Opinion and Order
Based on the undisputed facts, it is clear that the Locast service is not offered without charges other than those "necessary to defray the actual and reasonable costs of maintaining and operating" its service .
The payments defendants elicit from users are charges assessed on users to avoid constant service interruptions, regardless of whether defendants euphemistically call them publicly "recommended donations". Locast users pay the minimum $5 monthly fee in exchange for month-long , uninterrupted service. It is not merely a recurring gift to a charitable cause. It is of no consequence that a number of users employ the service without paying. SFCNY still solicits, and receives, substantial amounts in charges from recipients for its uninterrupted service.
In 2020, Locast's total costs (including depreciation) were $2.436 million. According to defendants, those costs "represent what it costs to operate the Locast service in 2020, when the Locast service began operating in 16 markets and gradually expanded to 25 markets." Locast's total revenue in 2020 was $4.519 million, comprised of $4.372 million from users and $147,161 from other sources. On those undisputed facts, in 2020 Locast made far more money from user charges than was necessary to defray its costs of maintaining and operating its service.
Defendants argue that Locast's funding qualifies for the statutory exemption because payments from users are reinvested in the organization to cover costs of "maintaining an operating an expanding system", and the costs of expansion are part of the operation.
Defendants aver that contributions from users are essential to the expansion of the Locast service. They argue that disallowing use of the assessments for that purpose would prevent expansion, which they say was not intended by Congress when granting the exemptions.
But under the statute, income made from charges to recipients can only be used to defray the actual and reasonable costs of maintaining and operating the service, not of expanding it into new markets. The argument that Section lll(a)(5) should not "prevent" a natural process of expansion misconceives the statutory structur . Retransmissions (i. e., secondary performances of copyrighted matter) are already penalized
("prevented") by the Copyright Law in its main section. See 17 U. S. C. § 501 ("Anyone who violates any of the exclusive rights of the copyright owner .. is an infringer of the copyright or right of the author, as the case may be.". Nothing in Section 111 specifies that an expansion of the number of infringing transmissions is exempt from that law, and it is not for a court to infer that Congress really meant to allow them. It would have been simple for Congress to add one word to paragraph (5) to make it read ".. costs of maintaining, expanding, and operating the secondary transmission service." But expansion is nowhere mentioned, and it is therefore excluded from the short, tightly-crafted grant of exemptions.
Since portions of its user payments fund Locast's expansion, its charges exceed those "necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service", which is the only exemption granted in Section 111(a) (5).
[Court document references removed. "Undisputed facts" are those that Locast did not dispute.]
