Originally posted on December 26, 2006
By Martin Medeiros 
Never before has the power of production and distribution of intellectual property been so great, and the related costs so low. The Internet is the distribution tool for the masses. This does not mean, however, that legal principles have been thrown out the door. Indeed, the intent of the founding fathers of America, and the western concept of intellectual property law that was forged on the anvil of Medieval Europe is almost identical to the one today. The facts have changed dramatically, and are much more interesting, but the right to incentives for a creative class of citizens is the hallmark of intellectual property.
There are important concepts regarding the choice of content such as using images of others, portrayal of images, libel, slander, defamation, privacy and its expectations and obscenity. All of these concepts are not addressed in this article, which is intended to be a brief discussion of the area of law.
A number of cases applying these new, fast-evolving facts are making this area of the law interesting although, perhaps, confusing to some producers and distributors as old laws, new laws and new facts collide. This distinction and many others, govern the nexus between copyright law and the Internet.
1.0 What is Covered by Copyright
Copyright exists the moment expressive ideas are affixed in tangible form. These tangible forms (such as writings, recording, still photographs and motion pictures) confer on the creator six exclusive rights: the rights to copy, make derivative works, display, perform, distribute and to perform audio works digitally.
The enabling right is found in the first part of the United States Constitution. The essence of the copyright law is exclusivity of control over one’s content. First, one should know what is protected. While ideas are not protected in copyright law, facts and ideas may be protected on free speech grounds under the First Amendment. Registration with the U.S. Copyright office affords various benefits, among them, it creates a presumption that the work is that of the registrant, allows more financial recovery in the form of damages and legal costs, and permits the Customs Service to seize infringing goods before they enter the stream of commerce.
2.0 Contracts Matters
2.1 A Bundle of Rights. In copyright law, well-drafted contracts can trump many ambiguous common law or statutory rights. We should think of the copyright as a bundle of rights that can be sold or licensed one at a time. A contract that conveys limited rights to the various “sticks” in the “bundle” of rights given to you at law is called a “license.” Gone are the days when copyright applied only to books, maps and charts, as in the formative years of the United States of America. Now, this bundle of rights has increased by statute to include motion pictures, sound recordings and, most recently, digital rights. Effective agreements must address all of the various rights in modern productions, such as synchronization rights, performance rights and others. The issue of what rights are conferred is important as some are afforded copyright protection, and others are not. There is a misconception that all rights are implied in a contract.
2.2 Some Limits to a License. A similar misconception is that general music licenses include synchronization rights to images and even different audio works. When you use music from others, you must know how you are permitted to use it. Litigation can result if the rights licensed are not clear. Synchronization licenses typically address two separate elements: permission to reproduce the music in connection with a particular visual work (e.g., a movie, a video recording of a concert); and limits on how the audiovisual work may be used. These limits may restrict the medium (e.g., Internet, broadcast, or cable), the territory (e.g., United States of America) and the duration of the license (e.g., one year). Sometimes, statues do fill gaps in terms, including royalties in the compulsory licensing dynamic. Other rights are left to the contract and the marketplace, for example, a synchronization license.
2.3 Synchronization Example Expanded. This license may be financially rewarding, as rights are set in the free market or between two bargaining parties, unlike a mechanical license, which permits reproduction of the music by using a mechanical device, which is set by federal statute. A mechanical license permits the reproduction of music in a form that may be heard with the aid of a “mechanical” device, without visual images.
2.4 Recurring Problems in Licenses Generally and Webcasters Specifically. Most cases that lead to litigation involve three scenarios between the copyright owner and the person using the copyright: (1) the license as drafted by the parties was not clear or precise enough to specifically involve digital copies, digital broadcasting, and data distribution; (2) one party regrets the transaction and seeks to get more or give less than stated in the license; or (3) someone is infringing, and has no agreement and no contractual right but relies on a statutory or common law right to infringe, such as fair use. Webcasters are no exception to these generalities. Often the first attack in a copyright case challenges the subject matter of the copyright. As mentioned above, ideas themselves are not copyrightable, but facts and legal allowances can complicate things. In this context, the question is whether the content is expressive, or just and idea or data?
3.0 Can Data on the Internet Be Protected if Pushed by Webcast?
Even if the data is in the public domain, meaning the intellectual property right expired or does not exist, the compiler of data can limit the dissemination of that information through contracts. Also, the investment made and time of delivery may confer additional rights depending on the facts and contractual relationships.
An example illustrating how data, facts or information are protected arises in certain “real time” data displayed on the Internet. In these cases, the proprietary compilation of data is evanescent. In one case, the investment and system management of a data-capturing network allowed the ownership of facts for thirty minutes exclusively (pursuant to a contract) or anytime before those facts went into the public domain when broadcast or published on the Internet. This right sprung not from copyright law, but from a proprietor’s right to control access to its private events at a private venue. While this right is similar to a trade secret there is no real “secrecy” component, but there is a market value and competitive advantage component. These laws are based on the “ticker cases” at the genesis of real-time stock quotations at the beginning of the twentieth century. The facts in those cases differ, but the controversy is the same: what is the right to one’s ownership of facts, or the right to publish those facts from private venues to the public. One of the most important public knowledge areas highlights the conflict between the rights granted by the First Amendment of the United States Constitution, conveying rights to the press, free speech and copyright law. Now that everyone can have a “press” in the form of a Blog, bulletin board or Web Site, what are the limits? What if the news is really important? Are you a “news” reporter?
