A federal appeals court in New York, in a victory for Yahoo Inc, on Friday ruled that a webcasting service that provides users with individualized Internet radio stations need not pay licensing fees to copyright holders of the recordings it plays.

The U.S. Second Circuit Court of Appeals said a webcasting service cannot be classified as an interactive service, which would require the fees. It said a webcasting service must instead pay only a statutory licensing fee set by the Copyright Royalty Board.

The three-judge panel in the case said it was the first federal appeals court to decide the issue.

The case involved Launch Media Inc, a Yahoo unit that operates an Internet radio website called LAUNCHcast, which lets users create stations that play songs in a particular genre or similar to particular artists or songs they select.

Judge Richard Wesley, writing for the court, wrote: There is no general right of performance in the sound recording copyright. There is only a limited right to performance of digital audio transmission with several exceptions to the copyright, including the one at issue in this case.

The plaintiff recording companies in the case include Sony Corp's Arista Records LLC, Bad Boy Records, BMG Music, Capital Records Inc, Motown Records Co and Virgin Records America Inc, among others.

A Sony representative declined to comment. A lawyer for the recording companies did not immediately return a call seeking comment. A lawyer for Launch Media had no immediate comment.

The case is Arista Records LLC et al v. Launch Media Inc, U.S. Second Circuit Court of Appeals, No. 07-2576.

(Reporting by Jonathan Stempel)

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