Not So Fast Pandora: Second Circuit Court of Appeals Omission Could Mean Pandora Interactive

In the last 3 years Pandora has done just about everything it could to lower payments to songwriters and performers. First there was the Orwellian named “Internet Radio Fairness Act.” They followed that up with multiple suits against songwriters’ organizations and now they are playing fast and loose with the Copyright Royalty Board apparently cutting direct deals to simply “create evidence.”

But sometimes you got to wonder if Pandora is a little too smart for its own good. Because Pandora considers itself to be non-interactive it can avail itself of the compulsory licenses for sound recordings and go before the Copyright Royalty Board to seek lower rates. That is what is happening right now. But is Pandora really a “non-interactive” service? And shouldn’t that be the first question answered before proceeding to rates? Has this question ever really been carefully examined? I don’t really know how the Copyright Royalty Board proceedings work but shouldn’t they be able to asks this question?

Pandora has never seemed to fit the definition of a non-interactive service to me. But I’m not a legal expert. Generally the answer from folks who are legal experts goes something like this:

“Because the Second Circuit Court of Appeals ruled that LAUNCHcast was non-interactive Pandora has proceeded as if they were non-interactive and the music business let them get away with it.”

Okay. The weird thing is that very few people have really read the LAUNCHcast decision. Most experts don’t really know what the decision says and are loathe to go on record speculating whether it applies to Pandora So I spent the last week reading up on the ruling myself. Again I’m not a legal expert but I don’t think that Pandora can use the LAUNCHcast decision because the court does not address a key clause in the DMCA conference report that gives a clear example of an interactive service:

The recipient of the transmission need not select the particular recordings in the pro- gram for it to be considered personalized, for example, the recipient might identify certain artists that become the basis of the personal program.

The court quotes everything else in the paragraph. But not this. In fact this omission is really quite stunning. They seem to steer around this particular sentence like it’s a pothole and they are driving a low rider Cadillac. Look at my highlighted screenshots if you don’t believe me. The significance is that Pandora lets you “build a program based on certain artists” and this example would seem to qualify Pandora as interactive. IMHO since the LAUNCHcast ruling seems to specifically avoid this clause it can’t be used by Pandora to justify non-interactivity.

Bye Bye compulsory license.