Whether the satellite broadcasting allowing listeners to reproduce a variety of sound recordings may constitute an actionable reproduction?

Recording companies have made substantial investments to produce sound recordings. Currently, the investments are mainly recouped though the sale of compact discs or CD's. Then, what if listeners may freely reproduce sound recordings without the need to purchase CD's? What if the sound recordings so reproduced are in such quality equivalent to CD's? And, what if the sound recordings are transmitted in a form of "broadcasting"? These questions were discussed at the Tokyo District Court in two recent cases initiated by recording companies against Daiichikosho Co., Ltd. ("DCL"). The first case (Tokyo District Court Case No. 1998-WA-17018; the "17018 Case") was initiated against DCL and SKY Perfect Communications Inc. ("SPCI"), the operator of satellite transmission platform. And, the second case (Tokyo District Court Case No. 1998-WA-19566; the "19566 Case") was initiated against DCL only. On May 16, 2000, the Tokyo District Court dismissed the both cases. This article summarizes the legal implications of the said two cases.

Before going into the details of the said two cases, I should outline the legal framework involving "reproduction" and "broadcasting" of sound recordings in Japan.

The Copyright Law of Japan ("Law") draws a bright distinction between "reproduction" and "broadcasting". Performers and producers of phonograms are granted the neighboring rights to enjoin unauthorized reproductions of their performances or sound recordings, although they are not allowed to enjoin "broadcasting" of the same. In other words, broadcasting organizations are free to play sound recordings for broadcasting insofar as they are using genuine CD's, while the broadcasting organizations need to pay certain monetary compensation known as "secondary use fees" in consideration of the exploitation of the sound recordings for broadcasting. It should be noted also that the secondary use fees should not be claimed individually, but should be claimed only through such associations as designated by the Commissioner of Agency for Cultural Affairs. Currently, Recording Industry Association of Japan ("RIAJ") is designated as such association for producers of phonograms, and Japan Council of Performers' Organizations ("JCPO") is designated as such association for performers.

RIAJ and JCPO are supposed to negotiate with the broadcasting organizations to determine the amount of the secondary use fees on a year-to-year basis. Then, what happens if they fail to reach an agreement as to the amount of the secondary use fees? If no agreement has been reached, RIAJ or JCPO may enjoin the exploitation of the sound recordings so as to protect their rights?

The answer is "No". The Law grants only the right to claim a payment of secondary use fees. No injunctive relief is afforded to performers or producers of phonograms. Then, what kind of legal remedies are granted to performers and producers of phonograms? The sole remedy granted to performers and producers of phonograms is the right to request for a ruling of the Commissioner of the Agency for Cultural Affairs to determine the applicable amount of the secondary use fees. The right to request for a ruling, however, has never been implemented before. From a perspective of performers and producers of phonograms, the said legal system may be viewed as insufficient protective measures since broadcasting organizations would not be prompted to make a compromise to determine the amount of secondary use fees.

Apparently, the legislative intent of the said legal framework is to balance the protection of intellectual property rights and the encouragement of exploitation of sound recordings: Insofar as the sound recordings were duly made available to the broadcasting organizations, the relevant performers and the producers of phonograms should have somewhat benefited from the broadcasting organizations' obtainment of the sound recordings, which may be in a form of sales revenue of CD's or performance fees; For broadcasting organizations, it is rather bothersome to secure any and all consents of performers and producers of phonograms for a number of sound recordings to be used in broadcasting.

In the case of ordinary analogue broadcasting, the said legal framework has some plausible grounds. For listeners, there is a significant difference between the purchasing of a copy of phonogram (either in the form of CD or otherwise) and the listening to radio or television programs. If a copy of phonogram is purchased, the purchaser may at any time and with no limitation on the number of plays enjoy the sound recording, whereas the sound recording is played only once during a predetermined period through broadcasting. Although listeners may copy the broadcasted sound recording with recoding machines, the quality of the copied sound recording is not equal to a copy of the phonogram. In that sense, there are certain reasonable grounds to differentiate "reproduction" and "broadcasting" at least to the extent that the broadcasting is made by means of analogue transmission.

For these days, however, the situations have been changed in association with the rapid development of digital technology, which enables listeners to reproduce sound recordings in such quality substantially equal to a copy of phonograms. In order to cope with such changes, the Law was amended in 1992 to introduce the mechanism known as "compensation for private recording", whereby the producers of digital recording machines and media are required to pay to copyright holders, performers and producers of phonograms, the "compensation for private recording" on behalf of individuals who produce copies of sound recordings using digital recording machines and media.

Furthermore, the satellite transmission technology has been making dramatic changes in the concept of "broadcasting". At the moment, the broadcasting organizations may supply more than a hundred of digital audio radio programs through which consumers may easily find and copy their desired sound recordings. That kind of business would be comparable to the selling of CD's in that consumers can acquire a copy of phonogram substantially in the same quality as the original phonogram and that consumers could enjoy the sound recording at any time and with no limitation on the number of plays. Therefore, there are certain reasonable grounds to argue that in some cases, broadcasting organizations' activities should be viewed as equivalent to production of copies of phonograms. Certainly, this means a fundamental change in legal framework. As I said before, the Law draws a bright distinction between "reproduction" and "broadcasting". The line between "reproduction" and "broadcasting" will become vague, if we accept the theory that certain "broadcasting" should be viewed as equivalent to production of copies of phonograms. On the other hand, we should acknowledge the fact that digital audio radio programs would affect significantly the sales of CD's. The lawsuits were initiated under such circumstances.

DCL broadcasts, through the satellite communications platform known as "SKY PerfecTV!", digital audio radio programs using around 100 channels. The said programs of DCL are called "STAR Digio".

To operate the programs, DCL engages in, or causes SPCI to engage in, the following activities;

	(1)	To purchase CD's;
	(2)	To play sound recordings on CD's and convert them into digital format;
	(3)	To compress the digitized sound recordings (the "music content");
	(4)	To record the music content so compressed on DCL's possession server;
	(5)	To input the program schedule into DCL's program schedule server;
	(6)	To transmit and record the music content to DCL's transmission server in accordance with the program schedule; and
	(7)	To uplink and downlink the music content.

Many listeners copy the broadcasted music content on mini-discs or MD's so that they may play the sound recordings at any time and with no limitation on the number of plays.

In the 17018 Case, the plaintiffs argued, in essence, as follows:

	(1)	he reproduction of music content on the possession server shall be deemed to constitute an actionable reproduction, as DCL's activities shall be considered not to fall under the definition of the "broadcasting". ("First Cause of Action")
	(2)	The listeners' copying of the sound recordings on mini-discs or MD's constitutes "reproduction". Although the reproduction for private use is exceptionally permitted under the Law, DCL and SPCI shall be responsible for the listeners' activities to reproduce the music content. This is because DCL and SPCI solicit and facilitate reproduction of the music content with the intent to gain their own economic benefits. In other words, listeners will not be liable for infringement insofar as the reproduction is made for their own private use. But, this does not mean to exempt the liabilities of parties who solicited and facilitated the reproduction. ("Second Cause of Action")
	(3)	Reproduction of music content on the random-access memory or RAM of the receivers possessed by listeners constitutes an actionable reproduction. ("Third Cause of Action")

The plaintiffs in the 19566 Case also argued the First Cause of Action and the Second Cause of Action. But, they did not argue the Third Cause of Action. Instead, they argued, in essence, as follows:

(1)

In light of the purpose of the Law, DCL shall be deemed to have reproduced the music content controlling listeners as DCL's tools for that purpose. ("Fourth Cause of Action")