Arista Records, LLC v. Launch Media, Inc.

• Citation: 578 F.3d 148
• Decision Date: 21 August 2009
• Docket Number: Docket No. 07-2576-cv.
• Parties: ARISTA RECORDS, LLC, formerly known as Arista Records, Inc., Bad Boy Records, BMG Music, doing business as the RCA Record Label and Zomba Recording LLC, formerly known as Zomba Recording Corporation, Plaintiffs-Appellants, Capitol Records, Inc., Virgin Records America, Inc., Sony Music Entertainment, Inc., UMG Recordings Inc., Interscope Records and Motown Records Company L.P., Plaintiffs, v. LAUNCH MEDIA, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

578 F.3d 148

ARISTA RECORDS, LLC, formerly known as Arista Records, Inc., Bad Boy Records, BMG Music, doing business as the RCA Record Label and Zomba Recording LLC, formerly known as Zomba Recording Corporation, Plaintiffs-Appellants, Capitol Records, Inc., Virgin Records America, Inc., Sony Music Entertainment, Inc., UMG Recordings Inc., Interscope Records and Motown Records Company L.P., Plaintiffs, v. LAUNCH MEDIA, INC., Defendant-Appellee.

Docket No. 07-2576-cv.

United States Court of Appeals, Second Circuit.

Argued: March 17, 2009.

Decided: August 21, 2009.

Hadrian R. Katz (Sarah M. Brackney, on the brief), Arnold & Porter, LLP, Washington, DC (Robert A. Goodman, on the brief, New York, NY), for Plaintiffs-Appellants.

Michael S. Elkin (Thomas P. Lane, Shari Markowitz Savitt, on the brief), Winston & Strawn LLP, New York, NY, for Defendant-Appellee.

Before: CALABRESI, WESLEY, Circuit Judges, and DRONEY,^* District Judge.

WESLEY, Circuit Judge:

We are the first federal appellate court called upon to determine whether a webcasting service that provides users with individualized internet radio stations—the content of which can be affected by users' ratings of songs, artists, and albums—is an interactive service within the meaning of 17 U.S.C. § 114(j)(7). If it is an interactive service, the webcasting service would be required to pay individual licensing fees to those copyright holders of the sound recordings of songs the webcasting service plays for its users. If it is not an interactive service, the webcasting service must only pay a statutory licensing fee set by the Copyright Royalty Board. A jury determined that the defendant does not provide an interactive service and therefore is not liable for paying the copyright holders, a group of recording companies, a licensing fee for each individual song. The recording companies appeal claiming that as a matter of law the webcasting service is an interactive service, and alternatively, that the district court's instruction to the jury, as well as its admission and exclusion of certain evidence and testimony, was harmful error.¹ We affirm; the webcasting service is not an interactive service as a matter of law.

Background²

On May 24, 2001 Arista Records, LLC, Bad Boy Records, BMG Music, and Zomba Recording LLC (collectively, "BMG") brought suit against Launch Media, Inc. ("Launch") alleging that Launch violated provisions of the Digital Millennium Copyright Act of 1998, Pub.L. 105-304, 112 Stat. 2860 (1998) (the "DMCA"), codified in relevant part in 17 U.S.C. § 114, by willfully infringing sound recording copyrights of BMG from 1999 to 2001. The United States District Court for the Southern District of New York (Owen, J.) denied the parties' cross-motions for dismissal under Federal Rule of Civil Procedure 12(b)(6) and summary judgment. The case was tried before a jury, and after the district court denied BMG's motion for judgment as a matter of law, the jury returned a verdict for Launch.

Launch operates an internet radio website, or "webcasting" service, called LAUNCHcast, which enables a user to create "stations" that play songs that are within a particular genre or similar to a particular artist or song the user selects. BMG holds the copyrights in the sound recordings of some of the songs LAUNCHcast plays for users.

BMG, as a sound recording copyright holder, has no copyright in the general performance of a sound recording, see 17 U.S.C. §§ 106(4), 114(a), but BMG does have the exclusive right "to perform the copyrighted [sound recording] publicly by means of a digital audio transmission," 17 U.S.C. § 106(6). Launch does not dispute that LAUNCHcast provides a digital audio transmission within the definition of § 106(6). See 17 U.S.C. §§ 101, 114(j)(5). BMG has a right to demand that those who perform—i.e., play or broadcast—its copyrighted sound recording pay an individual licensing fee to BMG if the performance of the sound recording occurs through an "interactive service." See 17 U.S.C. § 114(d)(3)(C).

