Meeting of the Minds

Next Up in Copyright

Jay A. Rosenthal and Rachael A. Stelly

©2016. Published in Landslide, Vol. 8, No. 6, July/August 2016, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Last year marked the end of phase one of the House Judiciary Com- mittee’s comprehensive review of United States copyright law announced by Chairman Bob Goodlatte in 2013.1 Over the course of the past two years, the House Judiciary Committee held 20 substantive hearings on everything from intermediary liability to reforming statutory damages.2 At the conclusion of the hearings last spring, the committee traveled the country, holding meetings in Silicon Valley and Nashville, Tennessee, to “hear directly from the creators and innovators about the challenges they face in their creative fields and what changes are needed to ensure U.S. copyright law keeps pace with technological advances.”3 This review engaged stakeholders in order to identify what areas of the law are working and what areas of copyright law are significantly lagging behind the digital world we live in today.

In addition to congressional oversight, the Copyright Office and the Department of Commerce released reports within the past year on music licensing, the “making available” right, the first-sale doctrine, remixes, and statutory damages.4 Further, the Copyright Office recently announced policy studies of § 512 “safe harbors,” embedded software in consumer devices, and the § 1201 rulemaking process for exceptions to prohibitions on technological protection measures.5 The Copyright Office accepted comments this spring and will hold public hearings in May on both the East and West Coasts. Copyright modernization has also been a point of discussion. There is a push for the Copyright Office, currently residing within the Library of Congress, to become an independent agency.6

Needless to say, there are many issues at the forefront of the overall copyright reform discourse.

One of the most important issues raised by the Copyright Office is the need for change in the way copyright law intersects with music licensing.7 Users today have access to music like never before, with options for digital downloads, Internet radio, and streaming subscription services. However, the introduction of all these new platforms for content delivery has also brought legal complexities, inefficiency, and resource problems.

Since the passage of the Copyright Act of 1976 (1976 Act), the music marketplace has changed substantially and stakeholders on all sides have urged updates to the law.8 While Congress has made changes to the law since the 1976 Act,9 this fractured approach has created numerous inconsistencies in protection and licensing regimes. This patchwork, in conjunction with an already complicated statutory regime of compulsory licenses of musical works and sound recordings, has greatly frustrated musicians and distribution services alike. We are now seeing artists getting involved in the discussion in unprecedented ways.10

The concerns are particularly relevant in the subscription streaming context. While Spotify currently dominates the market, the number of streaming services has greatly increased over the past few years.11 Apple Music will be a year old in June, despite a particularly controversial launch last summer.12 SoundCloud recently announced its entrance into the subscription-based service.13 However, musicians are increasingly frustrated with little or no compensation for the inclusion of their works on these services. The anger arises from the disparate treatment of works and the inability of artists and publishers to opt out of making their works available on the interactive streaming services, and the disproportionate payout to songwriters.

The Copyright Office released its study on music licensing last February, recommending many legislative changes.14 Congress responded in turn, either reintroducing bills addressing the issues raised or proposing entirely new bills.

Copyright Office Music Licensing Report

In February 2015, the Copyright Office released an in-depth study on music licensing and the music marketplace. While it made numerous recommendations for legislative changes, it expressed wariness about continuing a piecemeal approach to updating copyright law.15

The report requested updating the existing law and enacting regulations to ensure uniformity. The recommendations included increased consistency in establishing regulations for musical works and sound recordings, extending the public performance right in sound recordings to terrestrial radio broadcasts, full federalization of pre-1972 sound recordings, and adoption of a uniform market-based compulsory license rate setting for both sound recordings and musical works.16 The report also called for the migration of all rate setting to the Copyright Royalty Board, bundled licensing of mechanical and performance rights, increased transparency in the licensing process, and the creation of an authoritative public database that would include information on rights, assignments, and ownership.17

The Copyright Office’s report set the stage for subsequent congressional action in this area to provide clarity and uniformity in copyright law for artists and Internet services.

Current Proposed Legislation

Members of the House Judiciary Committee introduced bills this session to implement many of the changes recommended by the Copyright Office. Among the proposed legislation are provisions to address royalties for sound recordings on terrestrial radio, federalization of pre-1972 recordings, and rate-setting reform.

