Federal court: what's 'interactive'?

By Eriq Gardner

A federal appeals court in New York has found that a webcasting service that allows users to customize their Internet radio is not "interactive," and therefore doesn't need to pay royalties beyond statutory licensing rates for radio stations.

The Second Circuit's decision in this case, Arista Records v. Launch Media, is interesting in the way it reached a decision and potential ramifications.

As the Broadcast Law blog points out, the Court analyzed the method by which Launch Media (owned by Yahoo and operated by CBS Radio) allows users to select music in a stream. Users can pick their favorite genre of music and rate specific artists and songs in an attempt to have preferable music streamed, but users can't go backwards or replay a song or have favorite songs appear with any "predictability." 

The Court had to determine whether this satisfied the conditions of being "interactive" under an analysis of sound recording copyright history and the Digital Millennium Copyright Act definition of an interactive service. On Friday, the Court agreed with a 2007 jury decision that Launch's service didn't go far enough to give an individual a "specially created" transmission.

The appeal was led by Sony BMG, owner of Arista Records, but had the support of all of the majors who want web services like Launch to negotiate with each sound recording copyright holder for each song. Now that the recording industry has lost, some lawyers like Ray Beckerman believe Launch's service could create a model for others to emulate without risking excessive royalty payments. "This decision now creates a safe harbor for a whole industry and business model," Beckerman writes.