Record labels had a minor setback Nov. 4 when the federal District Court in New York refused to say definitively that Launch Media's LAUNCHcast with its "consumer influenced" playlists are interactive

Record labels had a minor setback Nov. 4 when the federal District Court in New York refused to say definitively that Launch Media's LAUNCHcast with its "consumer influenced" playlists are interactive, which would have required the service to negotiate individual licenses with the labels.

Launch was sued in 2001 by ten labels -- including UMG Recordings and then-separate BMG Music and Sony Music - for copyright infringement, claiming Launch failed to properly license sound recordings for their service.

Under the Digital Millennium Copyright Act, the owners of sound recordings -- typically labels -- must grant licenses to operators of non-interactive Webcasts at a fixed (statutory) rate. SoundExchange handles licensing these rights and collects royalties, which are then distributed to the copyright owners and performing artists.

When the digital service is interactive, the operators must negotiate with each copyright owner for the right to provide those recordings. These licenses are not compulsory, so labels/owners may say "no" or may grant the licenses on their own terms. The DMCA defines an interactive service as one that enables someone to receive transmission of a program "specially created for the recipient" or, on request, "a particular sound recording" that was "selected by or on behalf of the recipient."

LAUNCHcast allows users to listen to traditional format radio-style broadcasts, but it also permits users to customize the service. The labels claim that these consumer-influenced playlists and streams, while they are not on-demand plays, are still interactive under the DMCA.

The labels filed a motion for summary judgment, asking the court to say definitively before trial that the service is interactive. The court refused to do so since there is a question on how the definition applies to the specific service. Courts must deny this type of motion unless there is no material fact in dispute.

"While Launch concedes, as it must, that LAUNCHcast engaged users in a collaborative effort in the creation of music playlists, the semantic and factual disputes ... preclude a finding that as a matter of law that LAUNCHcast was 'interactive' under the statute," the court wrote.

The case will continue moving through the court system toward a trial. No trial date has been set.

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