As the New
Year gets underway, opportunities have opened for Congress to make needed
reforms regarding copyright protections in music. A broad consensus has emerged
in support of a trio of music-related copyright bills that would improve the
ability of recording artists, producers, and songwriters to exercise their
rights in copyrighted music or at least to enjoy the financial rewards for
their efforts. In 2018, Congress should promptly take up the CLASSICS Act, the
AMP Act, and the Music Modernization Act.
Music
copyright is grounded in the U.S. Constitution. Article I, Section 8, Clause 8 –
the “Copyright Clause” – confers on
Congress the power “[t]o promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the exclusive Right to
their respective Writings and Discoveries.” As Free State Foundation President
Randolph J. May and I explain in our book, The
Constitutional Foundations of Intellectual Property: A Natural Rights
Perspective
(2015), copyright is a unique private property
right, rooted in an author’s natural right to enjoy the fruits of his or her creative
labor. Federal
copyright protections in music help ensure that copyright holders, including
creative artists, enjoy exclusive rights to the potential proceeds from their
musical labors.
Copyright
protections provide an important economic incentive for the work and expense of
new creative works. The International
Intellectual Property Alliance’s report, “Copyright
Industries in the U.S. Economy,” found that “core
copyright industries” generated $1.2 trillion in economic activity and employed
5.5 million workers in the U.S. in 2015. Sound
recordings and musical compositions are extraordinary sources of value. A
report by Recording Industry Association of America’s Joshua P. Friedlander, cites
$7.7 billion in 2016 U.S. retail revenues from recorded music.
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However,
the Copyright Act is in need of comprehensive updating to address changes
brought about by digital technologies and the Internet. Many provisions of
copyright law that touch on sound recordings and musical compositions need to
be reformed to better enable copyright owners to exercise their rights and to direct
proceeds to their rightful recipients. The three bills now pending in Congress would,
if enacted, provide targeted reforms to further those purposes:
(1) The CLASSICS Act -- H.R. 3301. Copyright holders do not have the same right under federal law to
receive royalties for public performances of sound recordings fixed prior to
1972 that copyright holders of later recordings have. As a result, major
digital music service providers, such as Pandora and Sirius XM, have publicly
performed pre-72 sound recordings by digital audio transmission to their
subscribers – without obtaining consent or paying royalties to the copyright
owners of those sound recordings.
The Compensating Legacy Artists for their
Songs, Service, and Important Contributions to Society Act – or CLASSICS Act –
would finally provide public performances of pre-72 sound recordings via
digital audio transmission with the same federal protections that post-72 sound
recordings receive. Copyright owners of pre-72 sound recordings would receive royalties based on rates
established by the Copyright Royalty Board pursuant to its “willing
buyer/willing seller” standard that seeks to approximate market prices for
public performances of sound recordings via digital audio transmissions. And
the CLASSICS Act would provide a streamlined resolution process for existing
lawsuits involving state law claims regarding digital audio transmissions of
pre-72 sound recordings. (See my July 2017 blog for more on the CLASSICS Act.)
(2) The AMP Act -- H.R. 881. Producers, mixers, and
sound engineers serve important roles in the creation of sound recordings. Many
sound recording artists and sound recording copyright owners desire to reward financially
producers and others when their sound recordings are publicly performed through
digital audio transmissions. Yet, existing law does not provide a streamlined
statutory mechanism for creative artists to voluntarily direct portions of
their own royalties for outright payments to producers, mixers, or engineers.
The
Allocation for Music Producers Act – or AMP Act – would establish in the
Copyright Act a process for producers, mixers, and sound engineers to directly receive
royalty payments. Under the AMP Act, sound recording artists and other copyright
owners of sound recordings could submit “letters of direction” to a collective
entity – SoundExchange – authorizing direct distribution of such payments.
Importantly, the AMP Act respects the exclusive rights of creative artists and
other copyright holders by permitting
letters of direction – not requiring
any new subdivision of royalties. It does not undermine the liberty of creative
artists and studios to negotiate contracts with producers, mixers, and
engineers. Nor does the AMP Act give producers any kind of misguided “moral rights” against copyright owners of sound recordings.
(3) The Music Modernization
Act -- H.R. 4706. Currently, songwriters sometimes fail to receive royalties in
a timely fashion for digital audio transmissions of their songs by services
like Spotify. Such services encounter difficulties in accurately locating
songwriters. Among other things, the Music Modernization Act would establish a
Mechanical Licensing Collective (MLC) to facilitate accurate royalties for
songwriters by ensuring digital music services have correct information.
Digital service providers would receive blanket usage licenses for copyrighted
compositions.
Also,
mechanical license royalties – revenues for songwriters when sound recordings
of their compositions are recorded and copied – are subject to a rate standard
that results in exceedingly low returns for songwriters. Under the Music
Modernization Act, the Copyright Royalty Board would set mechanical licensing
royalties for music compositions according a “willing buyer/willing seller”
standard. Although rate controls are always less-than-desirable, where such controls do exist
they should at least seek, to the extent possible, to mirror market prices.
Rates established under the willing buyer/willing seller standard are intended
to “most clearly represent the rates and terms that would have been negotiated
in the marketplace” between willing parties.
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