
The likelihood that new collective licensing mechanisms will
emerge is unclear. Copyright owners ordinarily have an economic inter-
est in licensing any valuable use of their work where the license fee to
be paid is greater than the value of any alternative use of the work that
the license would preclude (multiplied by the probability of that alterna-
tive use occurring). Because collective licensing reduces transaction
costs, it makes it possible for copyright owners to license more uses of
their works than would occur in the absence of collective licensing and
therefore should appeal to copyright owners as a way to increase the
revenues generated by their copyrights.95

93. See National Music Publishers Association Press Release, Music Publishers and
[Link] Reach Landmark Agreement, at [Link] (last visited
Feb. 10, 2001) (terms of license include payment of one quarter cent each time a song is
streamed on demand to a customer from his or her [Link] locker along with a one-time fee
per track added to the [Link] service); National Music Publishers Association Press
Release, [Link] Executes License with Americas Music Publishers for Subscription Music
Streaming Service, Dec. 11, 2000, at [Link] (last visited Feb. 10,
2001) (EMusic will pay HFA a royalty fee equal to 10 cents . . . per each version of a song it
encodes and uploads into its database. EMusic will also pay HFA a royalty fee of one quarter of a
cent . . . for each stream initiated for delivery to the user.). Other efforts appear to involve
streamlined procedures for obtaining licenses to make DPDs. See National Music Publishers
Association Press Release, Music Publishers and Record Labels Reach Accord to Facilitate
Licensing for Internet Distribution, at [Link] (last visited Feb. 10,
2001).
94. While the RIAA has been named to perform certain negotiating, collecting and
distribution functions under the digital performance compulsory licenses, see 37 C.F.R. 260.3(e)
(1999) and 17 U.S.C. 114(e)(1) (Supp. IV 1998), the RIAA appears not to have authority to
negotiate on behalf of sound recording copyright owners any performance or reproduction
licenses other than the compulsory licenses. See Recording Industry Association of America, You
Need A Voluntary License If You Are . . . at [Link] (last
visited Sept. 29, 2000). SoundExchange, an organization formed recently by multiple recording
companies, also appears to have authority only to negotiate and administer digital performance
compulsory licenses and not licenses for any transmitter that does not comply with the
requirements for the compulsory license. See [Link]
(last visited Feb. 10, 2001).
Attempts at collective licensing of sound recording rights have begun to emerge overseas.
Some four hundred independent record labels in the United Kingdom have recently formed the
Association of Independent Music to engage in experimental collective licensing of Webcasters.
Micheal Learmonth, Breaking the Sound Barrier, THE [Link], Sep. 18, 2000, at http://
[Link]/article/display/0,1151,18581,[Link] (last visited Sep. 26, 2000).
95. Of course, collective licensing has potential disadvantages for copyright owners as well.
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268 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

In the context of Internet music, however, economic incentives may

not induce collective licensing mechanisms in the near future. On the
one hand, ASCAP, BMI, and SESAC have begun granting blanket per-
formance licenses to Internet transmitters and the Harry Fox Agency has
granted streamlined Internet licenses, suggesting some willingness
among copyright owners to engage in collective licensing. On the other
hand, though, owners of the reproduction rights in musical works and,
especially, owners of sound recording copyrights have expressed sub-
stantial concerns and uncertainty over how Internet transmissions will
reshape the music industry; they generally have been perceived as quite
cautious about exploiting their works on the Internet, either by them-
selves or through licensing arrangements.96 Also, because four different
rights are involved (and at least three of those traditionally have been
administered separately), if a collective licensing mechanism does not
develop for any one of these rights, even collective licensing mecha-
nisms for the remaining rights may not reduce transaction costs suffi-
ciently to make Internet music transmissions workable.

B. Legislative Solutions
Collective licensing solutions address only the transaction costs
problem presented by simultaneous performance and reproduction
rights. They do not address the problem of interference with exemptions
and compulsory licenses which arises when someone who engages in a
congressionally sanctioned performance is held also to need a reproduc-
tion license or vice versa. If collective licensing solutions do not
emerge, engaging in compulsorily licensed or exempt activities could
become either significantly more expensive (because of the transaction
costs required to negotiate individual licenses of the additional right) or,
more importantly, entirely impossible (if rightsholders simply refuse to
license the additional right).

