Let’s say you own a restaurant and you want to have recorded music playing in the background. Can you? If you wrote the music yourself, then you own the copyright. Otherwise, you generally need to get permission, otherwise known as a license. For many, the names ASCAP, BMI, and SESAC will be familiar. They’re usually who you turn to when you need to license music. Besides restaurant owners, other people who license music are radio station owners and producers of television, movies and commercials.

Now let’s say you are an Internet service provider like AOL, Yahoo! or RealNetworks. You provide Internet access to millions of subscribers and you also own many Web pages where music is available, so millions of people are listening to music through your network. Do you still need a license?

The answer is yes. In a landmark decision on April 30 of this year, the United States District Court for the Southern District of New York rendered a public decision that answered this question. USA v. ASCAP, 2008 WL 1967722 (SDNY, 2008).

Pursuant to a settlement agreement that had been entered in an antitrust suit involving AOL, Yahoo! and RealNetworks, the court was charged with the obligation to ascertain the appropriate licensing fees that these Internet service providers were required to pay ASCAP for online use of copyrighted music.

In essence the court was converted into a “rate court.” This was the first time that a court of law has ever sat as the arbiter of online music use licensing fees.

The case involved a very broad license issued by ASCAP known as a “blanket license.” This form of license is unique since in addition to conveying the immediate right to use a musical composition, it also offers the flexibility of immediate and unlimited access to ASCAP’s vast and ever-growing repository of compositions without the licensee having to enter into additional individual agreements.

Since the economic value of a blanket license provides the licensee with more than just the right to utilize a single composition, the court held that the proper license fee must adequately compensate for this extra benefit.

Under the law, in a court proceeding for a determination of appropriate license fees, ASCAP had the burden to demonstrate that the fee it sought was reasonable.

If the court deemed the requested fee was unreasonable, it has the authority to fashion a fee that it considered to be reasonable under the circumstances.

The court ruled that a fee of 2.5 percent of music-derived revenue was appropriate here since it was comparable to blanket license agreements in effect at the three major television networks, ABC, NBC and CBS.

One difference noted by the court was that music is provided passively to homes through television. That is, when you’re watching a sitcom or TV movie or TV commercial and there’s music in the background, you can’t choose the music. The producers have chosen that particular background music — and they have to pay ASCAP (or another performing rights organization) to license it.

However, audiovisual programming offered by ISP’s on the Internet is streamed on demand to end users who determine the actual content of their musical programming. This difference, however, the court found was not significant enough to warrant a variance in the license fee and the court held that the formula presented by ASCAP was reasonable.

ASCAP licenses a wide variety of Internet and wireless performances made by numerous sites and services. For example, ASCAP licenses Internet simulcasts of thousands of over-the-air radio stations, a wide variety of Internet-only “radio” services, such as AOL Radio and Pandora, and interactive, on-demand audio subscription services, such as Napster and Rhapsody. Similarly, ASCAP also licenses video transmissions containing musical performances, including simulcasts and archived transmissions of network and cable television programming, music videos, and user-generated video content. ASCAP Internet licensees range from small Web sites to operators of large networks of sites like Live365 and the Internet’s largest portal sites, such as Yahoo! and MySpace.

Increasingly, many types of performances are also being transmitted by ASCAP licensed services available on mobile networks, such as Verizon V-Cast and MobiTV.

ASCAP also licenses products and services unique to wireless devices, such as ringback-tones and video wallpapers.

The decision covers fees owed for the period July 1, 2002 through Dec. 31, 2009 and applies to the complete ASCAP inventory.

It is evident that this historic decision will go a long way towards protecting the ability of songwriters and composers to obtain just recompense for the use of their music online, an area largely unregulated before the decision was rendered.

P.S. This article has focused on songwriters and composers. But instrumentalists may also earn a piece of the pie when their music is transmitted digitally. For more information and to see if you have money waiting for you, see www.RAroyalities.org.

Harvey Mars is one of Local 802’s lawyers. Legal questions are welcome from 802 members. E-mail them to JurMars566@aol.com. Nothing in this article should be construed as formal legal advice given in the context of an attorney-client relationship.