An interactive service is defined as a service "that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording ..., which is selected by or on behalf of the recipient." Id. § 114(j)(7). If a digital audio transmission is not an interactive service and its "primary purpose ... is to provide to the public such audio or other entertainment programming," id. § 114(j)(6), the transmitter need only pay a compulsory or statutory licensing fee set by the Copyright Royalty Board made up of Copyright Royalty Judges appointed by the Library of Congress,³ see id. § 114(f).

At trial, BMG claimed that between November 1999 and May 2001 Launch— through LAUNCHcast—provided an interactive service and therefore was required to obtain individual licenses from BMG to play BMG's sound recordings. To demonstrate how LAUNCHcast functioned, BMG submitted an email from Jeff Boulter, Senior Director of Product Development at Launch, in which Boulter described how LAUNCHcast generated a list of songs using the user's preferences. In turn, Launch submitted a report from Margaret L. Johnson, a computer science professor at Stanford University, which also detailed how LAUNCHcast generated songs for a user.⁴ There is no material dispute between the parties with regard to how LAUNCHcast works. The jury returned a verdict in favor of Launch.

BMG appeals the district court's denial of BMG's motions for dismissal under 12(b)(6), summary judgment after discovery, and judgment as a matter of law before the jury verdict, arguing that LAUNCHcast is an interactive service as a matter of law because LAUNCHcast is "designed and operated to enable members of the public to receive transmissions of programs specially created for them." BMG claims that under the DMCA there is no tipping point for the level of influence a user must assert before the program becomes an interactive service—all that matters is that the alleged copyright infringer is "transmi[tting] ... a program specially created for" the user. Alternatively, BMG claims the district court's jury instruction was error in several respects.

Discussion

The district court charged the jury with determining whether LAUNCHcast was an interactive service within the meaning of § 114(j)(7). The district court indicated that it was for the jury "to decide how much influence a consumer or a recipient can have on the programming offered by the transmitting entity—... the broadcaster—before that activity must be characterized as interactive, keeping in mind the purpose of the statute." On two separate occasions the district court noted that "there is no bright line marking the limits between an interactive service and a noninteractive service." These instructions may have misled the jury into believing that it was the jury's responsibility to determine the legal definition of interactive, a task far beyond the scope of its duty. See LNC Invs., Inc. v. First Fid. Bank, N.A. N.J., 173 F.3d 454, 467-68 (2d Cir. 1999).

But we need not determine the propriety of the instruction because we agree with BMG that the central issue of this case—interactivity—presents an issue of law.⁵ The parties do not materially disagree on how LAUNCHcast works; their point of conflict centers on whether the program is "interactive" as defined by the statute—clearly an issue of law and therefore strictly under the purview of the courts. See United States v. Nolan, 136 F.3d 265, 271 (2d Cir.1998).

An "interactive service" according to the statute "is one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient." 17 U.S.C. § 114(j)(7). The statute provides little guidance as to the meaning of its operative term "specially created." According to Merriam-Webster's Collegiate Dictionary, "specially" means: (1) "in a special manner"; (2) "for a special purpose"; (3) "in particular" or "specifically"; or (4) "especially." Create, the root of "created," means: (1) "to bring into existence"; (2) "to produce"; (3) to "cause" or "occasion"; or (4) to "design."

These definitions indicate that a "specially created" program is a program produced or designed specifically for the user—not much help defining the terms of the statute in this case. BMG sees the issue as a simple one. BMG argues that any service that reflects user input is specially created for and by the user and therefore qualifies as an interactive service. But we should not read the statute so broadly. Justice Oliver Wendell Holmes once wrote that "[a] word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used." Towne v. Eisner, 245 U.S. 418, 425, 38 S.Ct. 158, 62 L.Ed. 372 (1918) (internal citation omitted). Holmes's observation seems pertinent here. The meaning of the phrase in question must significantly depend on the context in which Congress chose to employ it.

Congress extended the first copyright protection for sound recordings in 1971 by creating a right "[t]o reproduce and distribute" "tangible" copies of sound recordings. Sound Recording Act of 1971 (the "SRA"), Pub.L. 92-140, 85 Stat. 391; see also Bonneville Int'l Corp. v. Peters, 347 F.3d 485, 487-89 (3d Cir.2003) (detailing the history and evolution of the sound recording copyright). Congress drafted the SRA to address its concern about preventing "phonorecord piracy due to advances in duplicating technology." H.R.Rep. No. 104-274, at 11 (1995) (summarizing the history of sound recording copyright). Notably, unlike the copyright of musical works, the sound recording copyright created by the SRA did...