iHeartgeo-fencing? The section 114 exemption that illustrates why full sound recording rights are the sine qua non for a vibrant music industry.

• Author: Ryba, Bradley

1. INTRODUCTION II. BACKGROUND A. Recording Artists' Digital Royalties. B. The Geo-Fencing Technology. C. VerStandig Up for What You Believe In. D. The 150-Mile Exemption Could Have Far Reaching Implications. III. COURTS PROBABLY SHOULD ALLOW BROADCASTERS TO USE GEO-FENCING TO AVOID COPYRIGHT ROYALTIES, BUT WILL PROBABLY FIND THEM TO BE GEO-INFRINGING. A. The Plain Language of the Statute Seems to Support Geo-Fencing to Avoid Royalties. B. The Purpose and Legislative History of the DPRA Probably Support Geo-Fencing to Avoid Royalties C. Disruptive Innovators Threaten Copyright Rights but Also Move Industries Ahead IV. SWING FOR THE FENCES AND CREATE EQUAL PUBLIC PERFORMANCE RIGHTS V. CONCLUSION I. INTRODUCTION

   "If you let me I could, I'd show you how to build your fences, set restrictions, separate from the world." (1) Principally, all types of radio should pay royalties for all uses of sound recordings. (2) By statute, digital radio broadcasters must pay copyright owners for the use of sound recordings produced on or after February 15, 1972. (3) Moreover, recent court decisions against Sirius XM Radio, Inc., regarding pre-1972 sound recordings, could make this statutory license even more profitable for sound recording owners. (4)

   However, a statutory exemption may allow some Internet radio services to avoid paying for sound recordings entirely. (5) This exemption allows services that transmit content only within a 150-mile radius to avoid paying digital sound recording royalties. (6)

   Recently, a radio broadcaster, VerStandig Broadcasting ("VerStandig"), claimed that its use of geo-fencing technology would allow it to take advantage of this exemption. (7) While one service's use of this exemption may be nominal, the aggregate use from many broadcasters could lead to the deterioration of digital recording royalties.

   This Article will introduce geo-fencing technology and the applicable law. It will propose simple regulations to strike the appropriate balance for geographical technology and recording artists' rights.

2. BACKGROUND

   This section will introduce the pertinent law and explain geo-fencing. It will then explain the music business' interest in geo-fencing.

   1. Recording Artists' Digital Royalties

      The Copyright Act gives copyright owners the exclusive right to publically perform and reproduce their work. (8) While musical compositions have received protection for public performances since about the early 1900s, recording artists did not have such rights until recently. (9) In 1995, Congress passed the Digital Performance Right in Sound Recordings Act ("DPRA"). (10) The DPRA amended the [section] 114 license to give recording artists rights for digital public performances by requiring digital radio services to pay recording artists for playing their music. (11) However, the language of the DPRA, and in turn the language of [section] 114, applies only to digital performances and not to performances over terrestrial radio. (12)

      SoundExchange is the sole organization authorized to collect royalties under the [section] 114 license. (13) SoundExchange collects royalties from all digital music services and from terrestrial radio stations that simulcast their content over the Internet. (14) Thus, radio stations do not pay for over-the-air content, but must pay if they choose to distribute this same content over the Internet. (15)

      The DPRA also created an exemption in [section] 114(d)(l)(B)(i) that states that the compulsory license does not apply to a "retransmission of a nonsubscription broadcast transmission" if "the radio station's broadcast transmission is not willfully or repeatedly retransmitted more than a radius of 150 miles from the site of the radio broadcast transmitter." (16) Previously, broadcasters gave this exemption limited attention; however, a new technology, geo-fencing, may make broadcasters' use of this exemption widespread. (17)

   2. The Geo-Fencing Technology

      Geo-fencing technology creates a perimeter around a pre-determined area and prompts a mobile device, through a mobile application ("app"), to take an action when it is inside or outside that area. (18) Individuals and businesses can utilize this virtual fence in a multitude of ways. (19) Individual users can set up geo-fencing with their offices or home devices to do such things as turn off lights, adjust room temperature, or lock doors. (20) Musicians can use geo-fencing at concerts to greet fans, help locate seats, and offer discounts on merchandise.21 Most commonly, geo-fencing allows retailers to give customers the option to sign up to receive discounts or other personalized experiences when they enter a retail store. (22)

      Importantly, geo-fencing technology can allow broadcasters to distribute their simultaneous webcasts to users only within a certain pre-determined area, pertinently a 150-mile radius. (23) Thus, a subscriber to a station's webcast could only receive that webcast if the subscriber's device using the station's app is within that 150-mile radius of the station. (24)

      Geo-fencing can work quite effectively, potentially with relatively small fees for businesses. (25) Geo-fencing can pinpoint devices for accuracy ranging from a few inches to about three miles, depending on a variety of factors. (26) Depending on the service or application provider, setup and maintenance of geo-fencing can cost upwards of several thousand dollars for businesses, however, network-based options, which eliminate the need for app development, can cost significantly less. (27)

   3. VerStandig Up for What You Believe In

      Plausibly, radio stations may be able to utilize geo-fencing technology to receive the benefits of the [section] 114 exemption. (28) Indeed, in February 2014, VerStandig announced in a letter to SoundExchange that it intended to geofence its simulcasts in Virginia. (29) After SoundExchange demurred, VerStandig sought a declaratory judgment against SoundExchange. (30) Magistrate Judge Hoppe issued an advisory opinion that recommended dismissal of the action for lack of standing because SoundExchange did not cause a concrete, traceable, and redressable injury to VerStandig. (31) Presiding Judge Michael Urbanski subsequently adopted the recommendation and dismissed VerStandig's lawsuit. (32) As such, the courts have not yet had occasion to address the legal validity of VerStandig's claim.

      VerStandig contended that the clear language of the statute created an exemption for digital transmissions within 150 miles of the transmitter. (33) VerStandig asserted that its simultaneous broadcasts would be geo-fenced to users within a 150-mile radius and, thus, would "not [be] willfully or repeatedly retransmitted more than a radius of 150 miles from the site of the radio broadcast transmitter." (34) Finally, VerStandig contended that SoundExchange was the proper party to name in the lawsuit because SoundExchange and the owners of the copyrights in sound recordings had the same interest in whether such transmissions are exempt from royalties. (35)

      Aside from standing, SoundExchange asserted two main arguments regarding the merits of VerStandig's claim. (36) First, SoundExchange argued that this exemption applies only to cable systems and broadcast networks and does not apply when broadcasters simulcast their own programming over the Internet. (37) Second, SoundExchange also noted that an unlicensed live stream of broadcasts would infringe sound recording owners' reproduction rights. (38)

   4. The 150-Mile Exemption Could Have Far Reaching Implications

      As listeners shift away from terrestrial radio, digital performance royalties have become increasingly profitable for sound recording...