D.C. Circuit Affirms APA Reviewability of Copyright Exemptions Rules

On June 7, the U.S. Court of Appeals for the District of Columbia issued its decision in Medical Imaging & Technology Alliance v. Library of Congress. The case presents the question of whether copyright rules adopted under the Digital Millennium Copyright Act (DMCA) are reviewable under the Administrative Procedure Act (APA). In a 2-1 decision that brought to the fore the unusual structure and operation of the U.S. Copyright Office, the court answered "Yes."

The court's opinion was authored by Judge Neomi Rao. At issue in the case was a legal challenge to an exemption from the DMCA's anti-circumvention provisions that were granted by the Librarian of Congress following a triennial DMCA rulemaking. The exemption allowed for independent service operators to bypass technological protective measures (TPMs) on medical devices for purposes of diagnosis, modification, or repair of those devices. The Library of Congress disputed that its rulemaking was subject to APA review.

According to the D.C. Circuit:

In the Copyright Act [of 1976], Congress provided that copyright regulations are reviewable under the APA. The Act expanded the Register's rulemaking authority and provided that, with one exception not relevant here, "all actions taken by the Register of Copyrights under [Title 17] are subject to the provisions of the Administrative Procedure Act." 17 U.S.C. § 701(e). We have previously reviewed actions of the Register based on this provision. See, e.g., Atari Games Corp. v. Oman, 888 F.2d 878, 879 & n.1 (D.C. Cir. 1989); Universal City Studios LLLP v. Peters, 402 F.3d 1238, 1242 (D.C. Cir. 2005). Although section 701(e) refers to actions of the Register, the Register is subordinate to the Librarian and 'shall act under the Librarian's ... direction and supervision." 17 U.S.C. § 701(a). More specifically, "[a]ll regulations established by the Register under [Title 17] are subject to the approval of the Librarian of Congress." Id. § 702…

Congress conferred authority for the triennial rules at issue here in the DMCA, which added the following provision to Title 17: "[T]he Librarian of Congress, upon the recommendation of the Register of Copyrights, ... shall make the determination in a rulemaking proceeding" whether to waive the anti-circumvention provision for certain classes of copyrighted works. Id. § 1201(a)(1)(C). In other words, the DMCA authorized a new type of copyright regulation that would be formulated by the Register and approved by the Librarian. 

 

Reading the two statutes as a comprehensive statutory scheme, DMCA rules are also subject to the APA under 17 U.S.C. § 701(e). The Copyright Act plainly applies the APA to "all actions" of the Register under Title 17, including rulemaking subject to the approval of the Librarian. See id. §§ 701(e), 702…

The court concluded that because Congress applied the APA's waiver of sovereign immunity to actions of the register and Librarian in adopting copyright regulations it is immaterial as to whether the Library is an "agency" under the APA. As the court recognizes, the Copyright Office is peculiarly subordinated to the Librarian of Congress and deemed an "agency" of Congress. The court acknowledged that the Librarian's decisions about the Library's internal workings are not reviewable under the APA, and the court's ruling in the case was limited to the issue of copyright regulation. But the essentially executive character of the copyright regulation adopted by the Librarian on the recommendation of the Register of Copyrights was noted in a commendable section on judicial review of administrative agency action for conformity with the law: 

Reading section 701(e) to provide for judicial review of triennial DMCA rules aligns with fundamental principles regarding the protection of individual rights against unlawful government action. To begin with, the Copyright Act and the DMCA give the Register and Librarian significant authority to "promulgate copyright regulations" and "apply the statute to affected parties.” See Intercollegiate [Broadcast System, Inc. v. Copyright Royalty Board, 684 F.3d 1332,1342 (D.C. Cir. 2012)]. As we have recognized, and no party disputes, these powers are "generally associated in modern times with executive agencies.” Id. When enacting regulations and enforcing the law, "the Library is undoubtedly a component of the Executive Branch." Id. (cleaned up). Moreover, the triennial rules directly affect valuable property rights, such as a copyright holder’s ability to limit access to a digital creation and to prevent intellectual property theft. The triennial rules also provide exemptions from civil and criminal liability that would otherwise attach to individuals who circumvent technological protective measures. 17 U.S.C. §§ 1201(a)(1)(B), 1203–04. The exemptions are not left solely to the Librarian's discretion, but instead must be determined according to specific statutory criteria. Id. § 1201(a)(1)(C). There is no indication in the DMCA that Congress, having allocated this substantial regulatory power to the Librarian and Register and identified the legal criteria they must apply, would leave such power unchecked by judicial review. 

