On July 16, 2008, the Copyright Office published a notice of proposed rulemaking seeking comments on a rule proposing that server copies and buffers used to make digital performances of music fall within the scope of the section 115 statutory license for making and distributing “phonorecords” of recorded music. The proposed rule and the reasoning adopted in the NPRM have potentially profound effects on all involved in making digital performances of any copyrighted work and on fundamental principles embodied in the Copyright Act. The rulemaking deserves your attention.

The Proposed Rule would hold that transitory buffers used to render a digital performance are “digital phonorecord deliveries” as defined by section 115. To reach this conclusion, the Copyright Office reasoned that the buffers are “phonorecords” within the scope of the copyright owner’s reproduction right and that they are distributed, so they are within the scope of the copyright owner’s public distribution right. This reasoning does not appear to survive the intervening decision by the Second Circuit in The Cartoon Network LP v. CSC Holdings, Inc., —F.3d—, 2008 WL 2952614 (2nd Cir. Aug. 4, 2008) (see the upcoming Fall 2008 issue of Intellectual Property Insights).

The NPRM threatens to eliminate the distinction between the performance right and the distribution and reproduction rights for performances by digital transmission. This blurring of the distinction between fundamentally different rights could affect such diverse copyright issues as whether (i) the statutory licenses for noninteractive streaming under sections 114 and 112 provide all necessary sound recording rights (they do not provide downstream reproduction and distribution rights); (ii) contrary to the express terms of the statute, a performance by digital transmission is a publication of a work; (iii) a musical composition that has been performed by digital transmission, but not otherwise recorded, is subject to recording by any artist and record company under the section 115 statutory license; (iv) all devices that receive digital transmissions, whether or not they enable the user to record the transmission, are “digital audio recording devices” subject to the constraints and royalty payment obligations of the Audio Home Recording Act; and (v) activities within the scope of the section 110 performance exemptions nevertheless are subject to the reproduction and distribution rights of the copyright owner.

Numerous interested parties filed public comments on August 28. Reply comments are due September 15 and there will be a Copyright Office hearing on September 19.