The United States Court of Appeals for the Second Circuit has issued a long-awaited decision confirming that websites that offer music downloads do not need licenses for the copyright public performance right. They do, however, still need to obtain licenses for the reproduction and distribution rights. The case could also affect the rates that website operators pay for streaming music.

In United States of America v. American Society of Composers, Authors, and Publishers (ASCAP) (Application of Yahoo and Real Networks), the Second Circuit affirmed a decision by the ASCAP Rate Court that music downloads do not constitute "public performances" requiring the licensing of the performance right. Thus, the only copyright rights implicated by downloads are the reproduction and distribution rights, for which separate royalties are paid. The Rate Court is a designated U.S. District Judge that has retained jurisdiction over an antitrust consent decree governing ASCAP's license fees.

The Second Circuit held that under the Copyright Act, to "perform" a work "means to recite, render, play, dance, or act it." 17 U.S.C. § 101. Each of these statutory terms, the Court found, involve "actions that can be perceived contemporaneously." The Court held that downloads, which "are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive," are not "performances" because a user does not contemporaneously perceive the song but, rather, must take "some further action to play the songs after they are downloaded." The Second Circuit distinguished downloads from Internet streaming and ordinary radio and television broadcasts-which all parties agreed constitute "public performances" requiring a performance license-because such transmissions are perceived by users simultaneously with the transmission.

The Court also struck down as unreasonable the performance rights fees set by the Rate Court on Yahoo! Inc. and RealNetworks for blanket licenses authorizing the performance by streaming of musical works in the ASCAP repertory. This aspect of the decision is focused on Internet portals, but the outcome of the proceeding on remand may well set precedent that affects the royalties that are paid by other entities.

Notably, this case is the third recent decision strongly rejecting attempts by the music performance rights organizations to advance aggressive (and many believe unreasonable) licensing positions. The other two involved the license fees applicable to streaming mobile video and efforts to prevent commercial background music services from obtaining adjustable fee blanket licenses under which they may deduct amounts for performances licensed directly from music publishers and writers from the amounts they must pay in royalties to the performance rights organizations. It remains to be seen whether the string of results causes the performance rights organizations to take more reasonable positions.

The Second Circuit's full opinion can be read here. Wiley Rein filed an amicus brief in the case supporting Yahoo and Real Networks on behalf of CTIA-The Wireless Association®, which can be read here.