4.0 Five Conditions of “Hot News” Claims
While the public good favors making facts available as soon as possible, the law does protect those who spend money and put effort into getting facts to the public. A “hot news” misappropriation claim may survive preemption by federal copyright law. There are generally five conditions central to allowing protection for those who accumulate facts, the so-called “hot news” exception. Those conditions are: the plaintiff generates or collects information at some cost or expense; the value of the information is highly time-sensitive; the defendant’s use of the information constitutes free-riding on the plaintiff’s costly efforts to generate or collect it; the defendant’s use of the information is in direct competition with a product or service offered by the plaintiff; and the ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened. This exception is important on the Internet as many things are “shared” without notice or acknowledgement of the intellectual property rights of the creators.
5.0 Is Webcasting “Broadcasting”?
Again, the law steps in where contracts fail or are silent. The Supreme Court is clear in distinguishing the Internet from broadcasters. However, since that decision, much new legislation, and more new facts have come into the law. Since the Digital Performance Right in Sound Recordings Act of 1995, copyright owners enjoy the exclusive right in performances of their works by digital audio transmission. These rights were extended in 1998 by the Digital Millennium Copyright Act (DMCA) of 1998 to cover webcasters.
Like so many other agreements, the scope of the right matters. Generally, “non subscription broadcast transmissions” from digital audio transmission performance copyright coverage do not cover simultaneous Internet streaming of AM/FM broadcast signals. The issue here is the license granted to broadcasters by the Federal Communications Commission, does not license webcasters. Broadcast transmission is operated by what we think of as radio transmission facilities, and not webcasters.  Therefore, webcasting, even if simultaneous with a terrestrial radio broadcast of AM/FM, does not qualify under copyright law for an exemption from the digital audio transmission performance right.  So a contract that permits transmission via broadcast does not include webcasting, unless the contract specifically states otherwise.
6.0 Conclusion: What are My Webcasting Rights Worth?
Generally the free market will determine the rates – what people are willing to pay makes and controls the market. However, the DMCA promulgated a process to follow when parties cannot agree. After six months of negotiation, the Librarian of Congress may convene a Copyright Arbitration Royalty Panel (CARP) to set rates and terms. The parties may appeal the resulting terms. While the appeal deals with cases of reasonableness, unfortunately, the Librarian may ignore real market data, as was the case in a recent dispute. To limit this risk, and expense of the arbitration, parties may consider working out a deal is their best option.
 Martin Medeiros is a Partner at Swider Medeiros Haver LLP; Chairman of the Oregon State Bar Computer and Internet Law Section; and Board Member, Vice President and Treasurer of Portland Community Media. “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const., Art. I, sec. 8, cl. 8.  See, Video Pipeline, Inc. v, Buena Vista Home Entertainment, Inc., 192 F.Supp. 2d 321, 346 (D. N.J. 2002) citing, Harper & Row v. Nation Enters., 471 U.S. 539 (1985), at 559-569.  These rights are granted by the copyright holder, generally the songwriter, until those rights are given away. This involves the timing or synchronization of music with visual images.  See, e.g., Freeplay Music, Inc. v. Cox Radio, Inc. (S.D. New York 2005).  For example, a tape or compact disk.  Fair use “creates a limited privilege in those other than the owner of a copyright to use the copyrighted material in a reasonable manner without the owners consent.” Fisher v. Dees, 794 F.2d 432, 435 (9th Cir. 1986).  ProCD Inc. v. Zeidenberg, 86 F.3d 1447, 1451 (7th Cir. 1996).  In the Court allowed the exclusive holder of the publication rights in “real time” of golf scores to own the data, if only for thirty minutes, the time required in exclusivity of score publication. Morris Communications Corporation v. PGA Tour, Inc., 235 F.Supp.2d 1269 (M.D. Florida 2002).  Id. At 1281.  Trade Secret is a scion of unfair competition and is governed by state and federal law. The Uniform Trade Secrets Act (“U.T.S.A.”) was promulgated by the National Conference of Commissioners on Uniform State Laws. “Trade secret” means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. U.T.S.A. § 1 (4) (1985).  See, e.g., Board of Trade of the City of Chicago v. Christie Grain and Stock Company, 198 U.S. 236 (1905); Moore v. New York Cotton Exchange, 270 U.S. 593 (1926).  See, National Basketball Ass’n v. Motorola, Inc. 105 F.3d 841, 852 (2d Cir. 1997).  Id. at 854.  The three distinctions include, (1) the Internet has not historically been regulated by an agency familiar with the medium, (2) available frequencies on the Internet are not scarce as they are on radio; and (3) affirmative steps are required to access information on the Internet. See Reno v. American Civil Liberties Union, 521 U.S. 844 (1997).  DMCA, Pub.L. No. 105-305; see 17 U.S.C. § 114(f)(2).  Bonneville International Corporation v. Peters, citing 17 U.SW.C. § 114(d)(1)(B).  17 U.S.C. 106(6).  17 U.S.C. § 114(f)(2)(A).  17 U.S.C. § 114(f)(2)(B).  Beetoven.com LLC v. Librarian of Congress, 394 F.3d 939 (D.C. Cir. 2005).