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Webcasters See Ruling As Royalty Victory

Internet services allowing listeners to personalize Web radio services will be included in an upcoming arbitration process on music royalties despite the objections of the recording industry, according to a decision by the U.S. Copyright Office.

A group of Web broadcasters, including Launch Media Inc., hailed the administrative ruling on Tuesday as a victory in a continuing legal fight to secure the same royalty rights as other Internet radio providers.

At issue is whether Webcasters that allow users to customize Internet radio services – by selecting a certain kind of music for example – should be eligible for compulsory licensing like traditional radio, or whether those features should require them to negotiate individual, and potentially more expensive, fees with the record labels.

“This is a great win for Webcasters,” said Samantha Steinwinder, a spokeswoman for San Diego-based MusicMatch, which announced a separate settlement with the recording industry on Sunday involving a licensing deal for its popular MusicMatch Radio service.

In a ruling issued on Monday, the Copyright Office held that the Webcasters at the heart of the controversy should be allowed to participate in an upcoming federal arbitration process, rejecting a bid by the Recording Industry Association of America (RIAA) to exclude them on the grounds that the services offer “interactive” features.

The 1992 Digital Millennium Copyright Act requires Webcasters that provide “interactive” features to seek special licenses with each record label for the material they broadcast, but the law does not define what constitutes those special features.

The Copyright Office said that question is best left to the federal courts, where several suits between the labels and the Webcasters are still pending.

A spokeswoman for the RIAA said the record label group was “pleased that the Copyright Office had agreed with us that the courts are the proper forum” for resolving the question of what constitutes “interactive” Internet music services.

“These matters will be decided by the federal courts,” said Ken Steinthal, a New York-based attorney representing six Webcasters in the lawsuits.

The Webcasters affected by this week’s Copyright Office ruling include MusicMatch, which has since settled separately, and Atlanta-based Incanta Inc., which provides streaming broadband services and has dropped out of the proceedings.

The remaining group of Internet broadcasters includes Echo Networks of San Francisco, Xact Radio of Denver, MTVi Group, a unit of MTV Networks and Viacom Inc, and Listen.com, a privately held company in which Madonna is an investor.

Santa Monica, Calif.-based Launch Media Inc., which is in the process of being acquired by Yahoo! Inc. in a $12 million deal, is also covered by the decision.

The dispute over Web broadcasting is the latest online legal battle for the recording industry, which won a major legal victory against Napster earlier this year, effectively shutting the once phenomenally popular song service down and barring its trade in copyrighted songs.

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