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Call it the mouse that roared. After 100 years of relative obscurity, the U.S. Copyright Office has leapt headlong into one of the hottest regulatory battles in cyberspace. Exercising what critics call an unprecedented use of her legal authority, Register of Copyrights Marybeth Peters has determined that radio stations must pay royalties for streaming music over the Internet — even though they pay record labels nothing for broadcasting the identical content over the airwaves. Of the nation’s 16,000 radio stations, industry lawyers report that 1,700 of them were streaming their content on to the Web as of April 2000. Those involved estimate the tab for radio stations is likely to be millions — and eventually perhaps hundreds of millions — of dollars a year. The regulation, which became final in December, has incurred the wrath of the National Association of Broadcasters and radio stations across the country, which filed suit in U.S. District Court in Philadelphia to block it Jan. 25. Calling the rule “arbitrary, capricious, [and] an abuse of discretion,” the broadcasters’ lawyers from New York’s Weil, Gotshal & Manges and the Philadelphia office of Pittsburgh’s Buchanan Ingersoll, as well as NAB’s Benjamin Ivins, assert it will “wreak havoc” and “fundamentally reorder the legal and economic relationships between broadcast radio and recording industries.” All this rhetoric, triggered by an office that is technically a division of the Library of Congress and that hasn’t been sued over a rule making since 1992. As an agency, the 500-employee Copyright Office is something of an oddity — part of the legislative branch and in existence in its current form since 1897. Strictly nonpartisan, its head is appointed by the librarian of Congress, also a nonpartisan post. The agency’s mission is to administer copyright law, create and maintain a public record, and provide technical assistance to Congress and the executive branch. But with the advent of the Internet and digital technology, which allow perfect copies to be made cheaply and distributed widely, copyright issues in recent years have taken on new importance. “Sometimes I wish it was less interesting,” says Copyright Office General Counsel David Carson, wryly. He is unlikely to get his wish. WAKE-UP CALL If anything, the usually sleepy Copyright Office is likely to make even more headlines in the near future. Members of the bar expect the office to issue rules addressing the royalty relationship between the record industry and composers for music streamed over the Internet. Another concern is copyright issues related to temporary copies, or packets of data cached on a computer as part of the streaming process. An even larger question is how to apply the doctrine of first sale to cyberspace. When a person buys a physical book or album, it has been settled law for 100 years that he has the right to resell it because he has already paid the royalty. The question is, how does this apply to something purchased by downloading? “We have new responsibilities and new tasks,” acknowledges Copyright Office Staff Director Robert Dizard, noting “the increased importance of copyright in our economy, and the high stakes of the decisions made in this office.” But broadcasters question whether the Copyright Office has the authority to make such monumental decisions at all. “Precedent makes clear that the Copyright Office has no authority to define render opinions, define legal terms, or interpret issues never before decided,” asserts Vincent Curtis Jr., a partner at Arlington, Va.’s Fletcher, Heald & Hildreth, in comments filed with the office on behalf of 21 broadcasters opposed to the latest rule. “Because the controversy does not involve intricate or technical questions of fact, the Copyright Office’s specialized expertise is not needed.” Indeed, had the office been looking to duck responsibility in the NAB case, it had an easy way out. The broadcasters had already filed suit against the recording industry over the royalty issue in the U.S. District Court for the Southern District of New York, and broadcast lawyers urged the agency to let the court decide the issue. TAKING CHARGE Instead, the Copyright Office stepped up, asserting in the Federal Register that it has the right to make the rule based on “authority granted by 17 U.S.C. Section 702 to interpret the statute in accordance with Congress’ intentions and, where Congress is silent, to provide reasonable and permissible interpretations of the statute.” The broadcasters subsequently withdrew the New York suit and filed against the Copyright Office in federal court in Philadelphia. (When questioned about the venue, NAB lawyer Ivins notes that two of the plaintiffs are located in Pennsylvania, but declines to elaborate further on litigation strategy.) At the core of the dispute is congressional intent in the Digital Millennium Copyright Act of 1998. Traditional radio stations have always been exempt from paying artists and record companies (although not composers) for playing music over the air on the grounds that they provide publicity that serves to increase record sales. But digital sound and the Internet changed the balance, making it much easier to pirate music. Recognizing that heightened copyright protection was warranted, Congress passed the DMCA, which requires Webcasters to pay royalties for broadcasting over the Internet. Congress also created a new statutory copyright license for noninteractive Webcasters that frees them from having to negotiate broadcast rights with individual copyright owners. What Congress failed to address explicitly was whether traditional radio stations that stream their on-air content into cyberspace are entitled to retain their royalty exemption. The broadcasters argue that Congress never intended to upset such an important and historical relationship, and doing so would actually place radio stations at a disadvantage vis-�-vis Webcasters. “It’s an unlevel playing field for us,” says Ivins of NAB. “Webcasters have no FCC obligations, no public interest obligations. We have to comply with all the FCC requirements.” Furthermore, the terms of the statutory license — no pre-announcing songs, no playing more than one song by the same artist in a row — while designed to thwart piracy, are not compatible with traditional radio broadcast formats. That puts radio stations in the all but impossible position of having to negotiate copyrights one by one. But with equal vehemence, Seth Greenstein, a Washington, D.C.-based partner at Chicago’s McDermott, Will & Emery who represents the Digital Media Association, argues that Congress clearly intended the 1998 law to apply to radio stations. “It’s a new transmission medium that has nothing to do with FCC broadcast requirements and requirements to serve local communities,” he says. “They are serving a national and, indeed, an international audience, and it’s not unfair for Congress to apply different rules.” Also strongly supporting the Copyright Office action is the Recording Industry Association of America, which has wrangled with broadcasters over royalty issues for decades. The Copyright Office took up the issue last March in response to a petition from the group. RIAA lawyer Robert Garrett, a partner at Washington, D.C.’s Arnold & Porter, argues that Web-only broadcasters and traditional broadcasters are “doing the exact same thing,” adding, “In our view, there is no distinction between whether the Internet transmission emanated from an FCC-licensed broadcaster or from an Internet-only Webcaster.” The ultimate decision on the matter was made by Copyright head Peters, a career civil servant who has worked at the office for 35 years and was named to the top post in 1994. While the office lacks the typical agency apparatus of commission meetings and votes, Carson says the affected parties were “full participants” in the rule-making process. However, he adds, their ability to lobby the office is limited because of a strict ban on ex parte communications during rule making. “There are no exceptions. We keep it to the record,” says Carson, who describes the office as “lobby-proof.” His assessment is seconded by copyright specialist Arthur J. Levine, of counsel at Washington, D.C.’s Finnegan, Henderson, Farabow, Garrett & Dunner. “The office is straight down the middle,” says Levine, who worked there from 1963 until 1971. “It’s not political in any way.” Still, in the long history of the Copyright Office, which has traditionally been best-known as record-keepers of copyrighted works, the rule stands out in both impact and scope. “The significance of this is great,” says Christine Haight Farley, an assistant professor at American University’s Washington College of Law who specializes in IP issues. “It’s a big deal in terms of the effect on the landscape of the music industry.”

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