For example, blanket licenseslikely to be the most efficient form of licensing for Internet music
transmissions, where a vast number of works, each of which is owned in part by multiple
copyright owners, are transmitted quickly to large numbers of peoplepose problems of
allocation of license revenues to individual copyright owners.
96. For example, in ratemaking proceedings for the compulsory license of the digital
transmission performance right enacted in 1995, sound recording copyright owners and licensees
proposed widely diverging rates: users suggested 0.5% to 2% of their gross revenues while
copyright owners proposed 41.5%. Determination of Reasonable Rates and Terms for the Digital
Performance of Sound Recordings, 63 Fed. Reg. 25394, 25395 (May 8, 1998) (to be codified at 37
C.F.R. pt. 260), available at [Link] While
these proposals may represent, in part, strategic positioning, they nonetheless suggest that it may
be difficult for owners and potential licensees to agree on a license rate. Uncertainty over how the
music industry will develop in the digital environment and how those developments will affect
existing revenue streams makes valuation of Internet uses problematic.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 269

But even if collective licenses were available, they would raise the
cost of engaging in activities that Congress has exempted or licensed.
For example, if a collective license were developed for the temporary
RAM storage of sound recordings in the course of digital transmission
performances, such a license would impose an additional cost on trans-
mitters who otherwise are entitled under the law to transmit sound
recordings either without payment to the copyright owner or at statuto-
rily set rates. It is not clear that Congress intended such transmitters to
bear this additional cost in order to engage in the licensed (or exempt)
conduct. The problem of potential interference with exempt or licensed
activityboth in preventing the activity and in imposing additional
coststherefore may require a legislative solution, rather than a collec-
tive licensing one.
Legislative solutions, like collective licensing ones, could range
from incremental to dramatic. One comprehensive legislative solution
would be to clarify for all types of copyrightable works that temporary
RAM storage does not infringe on the copyright owners reproduction
right97 and that a transmission that creates a new reproduction of a work
but does not make it perceptible to the recipient does not constitute a
public performance. A slightly less comprehensive solution would be
for Congress to grant a unified digital transmission right for musical
works and sound recordings that is separate from, and not simultaneous
with, the reproduction and public performance rights.98 Other radical
proposals can be imagined, although the possibility of their adoption
seems remote.99

97. I have suggested this position elsewhere. See R. Anthony Reese, The Public Display
Right: The Copyright Acts Neglected Solution to the Controversy over RAM Copies, 2001 U.
ILL. L. REV. 83, 146-48 (forthcoming 2001) (arguing that for visually perceptible works the public
display right adequately protects copyright owners and obviates the need to consider RAM storage
as the making of a copy).
98. Internet music transmitters would need only one license from musical work copyright
owners and one from sound recording copyright owners. Copyright owners could be expected to
offer to license the transmission right at different rates for different types of transmissions
higher rates for download and interactive streaming transmissions that substitute for the purchase
of phonorecords and lower rates for broadcast or noninteractive streaming transmissions.
Collective licensing could emerge where appropriate, particularly for streaming transmissions,
where large numbers of works are likely to be involved, making individual licensing very costly,
and Congress, where appropriate, could subject the unified right to exemptions and compulsory
licenses, particularly if collective licensing mechanisms do not emerge in the market in a
reasonable time.
99. A more radical solution would be to grant copyright owners in musical works and sound
recordings full exclusive rights to reproduce and to publicly perform their works without
subjecting those works to any compulsory licenses or exemptions and then simply allow market
forces to govern the exploitation of those rights. However, given previous unsuccessful attempts
to eliminate the compulsory mechanical license and to grant a general public performance right in
sound recordings, this approach seems doomed. Moreover, such an approach may not be
desirable. The existing scope of exclusive rights and limitations in musical works and sound
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270 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

