In January, the NAB and several broadcast groups sued the U.S. Registrar of Copyrights, seeking to overturn the Copyright Office's final rule that radio broadcasters simultaneously streaming their signals on the Internet are responsible for millions of dollars in royalty payments to record companies.

Historically, there has never been copyright protection for sound recordings of musical compositions. Limited copyright protection was first given to record companies and labels in the Sound Recording Amendment of 1971. The purpose of this amendment was to prevent the unauthorized reproduction and piracy of sound recordings. Until 1995, however, Congress had refused to afford protection for the public performance of sound recordings.

In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act (DPRA), which expanded copyright protection for public performance rights in sound recordings to cover certain digital, audio subscription transmissions as well as digital, audio interactive transmissions. Nevertheless, this protection was limited, and the free play of over-the-air transmissions of sound recordings by radio broadcasters remained exempt from copyright liability. With the passage of the Digital Millennium Copyright Act (DMCA) in 1998, Congress expanded the scope of the DPRA's statutory license to include certain nonsubscription digital audio transmissions. The DMCA did not, however, repeal the DPRA's provisions exempting over-the-air streaming transmissions by radio broadcasters.

The NAB argues that nonsubscription simultaneous streaming transmissions of over-the-air radio broadcasts by FCC-licensed stations are exempt from the digital performance right in sound recordings found in the Copyright Act. Therefore, such streaming transmissions should not be subject to either compulsory licensing under the Act or discretionary licensing by individual copyright owners.

Many stations engage in the simultaneous streaming of their over-the-air broadcasts on the Internet. The Copyright Act specifically exempts a nonsubscription broadcast transmission, defined as a transmission made by an FCC-licensed terrestrial broadcast station, from copyright liability. The simultaneous streaming of free over-the-air broadcast transmissions on the Internet is, by definition, a nonsubscription transmission; the issue continues to be whether streaming is a broadcast transmission.

The NAB argues that by excluding simultaneous streaming transmissions from the definition of a nonsubscription broadcast transmission, the Copyright Office will hinder the development and growth of a new entertainment medium. Furthermore, if subjected to liability, radio broadcasters would either have to negotiate individual licenses with every copyright owner of a sound recording or, if they qualify, get a compulsory license and pay an undetermined amount in royalties annually.

If the court does not reverse the Copyright Office's ruling, streaming may be doomed. Consequently, the NAB is asking the court to decree that FCC-licensed broadcasters simultaneously streaming their signals are subject to neither a compulsory license nor a discretionary license by individual copyright holders. The NAB has asked the court for expedited hearing of its case.

Tax certificates reexamined

Also in January, Congressman Charles Rangel (D-NY) announced that he intends to introduce legislation that would restore tax incentives intended to promote minority ownership of telecommunications businesses. In a press release issued by his office, Congressman Rangel noted that minority ownership of television stations is at its lowest level in 10 years, and minorities own less than four percent of the full power broadcast stations in the United States. Although Congressman Rangel did not provide specific details of his proposed bill, he indicated that it would offer tax incentives to reward owners who sell their broadcast stations or other telecommunications businesses to minorities. Thus, it seems likely that the approach taken by Congressman Rangel will draw upon the former §1071 and the FCC tax certificate program.

Under previous versions of the Internal Revenue Code, the seller could treat sales and exchanges of certain broadcast properties as involuntary conversions under former §1071 of the Code, provided that the FCC issued an appropriate tax certificate. The FCC certificate would specify that the sale was necessary to facilitate FCC policies, such as the policy to expand minority ownership of broadcast properties or policies aimed at reducing cross ownership of broadcast properties and other media outlets.

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Harry Martin is an attorney with Fletcher, Heald & Hildreth, PLC., Arlington, VA. E-mail martin@fhh-telcomlaw.com.

Dateline

Radio stations in the following locations must file their biennial ownership reports on or before June 1, 2001: Arizona, DC, Idaho, Maryland, Michigan, Nevada, New Mexico, Ohio, Utah, Virginia, West Virginia and Wyoming.