Sound Recordings

The Fair Play Fair Pay Act of 2015 (H.R. 1733) was reintroduced in the House in April 2015 by Representatives Nadler and Blackburn. The bill provides for many updates to music licensing, mainly by providing for a performance right for sound recordings on terrestrial radio. Under current law, only songwriters and music publishers (as owners or administrators of the musical composition) are compensated when a song is performed on the radio.18 Congressman Nadler stated that the bill would making “sure all radio services play by the same rules, and all artists are fairly compensated.”19 The bill would:

  • Create a terrestrial radio performance right in sound recordings, while providing for exceptions and special protection for small broadcasters, public and educational radio, religious services, and incidental use of music.
  • Provide equitable treatment of “legacy sound recordings” by requiring digital broadcasters to pay performers for the use of pre-1972 sound recordings.20
  • Create additional conditions for the copyright royalty judges for determining rates on noninteractive digital music services.
  • Streamline the allocation of royalty payments to producers, mixers, and sound engineers for digital broadcast of sound recordings.21

A terrestrial performance sound recording right would bring the United States into conformity with the rest of the world. The Future of Music Coalition, the Recording Industry Association of America, and the American Federation of Musicians are among supporters of the bill.22 However, the Future of Music Coalition supports full federalization of pre-1972 sound recordings and wishes the bill would go further in that respect.23

Broadcasters uniformly oppose extending the rights in sound recordings and have supported congressional action to preserve “local radio freedom.”24

The Allocation for Music Producers Act (H.R. 1457) was introduced by Representatives Crowley and Rooney in March 2015. The bill amends the 1976 Act to allow for some sound recording performance royalties to be paid directly to producers, mixers, and sound engineers in certain circumstances. Under current law and practice, producers do not obtain copyright in the sound recording. They are compensated through contractual agreements. This bill would allow artists to designate a portion of their royalties to go to producers and studio personnel directly. It would also allow producers to seek permission from artists to receive royalty payments for sound recordings created before 1995.

Royalty Rate Determination

The Songwriter Equity Act of 2015 (H.R. 1283, S. 6621) was introduced in the House by Representative Collins and 14 cosponsors. The complementary Senate version was introduced by Senators Hatch, Alexander, Corker, and Whitehouse.

Copyright royalty judges set the royalty rates under which the compulsory licenses are available for the reproduction and distribution of musical works (known as the mechanical license). The bill would require the judges to set the rates in a manner that would reflect the rates that would have been negotiated in the marketplace under a so-called “willing buyer–willing seller” standard. Their decision would be based on marketplace, economic, and use information offered by the participants in the process. The judges would also look at comparable uses and circumstances under voluntary license agreements.

The bill would allow for evidence from sound recording rate proceedings to be admissible when setting rates for compositions, which was also recommended by the Copyright Office in its report.25 The bill effectively negates the § 801(b) standards that presently apply to rate setting for § 115 mechanical reproduction licenses.

Department of Commerce Internet Policy Task Force

In February, the Department of Commerce Internet Policy Task Force released a white paper on remixes, first sale, and statutory damages in copyright.26 The study recommended that Congress act on the issue of statutory damages, which was also a subject of a hearing in the copyright review.27 The task force requested that the 1976 Act be updated to include a list of factors for courts and juries to consider when determining the amount of a statutory damages award, expanded eligibility for lower “innocent infringement” damages, and court discretion to award damages per work in cases involving nonwillful secondary liability for online services offering a large number of works.28 It also supported the creation of a streamlined procedure for adjudicating small claims.29

The paper discussed in length audiovisual remixes, such as “vidding,” but also touched on the increasingly common practice of music remixes.30 With respect to remixes, the task force did not recommend any legislative action. Rather, it encouraged industry to work with the creative community to develop best practices on how to engage in remixes in digital culture. The task force disagreed with the suggestion to provide for a compulsory licensing regime for music remixes.31 For the sophisticated users (usually those looking to commercially exploit their remixes), the paper encouraged an expansion of the licensing regime to allow users who wish not to engage in risk to easily obtain a license.