More incremental solutions would be to amend the statute to clarify

that any temporary RAM storage of a musical work or a sound recording
that is incidental to an authorized digital audio transmission is exempt
from copyright control, or to extend the existing compulsory licenses
and exemptions to the digital transmission performance right to cover
any such RAM storage necessary to make the licensed or exempt trans-
mission.100 Under either approach, the exemption or license would
extend to the RAM storage of any copyrighted work whose transmission
is authorized, whether it be a musical work or a sound recording. A
streaming audio site such as WebJazz would still need to obtain authori-
zation for public performance of both musical works and sound record-
ings, but once it got those licenses, it would not need any additional
reproduction licenses.101 An unauthorized transmission, however, might
still infringe both the performance and reproduction rights. This
approach resembles that already taken with respect to ephemeral record-
ings that transmitters produce in order to make their transmissions.102
The law treats such reproduction, under certain conditions, as necessary

recordings appears to offer authors and publishers sufficient incentive to create and disseminate
works while at the same time increasing public access to such works. For example, current rights
and limitations allow multiple recording artists to record any musical work and allow free
broadcasting of sound recordings.
Another radical possibility would be to exempt incidental performances and RAM storage
but to impose a royalty scheme in which every distribution of certain computer equipment, such as
software for downloading or streaming, or RAM devices, would require the payment of a small
fee to the Copyright Office. The Copyright Office would periodically distribute these royalties to
copyright owners to compensate them for any performance incidental to a download and any
RAM storage incidental to a streaming transmission. Cf. 17 U.S.C. 1001-1010 (1994)
(imposing similar scheme on digital audio recording devices and media). Such a solution seems
extraordinarily unlikely to be enacted in the current political climate. On the advantages and
disadvantages of such a system, see Fisher, supra note 2.
100. Because Part II.B., supra, suggests that the simultaneous application of the public
performance and reproduction rights to download transmissions seems unlikely to raise significant
problems for download transmissions, I have focused here on the problems presented by
considering streaming transmissions to be reproductions by virtue of RAM storage. If the
prediction in Part II.B. proves incorrect, a similar approach could be taken for download
transmissions. Congress could exempt any incidental performance as part of a lawful digital
phonorecord delivery or could extend the compulsory mechanical license to include any such
incidental performance.
101. This approach probably would require defining the term incidental and could lead to
interpretive questions about the term. However, the Copyright Act already uses the term in
various provisions. See, e.g., 17 U.S.C. 114(d)(1)(C)(i), (j)(2); 115(c)(3)(C), (D);
1001(5)(A)(i), (C)(ii).
102. The Copyright Act allows such recordings if the transmitter is authorized to perform the
work recorded, whether the authorization is by means of a license from the owner of the
performance right, by a compulsory license, or by an exemption from infringement liability. 17
U.S.C. 112(a)(1) (Supp. IV 1998). So, for example, a radio station that wishes to transmit ten
songs, each from a different compact disc, can make a compilation recording of the ten songs in
the order they are to be transmitted, rather than having to put each compact disc in a player in
succession as the songs are broadcast.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 271

for the authorized transmission and therefore allowable without addi-

tional permission from copyright owners. Congress could treat RAM
storage incidental to authorized streaming transmissions in the same way
and exempt that storage from infringing. This approach corresponds to
the functional reality of streaming transmissions. The goal of the trans-
mitter and the recipient of a streaming audio transmission is to allow the
recipient to hear the work: any temporary storage in RAM is purely
incidental to that listening and unlikely to be of any separate value from
the performance, for which the copyright owners are already entitled to
compensation.

C. Conclusions

In choosing among these possible solutions, legislation seems pref-

erable to merely relying on collective licensing. Collective licensing
mechanisms may not emerge and only a legislative solution will protect
the compulsory licenses and exemptions that Congress has granted.
Among legislative solutions, it seems preferable to act narrowly to solve
the particular problems of exploiting music on the Internet and not to
attempt to resolve issues that arise in the use of other types of copyright-
able works over digital networks. In addition, it seems desirable to
adopt a solution that would add as little complexity as possible to this
already too-complex area of law. Finally, it seems preferable to adopt
legislative solutions that would not preempt private action any more
than is necessary.
Amending the law to clarify for all types of copyrighted works that
temporary RAM storage does not infringe the reproduction right, and
that a transmission that creates a new reproduction of a work but does
not make it perceptible to the recipient does not constitute a public per-
formance, would have ramifications far beyond the realm of Internet
music transmissions. For example, RAM storage is ubiquitous not only
in computer network transmissions of all types of copyrightable works,
but also in virtually all non-networked computer uses of such works
and the debate over whether RAM storage ought to be treated as repro-
duction has been quite contentious. Similarly, the public performance
right applies to other types of works, particularly motion pictures and
other audiovisual works. The very differentand currently quite
fluidcontexts of digital exploitation of those various kinds of works
would require difficult predictions about all of those contexts before
enacting wholesale changes in the definitions of performance. The par-
ticular problems raised by simultaneous rights in Internet music trans-
missions, though, can be resolved by more targeted solutions, without
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272 UNIVERSITY OF MIAMI LAW REVIEW [Vol. 55:237

