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Geo-fencing and Radio Station Internet Streams

Geo-fencing and Radio Station Internet Streams

(WTGD v. SoundExchange)

As the radio station Internet streaming industry continues to grow, so do the number of legal issues surrounding the industry. Currently a district court in West Virginia is wrestling with the application of the Copyright Act to the use of Geo-fencing technology. Geo-fencing technology theoretically allows broadcasters to control receipt of their Internet broadcasts based on the geographic location of the listener. Geo-fencing may enable radio stations to avoid royalty payments for the sound recordings they reproduce and publicly perform.

The Plaintiff, WTGD, owns three radio stations in Harrisonburg, VA. WTGD filed a Declaratory Judgment action [1] to determine whether it would owe royalty payments if it deployed Geo-fencing technology that kept its Internet streaming simulcasts within the geographic area of the radio stations over-the-air broadcasts.

The Defendant, SoundExchange, [2] filed a motion to dismiss for lack of subject matter jurisdiction, and the district court requested a magistrate judge to issue a Report and Recommendation on the motion. The magistrate judge recommended the district court grant the motion to dismiss due to the absence of a justiciable case or controversy between WTGD and SoundExchange.

The issue before the Magistrate Judge was whether 17 U.S.C. §§ 112 and 114 of the Copyright Act “allow radio stations to retransmit their broadcast transmissions over the Internet exclusively to their local listeners without paying statutory licensing fees or royalties on copyrighted sound recordings that are part of those simulcasts.”

The Copyright Act exempts radio stations from license fees and royalties for the public performance of sound recordings by means of a digital audio transmission if:  (1) the performance is “part of a retransmission of a non-subscription broadcast transmission” and (2) “the radio station’s broadcast transmission is not willfully or repeatedly retransmitted more than a radius of 150 miles from the site of the station’s radio transmitter.” [3]

In order to comply with the 150 mile limitation, WTDG asserts that Geo-fencing is a proven technology and, once deployed, it will prevent its simulcasts from exceeding the 150 mile limitation. Geo-fencing limits the availability of services on the Internet to certain geographic areas. On-line gaming services currently use Geo-fencing technology to prevent the availability of their services in states that do not allow on-line gaming.

Presently, WTDG simulcasts its radio stations to the world over the Internet and pays royalties to SoundExchange. In order to avoid liability for royalties on sound recordings it simulcasts, WTDG proposes to limit its Internet broadcasts to its local geographic area. In other words, it would limit its Internet simulcasts to approximately the same areas as the broadcasts are available over the air.  Deploying Geo-fencing technology requires significant capital investments. Prior to making the investment, WTDG seeks a declaratory ruling that they will no longer need to pay SoundExchange royalties after they activate the Geo-fencing technology.

Before addressing whether WTDG would be liable for royalty payments to SoundExchange, the magistrate judge addressed whether WTDG had standing to file the complaint. To have standing, the plaintiff must allege facts that the plaintiff’s injury is fairly traceable to the defendant’s alleged conduct. Also, the relief sought by the plaintiff must redress the plaintiff’s alleged injury. WTDG failed to meet either of the two requirements.

ANALYSIS – Injury and Causation:

In a declaratory judgment proceeding, a plaintiff is injured if an “assertion of rights by the defendant forces the plaintiff either to pursue arguably illegal behavior or abandon” an action that plaintiff claims a right to do.

In this case, WTDG sent a letter to SoundExchange’s attorney informing SoundExchange of WTDG’s intention to deploy the Geo-fencing technology and that its reading of the Copyright Act was that it would not be liable to pay the statutory fees. SoundExchange’s attorney responded that it disagreed with WTDG’s interpretation of the Act and that WTDG would continue to be obligated to pay the statutory fees.

WTDG alleges SoundExchange’s refusal to agree to no statutory fees coerced WTDG’s “threat eliminating behavior” (i.e. not deploying the Geo-fencing technology). SoundExchange asserts Plaintiff’s alleged injury is speculative because Plaintiff has not proven its Geo-fencing technology will prohibit transmissions from extending beyond 150 miles.

The magistrate judge found WTDG’s decision not to deploy the Geo-fencing technology in the absence of a favorable declaratory ruling was voluntary. SoundExchange’s different interpretation of the Act did not place WTDG in its alleged position. SoundExchange simply did not agree to assure WTDG that SoundExchange would not bring suit, if WTDG moved forward. In order to establish standing for WTDG’s complaint, SoundExchange must have taken an affirmative action. Not providing assurances is not an affirmative action.

ANALYSIS – Redressability:

WTDG interprets 17 U.S.C. § 114(d)(1) to exempt their local simulcasts not only from the statutory license administered by SoundExchange, but also the exclusive rights that owners of sound recordings have under 17 U.S.C. § 106(6), e.g. public performance and reproduction.

WTDG is seeking a judgment that its local simulcasts: (1) are exempt from the § 114(d)(1) statutory license; (2) “[are] not an infringement of any right protected by the Copyright Act;” & (3) are covered by the First Sale Doctrine. Though these judgments would protect WTDG, they do not redress any injury traceable to SoundExchange’s actions.

Furthermore, SoundExchange does not have the authority to force WTDG to obtain a statutory license. The license is compulsory, meaning that it is compulsory to copyright holders and voluntary to webcasters. Therefore, SoundExchange only has authority to enforce the statutory license, if WTDG voluntarily chooses to license the sound recordings under the statutory license. Since WTDG seeks to operate outside the statutory license, it must obtain permission for public performance and reproduction from the owners of the copyrights in the sound recordings.

CONCLUSION:

The magistrate judge recommends the district court grant SoundExchange’s motion and dismiss the action without prejudice.

The Report and Recommendation did not hit dead on the issue of Geo-fencing for simulcasts of radio stations. If the Report and Recommendation proves influential, it does point to digital radio broadcasters needing to either facilitate a Performance Rights Organization for royalties for Geo-fenced simulcasts or negotiate with all the copyright owners of the sound recordings they choose to simulcast.

The Copyright Act does not speak clearly to this issue, and other courts are likely to take up this issue in 2015.

 

Contact Trent, trent@boaldinlaw.com, with any comments or questions about this post.

 

[1] VerStandig v. SoundExchange, 5:14-cv-00015 (W.Dist. Va., Sept. 12, 2014) Report & Recommendation.

[2] SoundExchange, is the sole performance rights organization for digital broadcasts of sound recordings.

[3] 17 U.S.C. § 114(d)(1)(B)(i).

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