In U.S. v. American Society of Composers, Authors, and Publishers (re Real Networks Inc. and Yahoo! Inc.), the United States Court of Appeals for the Second Circuit addressed the narrow issue of whether downloading of digital musical files would infringe the public performance right of those works because the parties had acknowledged that downloading of music files would infringe the reproduction right of copyright holders. The Second Circuit upheld the district court’s finding that downloading of music files does not constitute infringement of the public performance right of copyright holders.

The case was brought under the current revision of a consent decree that concluded a 1941 antitrust action against American Society of Composers, Authors, and Publishers (“ASCAP”), which gives the United States District Court for the Southern District of New York jurisdiction to set the rates ASCAP may charge for licensing the rights in its repertory. Real Networks and Yahoo! each sought a flat-fee blanket license to publicly perform all of ASCAP’s musical works over the internet. Although the parties acknowledged that downloading of music files resulted in copying of the works, and that “streaming” songs online would also constitute “performances” of those works under the Copyright Act, they could not agree on whether merely downloading “unstreamed” digital music files also constituted unauthorized performances of those works.

In addressing the “unstreamed” issue, the Second Circuit looked to the definition of the word “perform” in Section 101 of the Copyright Act, which states that “[t]o ‘perform’ a work means to recite, render, play, dance, or act it, either directly or by means of any device or process.” 17 U.S.C. § 101. Based on this definition, the Second Circuit reasoned that performance of musical works entails “contemporaneous perceptibility.” Unlike streamed music “that renders the musical work audible as it is received by the client-computer’s temporary memory … [and] is a performance because there is a playing of the song that is perceived simultaneously with the transmission,” the Second Circuit concluded:

The downloaded songs are not performed in any perceptible manner during the [electronic] transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work as defined by § 101 [of the Copyright Act].

In terms of calculating licensing fees, the Second Circuit vacated the blanket license fees set by the district court that ASCAP could charge Real Networks and Yahoo! (i.e., 2.5% of the value of the companies’ use of the music) as unsupported by the record in light of significant differences between the companies’ various services and product lines. The Second Circuit remanded the case back to the district court to use a more precise metric and to make specific findings in determining the reasonableness of the royalty rates.