Immediate Action

In remarks on April 26 for World Intellectual Property Day, Congressman Goodlatte provided an update on the review process. He stated that Committee would identify areas of potential consensus in the weeks ahead and would circulate outlines of potential reforms.32 In the current political climate, it is questionable that any substantial legislation updating copyright law will be enacted this session.33 However, his statement and the perceived widespread agreement among the many stakeholders in the community is an encouraging sign that the 1976 Act might soon be updated to provide consistency and reliability in the music marketplace.

Endnotes

1. Press Release, U.S. House of Representatives Judiciary Comm., Chairman Goodlatte Announces Comprehensive Review of Copyright Law (Apr. 24, 2013), https://judiciary.house.gov/press-release/chairmangoodlatteannouncescomprehensivereviewofcopyrightlaw.

2. Id.

3. Press Release, U.S. House of Representatives Judiciary Comm., Goodlatte & Conyers Announce Copyright Review Listening Tour (Sept. 10, 2015), https://judiciary.house.gov/press-release/goodlatte-conyers-announce-copyright-review-listening-tour/.

4. U.S. Copyright Office, Copyright and the Music Marketplace: A Report of the Register of Copyrights (2015) [hereinafter Music Marketplace Report], available at http://copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf; U.S. Copyright Office, The Making Available Right in the United States: A Report of the Register of Copyrights (2016), available at http://copyright.gov/docs/making_available/making-available-right.pdf; U.S. Dep’t of Commerce Internet Policy Task Force, White Paper on Remixes, First Sale, and Statutory Damages: Copyright Policy, Creativity, and Innovation in the Digital Economy (2016) [hereinafter Copyright White Paper], available at http://www.uspto.gov/sites/default/files/documents/copyrightwhitepaper.pdf.

5. Section 512 Study: Notice and Request for Public Comment, 80 Fed. Reg. 81,862 (Dec. 31, 2015); Section 1201 Study: Notice and Request for Public Comment, 80 Fed. Reg. 81,369 (Dec. 29, 2015); Software-Enabled Consumer Products Study: Notice and Request for Public Comment, 80 Fed. Reg. 77,668 (Dec. 15, 2015).

6. The Copyright Office for the Digital Economy (CODE) Act, H.R. 4241, 114th Cong., was introduced in December 2015 by Representative Marino. The CODE Act would address longstanding need for specific reforms regarding the Copyright Office operation and establish the Copyright Office as a separate independent agency in the legislative branch. The office would be led by a director appointed by the president with the advice and consent of the Senate. The bill received positive responses from the Software & Information Industry Association and the Copyright Alliance. See Press Release, U.S. Congressman Tom Marino, Reps. Marino, Chu to Introduce Landmark Copyright Reform (June 4, 2015), https://marino.house.gov/media-center/press-releases/reps-marino-chu-introduce-landmark-copyright-reform.

7. See Music Licensing under Title 17 (Part I & II): Hearing Before the Subcomm. on Courts, Intellectual Prop., and the Internet of the H. Comm. on the Judiciary, 113th Cong., 2d Sess. (2014).

8. Id. at 23 (statement of David M. Israelite, National Music Publishers’ Association) (“[C]opyright law today contains antiquated regulations that unfairly distort the value of creators’ work. Provisions of the law—some of which were enacted more than a century ago—are in dire need of reevaluation to determine whether they are still necessary in the digital age.”); Id. at 11 (statement of Neil Portnow, The Recording Academy) (“[T]oday, we have a patchwork of laws that do not address the challenges of the digital marketplace and often create a disincentive to make music as a career.”); Id. at 38 (statement of Lee Knife, Digital Media Association) (“It’s safe to say that if we were writing from a ‘blank slate’ no one would have developed the current system we’re asked to operate under today.”).

9. See, e.g., Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, § 4, 109 Stat. 336, 344–48 (confirming owner’s exclusive right to reproduce and distribute phonorecords of musical works extends to digital phonorecord deliveries that are the transmission of digital files embodying musical works).

10. Jillian Mapes, 2014: The Year Music Actually Did Something about Its Tech Skepticism, Flavorwire (Dec. 24, 2014), http://flavorwire.com/495852/2014-the-year-music-actually-did-something-about-its-tech-skepticism.

11. Colin Stutz, Spotify Tops Pandora as World’s Most Popular Music Streaming App, Billboard (Dec. 1, 2015), http://www.billboard.com/articles/news/6784774/spotify-pandora-most-popular-music-streaming-app-worldwide.

