Monday, August 10, 2015

Pre-1972 Sound Recordings Bill Consistent with the Constitution's Intent

The Second Circuit is the latest venue in an ongoing legal dispute over copyrights in sound recordings made before 1972. At issue in Flo & Eddie v. Sirius XM is a lower court ruling that New York common law provides owners of pre-72 sound recordings exclusive rights to public performances and proceeds of those recordings.
On August 5, Public Knowledge posted its amicus curiae brief urging that the lower court ruling be overturned. But as I've written, sound legal basis exists in state common law and equity for lower court rulings in New York and California recognizing such rights.
Whatever the ultimate outcome in the Second Circuit or in other courts, Congress can bring resolution to the pre-72 issue and bring needed reform to federal copyright policy for sound recordings.
Right now copyright law fails to adequately protect the rights of artists, producers, and other owners of sound recordings. Current law gives certain music platforms privileges to profit from public performances of copyrighted works without paying royalties or paying royalties at regulated rates set far below market value. And when it comes to pre-72 sound recordings, federal law allows preferred platforms to publicly perform copyrighted music without paying any royalties to sound recording owners at all.
Principled market-based reforms are needed to shore up the rights of owners of sound recordings. The Fair Play Fair Pay Act – H.R. 1733 – would improve protections for the rights of sound recording owners to the proceeds of their labors and move copyright policy in a free market direction.
Under the Constitution's Article I, Section 8 Intellectual Property Clause, Congress has the duty to secure to authors and producers of creative works the proceeds of their own labors. H.R. 1733 offers Congress the opportune means for fulfilling its duty under the Constitution to protect intellectual property (IP) rights. Congress should give the bill a full and fair hearing without delay.
Importantly, the Fair Play Fair Pay Act (H.R. 1733) would finally provide public performance copyright protections to the owners of sound recordings made before early 1972. No good reason exists for excluding federal copyrights in pre-1972 sound recordings while including pre-72 books or movies.
As Free State Foundation President Randolph May and I have written about previously in our Perspectives from FSF Scholars series of IP papers, the case for federal copyright protection dates back to the Founding Fathers and is embodied in the Constitution. The IP Clause assigns Congress the duty to secure to authors and producers of creative works the proceeds of their own labors. James Madison considered the lack of federal copyright protection one of the vices of the government then operating under the Articles of Confederation. And in Federalist No. 43, Madison wrote that “[t]he utility of this power will scarcely be questioned,” since “the States cannot separately make effectual provisions” for copyright.
A handful of courts, rightly, have recognized state common law copyright remedies for pre-72 sound recordings. (See my blog post, "Crediting State Common Law’s Role in Protecting Intellectual Property Rights.") But H.R. 1733 would offer uniformity and finality to the question by establishing federal public performance copyrights in pre-72 sound recordings. H.R. 1733 would apply the "willing buyer/willing seller" standard to music services transmitting post-72 sound recordings.
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." It seeks to approximate market values. And so the "willing buyer/willing seller" standard is preferable to the misguided Section 801(b) anti-disruption standard, as well as any other standard that seeks to insulate privileged incumbents from competition and innovation.

Under H.R. 1733, AM/FM broadcast radio, cable and satellite video services, broadcast TV, as well as non-interactive Internet-based music services such as Spotify and Pandora, would all have to obtain consent of sound recording owners. Absent agreement, all such music platforms publicly performing copyrighted music would pay royalties based on that same rate standard. That means all of those competing services would be treated equally under the law.

Under the IP Clause, Congress has an obligation to secure to authors and producers of creative works the proceeds of their labors. The Fair Play Fair Pay Act – H.R. 1733 – would be an important step in remedying critical defects in federal copyright law regarding sound recordings. It would put rights in sound recordings on more secure footing by eliminating favoritism and broadening the scope of protections.
Other improvements and adjustments in federal copyright law ought to be considered in order to protect the rights of artists and other recording industry rights holders in today's fast-changing digital environment. But by giving a prompt and fair hearing to legislation for reforming and better protecting copyrights, like H.R. 1733, Congress can live up to its constitutional obligation.