Sound Recordings Copyright Bill Would Better Secure Rights, Reduce Inequities

The basic right of music authors and producers to the fruits of their labors is secured by copyright. The Constitution's Article I, Section 8 IP Clause gives Congress the responsibility to ensure that the copyrights of authors and producers of creative works are secured.

But in some respects, existing federal law provides inadequate and unequal copyright protections in sound recordings. And in other respects, federal law provides no copyright protections at all for sound recordings. Newly-introduced legislation in Congress would implement overdue copyright reforms for sound recordings. If enacted, the legislation will better secure those rights and bring the law into closer alignment with the Constitution.

On April 13 the Fair Play Fair Pay Act of 2015 was introduced in Congress. Sponsored by Rep. Jerrold Nadler and co-sponsored by Rep. Marsha Blackburn, the Fair Play Fair Pay Act (H.R. 1733) includes a handful of provisions that would put copyright in sound recordings on more of a free market footing. The bill's provisions would eliminate favoritism towards certain kinds of technology platforms. Such favoritism results in copyright holders receiving either no royalties or royalties significantly below market value for public performances of their sound recordings.

Included in the Fair Play Fair Pay Act - H.R. 1733 - are three important reforms for copyright in sound recordings:

H.R. 1733 finally ends terrestrial radio broadcasters' free-rider exemption from paying royalties for transmitting copyrighted sound recordings. Existing federal law specially privileges over-the-air radio broadcasting over competitors by permitting AM/FM transmission of copyrighted sound recordings without any need to obtain copyright holders' consent or pay royalties. This gives broadcast radio stations an unfair advantage over commercial music services reliant on other transmission technologies that must obtain consent or pay royalty rates. It is also an inequitable deprivation of rights for the owners of sound recordings. Under H.R. 1733, radio broadcasters would have to respect performance rights in sound recordings by negotiating with copyright holders or paying rates according to the "willing buyer/willing" seller standard (discussed below).

H.R. 1733 ensures that cable and satellite video services playing copyrighted sound recording pay copyright holders royalties approximating market value. Current federal law applies different royalty rate standards to different service technologies. Cable and satellite video services are subject to the so-called 801(b) rate standard, which misguidedly is calculated to "minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices." We have elsewhere criticized the Section 801(b) standard, which results in royalty rates set well below market value. H.R. 1733 would end the disparate rate regime. The bill would require cable and satellite video services transmitting copyrighted sound recordings to either negotiate with copyright holders or pay royalties according to the "willing buyer/willing seller" standard applicable to non-interactive Internet-based digital music services like iHeartRadio, Pandora, and Spotify. The "willing buyer/willing seller" standard defines "reasonable" rates, as payments that "most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller." In other words, the "willing buyer/willing seller" standard at least attempts to approximate market values in order to secure to copyright holders the returns they deserve.

H.R. 1733 recognizes copyrights in sound recordings made prior to 1972. Federal law does not recognize public performance copyrights in music recordings made before early 1972. Of course, recent judicial rulings strongly indicate that state common law protects public performance rights in pre-72 sound recordings. Under H.R. 1733, public performance copyrights in sound recordings would be recognized in federal law. According to the bill, music service providers seeking to transmit such recordings must either negotiate royalties with the copyright holders or pay royalties according to the willing buyer/willing seller standard applicable to music services transmitting post-72 sound recordings.

The Fair Play Fair Pay Act includes carve-outs to keep royalty rates to an administratively simple, nominal amount for small, local radio broadcast stations as well as for public radio stations. A complete royalty carve-out is also provided for both religious services and non-incidental uses. In addition, H.R. 1733 includes provisions for recognizing industry custom for processing payouts of royalties to copyright holders of sound recordings through an entity designated by the Copyright Royalty Board – that is, through SoundExchange. This aspect of the H.R. 1733 is similar to the Allocation for Music Producers Act (H.R. 1457), which was introduced in March by sponsor Rep. Joseph Crowley and co-sponsored by Rep. Tom Rooney.

In sum, the Fair Play Fair Pay Act – H.R. 1733 – takes several steps in the right direction for reforming copyright in sound recordings. The bill would secure stronger and broader protections of the rights of copyright holders. It would establish an across-the-board standard for royalty rates intended to mimic market outcomes. Also, the bill would reduce the incidents of favoritism and free-riding that exists under current copyright law. Certainly, Congress should give this legislation a prompt fair hearing.