How does copyrighted material distribution and diffusion work on a legal level?

Question

I work in technology, building platforms for companies, which comprise the creation of the technological product and production of the applications.

I only want to work on businesses that I believe are fully legal. I am not a law expert but try to maintain a good level of understanding of laws related to technology. I think I have a good understanding of copyright in technology, but in this case there are a few things I can't figure out.

I have been asked to build a content distribution platform, quite similar to how Spotify works, but on a business to business level. It is geared towards businesses opened to the public, typically stores. The company operates in various European countries.

It works like so: the company sources some audio content, mostly through online platforms like iTunes, buying the content, according to my understanding with a normal user account. Then they distribute the audio files to their customers premises (they can be stored locally on various platforms like a computer or a mobile phone). And then the customer plays that audio content on their premises, to the public. The service is very similar to a radio or Spotify being played in a store for the customers to enjoy.

The company assures me they are in their full right and have been operating like that for some time now. They argue that the store that is diffusing music is the one legally responsible before their respective country's copyright collection society.

Can the company really put all the legal burden on the ones diffusing the copyrighted content? I thought the distribution was also subjected to licensing. For instance, I thought platforms like Spotify need to get the license from the record companies before they start distributing copyrighted content. I thought commercial radios also needed that.

What makes me wonder is also the fact that the Apple store refuses to allow the application in their store due to legal issues. They assume that the company does not have the authorization from the third parties to let users download their content. I have no idea how Apple knows that Spotify has the rights from the third parties to allow the download of audio files and not the company since they did not ask to see the licenses first. But anyway, it makes me think some legal work must be done before distributing the content.

I would like to understand the legal aspect of each step (getting the content, distributing it and diffusing it).

Answer 1

Generally speaking, copyright includes the right to make copies of protected content, the right to distribute those copies, and also the right to publicly perform. Those rights are all initially vested in the creator of the copyrighted content, but may be contractually assigned, sold, or licensed separately.

When physical copies, such as books or CDs or DVDs, are lawfully sold, the purchaser has the right to resell or rent those copies without further permission. This is know as the First Sale Doctrine that the copyright owner has the right to control the copies only until their first sale.

However, electronic copies are generally not sold at all, but rather are licensed. This avoids the First sale rule, and allows the copyright owner to control the entire distribution sequence, usually though a chain of contracts each granting appropriate license rights.

So the publisher would be authorized by the copyright holder to create copies, and the publisher would license distributors, and the retail customers would be licensed in turn by the distributors, or perhaps directly by the copyright holder.

I suspect that the companies you describe actually have some sort of license agreement with the copyright holder, possibly through the publisher. The retail stores license the right to perform through the performance societies (aka collection societies) or possibly directly with the copyright holders. If in fact the companies described in the question have no license agreement with the original copyright holder (or an authorized agent), then it seems to me that they would be infringing copyright. But given how much money is involved at that level of the distribution chain, I would think that a suit would already have been filed on such grounds if there was not a valid agreement. I cannot, however, know what agreements any particular company has or has not made.