Webcasters File Licensing Fee Suit

Internet-based radio broadcasters sued the Recording Industry Assn. of America on Friday in an escalating legal war over the price online companies must pay to license record labels’ music.

The online companies--including MTVi Group, MusicMatch Inc., Listen.com, Launch Media and XACT Radio--are asking a judge to declare that their music services are eligible for a so-called compulsory license. That license would allow them to broadcast music online for a fee set by a federal copyright panel.

The record industry last week filed a motion with the U.S. Copyright Office to disqualify the Webcasters from an upcoming proceeding in which the licensing fee will be set. Record executives maintain that Web-only radio shows are “interactive” services, which are ineligible for the license under federal law.

Webcasters say disqualification from the copyright proceedings would force them to negotiate rates much higher than the ones expected to be set by the government and would open them up to copyright-infringement lawsuits by labels.

Already, the RIAA and four of the five major record conglomerates have sued Launch Media of Santa Monica, alleging infringement on the grounds it failed to obtain licenses for its personalized radio service.

The suit filed Friday in U.S. District Court in San Francisco comes a few weeks before the copyright panel convenes to discuss the fee.

It is unclear whether the copyright office or the courts will be the first to decide the eligibility question. The legal battle was sparked in December when the Copyright Office declined to define whether Web-only radio programs, which let consumers influence their playlists, should be categorized as interactive.

“This is an entirely defensive measure,” said Jonathan Potter, executive director of the Digital Media Assn., another plaintiff in the case filed Friday. Potter said that online companies feel “enormous frustration” battling “the sledgehammer of litigation by a well-financed industry.”

But record executives accuse the Webcasters of trying to enter the royalty-setting proceeding unfairly.

“This case is about a handful of Internet music companies who are attempting to gain a market advantage over their competitors,” said Steven Marks, the RIAA’s senior vice president for legal and business affairs. “This is unfair to the music services that are abiding by the rules laid down by Congress. It is also unfair to the creators of the music that is the backbone of their business.”