12. Tim Bajarin, How Taylor Swift Saved Apple Music, Time (June 30, 2015), http://time.com/3940500/apple-music-taylor-swift-release/.

13. Introducing SoundCloud Go, SoundCloud Blog (Mar. 29, 2016), https://blog.soundcloud.com/2016/03/29/introducing-soundcloud-go/.

14. Music Marketplace Report, supra note 4.

15. Id. at 133 (“In recent years, we have seen piecemeal efforts to address particular issues through focused legislation . . . . In the current environment, however, these sorts of limited proposals—standing alone—seem unlikely to generate broad enough support to become law. Is it for this reason, perhaps, that some members of Congress have recently indicated interest in a more holistic approach.”).

16. Id. at 2–3.

17. Id. at 4–5, 8–9.

18. See supra note 5.

19. Press Release, Reps. Nadler and Blackburn Introduce the Fair Play Fair Pay Act of 2015 (Apr. 13, 2015), https://nadler.house.gov/press-release/reps-nadler-and-blackburn-introduce-fair-play-fair-pay-act-2015.

20. H.R. 1733, 114th Cong. § 7 (2015). This section of the bill also implements provisions in the RESPECT Act, H.R. 4772, 113th Cong. (2014).

21. H.R. 1733 § 9. This would implement the changes in the Allocation for Music Producers (AMP) Act, H.R. 1457, 114th Cong. (2015).

22. See Fair Pay for All Music on All Platforms, musicFIRST, http://musicfirstcoalition.org/fairplay_for_fairpay (last visited May 9, 2016); Casey Rae, A Look Inside the Fair Play Fair Pay Act, Future of Music Coalition (Apr. 12, 2015), http://futureofmusic.org/blog/2015/04/12/look-inside-fair-play-fair-pay-act; Letter from Cary Sherman, Chairman & CEO, Recording Indus. Ass’n of Am., to Rep. Jerrold Nadler & Rep. Marsha Blackburn, U.S. House of Representatives (Apr. 9, 2015), available at http://www.riaa.com/wp-content/uploads/2015/04/RepNadler.pdf (supporting recognizing a sound recording performance right for terrestrial radio and the “willing buyer–willing seller” rate standard, but not seeing the need for legislation for pre-1972 sound recordings).

23. Legislation Tracker, Future of Music Coalition, https://futureofmusic.org/legislation-tracker#fairplayfairpay (last visited May 9, 2016).

24. H.R. Con. Res. 17, 114th Cong. (2015); S. Con. Res. 4, 114th Cong. (2015) (declaring that Congress should not impose any new performance charges on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings).

25. Music Marketplace Report, supra note 4, at 144.

26. Copyright White Paper, supra note 4.

27. See Copyright Remedies: Hearing Before the Subcomm. on Courts, Intellectual Prop., and the Internet of the H. Comm. on the Judiciary, 113th Cong., 2d Sess. (2014).

28. Copyright White Paper, supra note 4, at 5.

29. Id. at 99. The Copyright Office also released a report in 2013 recommending the creation of a small claims court. See U.S. Copyright Office, Copyright Small Claims: A Report of the Register of Copyrights (2013), available at http://copyright.gov/docs/smallclaims/usco-smallcopyrightclaims.pdf.

30. Copyright White Paper, supra note 4, at 24.

31. Id. at 25 (“The Task Force does not believe, however, that the case has been made to abandon fundamental market principles for the more drastic approach of a statutorily imposed license. While there are a handful of compulsory licenses in the Copyright Act, they have been enacted sparingly as exceptions to the normal structure of exclusive rights.”).

32. Press Release, U.S. House of Representative Judiciary Comm., Chairman Goodlatte Remarks at World IP Day Event (Apr. 26, 2016), https://judiciary.house.gov/press-release/chairman-goodlatte-remarks-world-ip-day-event/.

33. One notable exception that is tangential to the copyright discussion might be the confirmation of President Obama’s nomination for the Librarian of Congress. See Nicholas Fandos, Carla Hayden Nominated to Head Library of Congress, N.Y. Times, Feb. 24, 2016, http://www.nytimes.com/2016/02/25/us/carla-hayden-nominated-to-head-library-of-congress.html?_r=0.