- Whether the interim copies generated in the course of streaming or limited downloads
constitute a fair use or instead require a mechanical license; - Whether the interim copies produced in the course of streaming and limited downloads
are subject to the compulsory mechanical license of Section 115; and - What royalties should be paid for the copies of works generated in the course of
streaming and limited downloads.
The foregoing issues came to the fore with the rise of online music distribution systems,
both “free” services such as Napster, Music City, Grokster, and Kazaa, as well as the various
nascent subscription online music services such as Pressplay, MusicNet, Listen.com, and
MP3.com. The issues have been fought in a variety of forums, as described in the next
subsections.
(a) Applicability of the Section 115 Compulsory License to
Streaming
Only one case to date has addressed the issue of whether the compulsory mechanical
license of Section 115 applies to streaming. In Rodgers & Hammerstein Org’n v. UMG
Recordings, Inc.,^3257 a number of songwriters and music publishers brought an action for
copyright infringement against the defendants, UMG Recordings, Inc. and The Farm Club
Online, Inc., for copyright infringement. The Farm Club was a subsidiary of UMG that streamed
recordings over the Internet. The plaintiffs alleged that such streaming was being conducted
without proper licenses under the musical composition copyrights held by the plaintiffs. The
defendants claimed that, if a mechanical license were required at all for streaming, they were
entitled to the compulsory license under Section 115.^3258
The court ruled that the Section 115 compulsory mechanical license did not permit the
defendants to stream the copyrighted works at issue over the Internet.^3259 The court pointed to
Section 115(a)(1), which provides that a “person may obtain a compulsory license only if his or
her primary purpose in making phonorecords is to distribute them to the public for private use.”
The court noted that the defendants did not fall within this language because they did not sell
copies of records to their users, but rather merely placed copies of recordings on their servers to
allow users to listen to songs on those records via streaming.^3260 Nor did the copies stored by the
defendants on their servers trigger applicability of the compulsory mechanical license:
(^3257) 60 U.S.P.Q.2d 1354 (S.D.N.Y. 2001).
(^3258) Id. at 1355-57.
(^3259) The court also held that an existing license from the Harry Fox Agency (HFA) held by the defendants did not
cover the streaming because that license was limited by its terms to a specific phonorecord number, and the
HFA license did not constitute a compulsory license under Section 115. Id. at 1357-59.
(^3260) Id. at 1360.