This week brings news that a Virginia broadcaster has brought suit to have a court declare that broadcasters who stream their signal on the Internet, but limit the reception of the signal to within 150 miles of their transmitter site, should not have to pay royalties to SoundExchange.  As we have written before, when Congress adopted the digital performance royalty for sound recordings in the late 1990s, there was an absolute exemption from the sound recording performance royalty forbroadcast transmissions, embodied in Section 114(d)(1)(A).  That exemption is not limited by the 150 mile rule.  However, there is another section of the law, Section 114(d)(1)(B), that also exempted from royalty payments retransmissions of broadcast transmissions.  The law exempted from the 150 mile limit those retransmissions done by other broadcast stations.  Thus, FM translators, for instance, can rebroadcast their primary station beyond the 150 mile rule without triggering a sound recording performance royalty.  So what was the section on the 150 mile zone for retransmissions intended to cover?

This issue was raised back in the early days of webcasting, when questions were raised as to whether simulcasting of broadcast transmissions were covered by the 150 mile rule.  There was some thought that it was in the early days of Internet radio.  In the first webcasting decision (the one conducted by a Copyright Arbitration Panel – or CARP, before the Copyright Royalty Board came into existence), evidence was cited that Yahoo! Music, growing out of Mark Cuban’s which built its business on the retransmission of broadcast station’s over-the-air signals, had set up its royalty structure negotiated with the record labels to take into account that broadcast simulcasts would be exempt.  But the Librarian of Congress issued a ruling rejecting that premise for a number of reasons.  See the decision here.  These included that, because Internet retransmissions of broadcast signals could not be geographically limited, they could not be encompassed within the 150 mile exception of 114(d)(1)(B).  The Librarian read the exception as encompassing only retransmissions that could be limited to being wholly within the 150 mile zone.  The Librarian also looked at Section 112, and did not find a similar exception in that section which grants a statutory license for the ephemeral copies made in certain transmissions, and thought that such an exemption would be necessary for the retransmission of broadcast signals on the Internet. (We have discussed ephemeral rights before, see e.g. here and here). There the issue sat until the case filed last week.

The complaint seeks a ruling that all broadcast Internet retransmissions that are limited to an area of less than 150 miles from the station transmitter, be exempt from the SoundExchange royalty fees.  The station argues that it can use geo-fencing technologies that did not exist in the early days of webcasting, limiting the Internet rebroadcasts to a limited geographical area using a combination of IP addresses and GPS confirmations, to keep all retransmissions to an area well-within the statutory 150 mile zone.  According to the complaint, SoundExchange contended that the exemption was intended to apply to cable rebroadcasts of radio stations when, for instance, a local cable system retransmitted a radio station’s audio as background to a local events channel or as part of an offered audio service.  This was the position taken by the Librarian in the ruling relied on by the CARP. 

But, as the statute does not contain that limitation, this case could be a very interesting one that could dramatically change the royalty payment of stations willing to limit their retransmissions to their local broadcast service area.  Of course, SoundExchange is bound to fight this suit, so watch to see what happens as the litigation continues.