Yahoo and RealNetworks score a victory

A federal appellate court said that the downloading of music online does not constitute a “public performance,” handing a victory to Yahoo and RealNetworks as they challenge the license fees paid to the American Society of Composers, Authors and Publishers.

A three-member panel on the 2nd Circuit Court of Appeals on Tuesday also threw out lower court determinations of rates that the two Internet companies were to pay ASCAP, ruling that in some cases the formulas were “imprecise” metrics.

ASCAP had argued that the music downloads should be considered “public performances,” meaning that its members were entitled to an additional revenue stream beyond the compensation it received for the sites’ copying of the music on their sites.

But the appellate court judges, mirroring the opinion of a district court in 2007, wrote that “because the electronic download itself involves no recitation, rendering or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work.”

The appellate court, however, found fault with the way that lower courts set rates for Yahoo and RealNetwork fees to ASCAP. For instance, it said the rate the court set for Yahoo calculated the value by using the amount of time music is streamed, not page views, and that rationale “neither drives nor correlates with Yahoo!’s advertising revenue.”

It also said a blanket 2.5% royalty rate should reflect the varying values of the way music is used on Yahoo. It sent the matter back to the district court to figure out new formulas.

A spokeswoman for ASCAP said they were “disappointed” in the court’s decision and “are studying the decision and will determine what further action is appropriate.”

“We anticipate that in the end, the proceeding will result in a fair and favorable license fee to be paid by commercial online services for the valuable intellectual property they use to sustain their business.”

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