the need to resolve these larger disputes or make these difficult

predictions.
Therefore, the best solution may be to extend the existing compul-
sory licenses and exemptions that apply to digital performance transmis-
sions of sound recordings to cover all incidental RAM storage of any
copyrighted work in the course of that transmission.103 This change
would prevent situations where the existence of simultaneous rights
impedes users from engaging in licensed or exempt transmission activ-
ity. At the same time, because the compulsory license rates for the
noninteractive streaming license are set through a process of periodic
voluntary negotiation (followed by arbitration in the event that negotia-
tions fail), the opportunity exists for the parties to ensure that future
license rates reflect any value of incidental RAM storage that is not cov-
ered in the current license rates, particularly if changes in technology or
business arrangements alter the value of such incidental storage in
unforeseen ways.104
Clarifying that temporary RAM storage incident to authorized
streaming audio transmissions does not constitute infringing reproduc-
tion of the works transmitted would be only one step toward increasing
legitimate Internet dissemination of copyrighted music. Other legal
issues still require clarification, such as the scope of the digital transmis-
sion performance right exemption for broadcast transmissions and
when a digital transmission service is interactive and therefore ineligi-

103. The RIAAs president has spoken approvingly of the compulsory license of the digital
transmission performance right: [W]e thought that the blanket license model made sense in this
unique environment for this specific purpose. We think the process set up by Congress and
currently in place is a good one. Rosen Statement, supra note 5. The RIAA therefore might be
willing to accept extending the compulsory license to temporary RAM storage in order to make
the Webcasting compulsory license serve its intended purpose.
104. Allowing incidental RAM storage under the compulsory performance license (and
exemptions), rather than simply exempting all RAM storage of any work that is incidental to an
authorized transmission of a sound recording, would give transmitters an incentive to meet the
conditions of the compulsory license. If a Webcaster is eligible for the compulsory license for the
digital performance transmission right, and if it buys the necessary ASCAP, BMI, and SESAC
licenses, it would be entitled to make its transmissions with no further permission. If, however,
the transmitter does not qualify for the compulsory license, for example, because it runs an
interactive service, then it will need to obtain reproduction and performance licenses directly from
the sound recording copyright owner, performance licenses for the musical works from ASCAP,
BMI, and SESAC, and a mechanical license for the temporary RAM storage of each musical work
from Harry Fox or through the Copyright Office if RAM storage in streaming transmissions
constitutes a reproduction. If we are concerned about fostering activities that Congress has
exempted or compulsorily licensed, a focus on extending the compulsory license makes sense. If
we are concerned that transaction costs may make desirable uses of copyrighted works too costly
to occur and if no collective licensing mechanism emerges for temporary RAM storage of musical
works in the course of streaming transmissions, simply exempting from infringement any
temporary RAM storage of a work in the course of an authorized performance of the work would
be preferable.
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2001] COPYRIGHT AND INTERNET MUSIC TRANSMISSIONS 273

ble for the compulsory license. Internet music disseminators will con-
tinue to face practical obstacles as well. Those who want to operate
under the compulsory license of the digital transmission performance
right must tailor their activities to the extensive conditions under which
the license is available; those who cannot do so must overcome the
transaction costs involved in obtaining permission directly from the cop-
yright owner of each sound recording to be streamed, as well as the
possible business resistance of such copyright owners. Nevertheless, the
exemptions and compulsory license that Congress created for certain
streaming transmissions, if freed from the uncertainty of potential liabil-
ity for temporary RAM storage, create significant opportunities for
streaming more music than ever before as part of various business mod-
els. This provides a significant start to realizing through legitimate busi-
ness models the Internets promise of increased access to copyrighted
music.
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