Appeals Court Ruling Affirms Internet Radio RoyaltiesAppeals Court Ruling Affirms Internet Radio Royalties

PHILADELPHIA (AP) -- Radio stations must pay royalties to recording companies and performers, as they do to composers and songwriters, when musical broadcasts are streamed over the Internet, a federal appeals court has affirmed.

A three-judge panel of the 3rd U.S. Circuit Court of Appeals upheld a rule adopted by the U.S. Copyright Office, under the Digital Performance Right in Sound Recordings Act of 1995.

"The exemptions the DPRA afforded to radio broadcasters were specifically intended to protect only traditional radio broadcasting, and did not contemplate protecting AM/FM Webcasting," said the opinion, written by Senior Judge Richard D. Cudahy.

Cary Sherman, president of the Recording Industry Association of America, applauded the ruling "affirming our view of the law that artists and record companies should be fairly compensated for the use of their music on the Internet."

Attorneys for station owners and the National Association of Broadcasters, which had challenged the rule, didn't immediately return calls seeking comment on the ruling.

Traditional radio broadcasts haven't been subject to royalties to recording companies and performers because they have served to promote sales of recordings. But Congress passed the Digital Millennium Copyright Act in 1998, which required such royalties from Webcasters.

The RIAA subsequently asked the Copyright Office to clarify whether simultaneous streaming of AM/FM broadcasts on the Internet was exempted from royalties, and the Copyright Office issued a rule in December 2000 saying it wasn't.

The federal appeals court ruling, issued Friday, came in a lawsuit by some station owners and the NAB challenging the rule. U.S. District Judge Berle M. Schiller upheld the Copyright Office rule, and the stations owners and the NAB appealed.

Sherman noted that the RIAA has already negotiated royalty rates with the broadcasters. "And we look forward to continuing to work with them in the future," he said.

An arbitration panel proposed rates of $1.40 a song heard by 1,000 listeners, an amount halved by the Copyright Office in June. Under a settlement awaiting Congressional approval, smaller Webcasters could calculate payments based on their earnings or expenditures.