In sum, the court held that DMCA triennial rulemakings are subject to APA review. Judge Rao deserves credit for writing a well-reasoned and perceptive judicial opinion. 

Free State Foundation President Randolph May and I explored the structural history of the U.S. Copyright Office and its relationship with the Library of Congress in our book Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Satellite and Webcasting Royalty Payments at Issue in Copyrighted Music Case

On August 16, a lawsuit was filed for a case called SoundExchange, Inc. v. Sirius XM Radio Inc. Plaintiff SoundExchange's complaint alleges that Sirius XM underpaid royalties for public performance of copyrighted music recordings on its satellite digital audio radio service (SDARS). SoundExchange is a non-profit entity that collects digital performance royalties from statutory license users and distributes them to artists and copyright owners.  

Royalty rates are set by the Copyright Royalties Board (CRB). The CRB separately sets royalty fees for satellite radio and commercial webcasters under the statutory license. As explained in SoundExchange's complaint, regulations provide that "royalties for webcasting are calculated on a per-performance basis rather than as a percentage of gross revenues: the webcasting royalty is assessed for each transmission of a sound recording to a listener, while the SDARS royalty is assessed as a percentage of the revenues the service generates." 

SoundExchange alleges that Sirius XM improperly allocated excessive amounts of revenue to its webcasting service – which requires lower royalty payments – thereby reducing royalties payable for its satellite radio service. Additionally, SoundExchange alleges that an independent audit revealed Sirius XM underpaid royalties, and that regulations require that amount owed – as determined by the auditor – be paid. According to SoundExchange's complaint: "To date, Sirius XM already has unjustifiably withheld more than $150 million in royalties owed to artists and copyright owners under the SDARS statutory license."

The case is likely to be a one-off because Sirius XM is the only provider of SDARS and music webcasting services. But given that Sirius XM has approximately 34 million subscribers and generates significant public performance royalties – not to mention the $150 million in unpaid royalties figure alleged in the complaint – a legal resolution will be tremendously important for copyright owners. 

That said, copyrighted sound recordings are valuable property and it is the role of Congress -- and its delegated authorities at the Copyright Royalty Board -- to provide clear boundary rules defining the scope of exclusive rights and expectancy interests in copyrighted property. Clear rules are a necessary foundation for ensuring that copyright owners can maximize the value and returns for their labors and investment. If nothing else, the case may furnish occasion for more clearly specify for future purposes how revenues and royalties are allocated between SDARS and webcasting services. 

 

This blog post does not express a position on the correct prospective outcome in SoundExchange, Inc. v. Sirius XM Radio Inc. The case is only at its beginning in the U.S. District Court for the Eastern District of Virginia. Sirius XM has not yet filed any detailed pleadings in response to those SoundExchange allegations. Stay tuned. 

White Paper by IP Scholars Reject State-Level Regulation of Copyright Licensing

On February 13, the Federalist Society's Regulatory Transparency Project released a white paper titled "State Mandates for Digital Book Licenses to Libraries are Unconstitutional and Undermine the Free Market." The white paper's distinguished co-authors are Alden Abbott, Adam Mossoff, Kristen Osenga, and Zvi Rosen. Among Prof. Mossoff's many distinctions, he is a Member of the Free State Foundation's Board of Academic Advisors.

The white paper persuasively explains why legislation introduced in several states that would require authors and book distributors to license e-books to public libraries according to rates and other terms set by state law is preempted by U.S. copyright law. Moreover: "The proponents for these bills present a distorted view of the market for copyrighted works in order to rationalize unprecedented government intervention into the longstanding and fundamental rights of copyright owners to determine prices and other contractual terms in the market." And the white paper states that "these bills will undermine the very goal that their supporters seek—easy and affordable access to e-books."

 

Free State Foundation President Randolph May and I analyzed the legal defects of state compulsory licensing of ebooks to public libraries in our March 2022 Perspectives from FSF Scholars, "State Laws Forcing Publishers to License Ebooks to Libraries Are Unlawful." And in a May 2022 Perspectives from FSF Scholars, "State Restrictions on Ebook License Prices Are Preempted by Federal Law," I explained why state-level rate controls of ebook licensing also run afoul of federal copyright law. 

 

The Constitution and the Copyright Act establish a uniform nationwide system for copyright protection that ensures that creators have financial opportunity to seek returns on their creative labors. But any state laws that seek to regulate the exclusive rights of copyright owners in their creative works – whether movies, TV shows, sound recordings, or literary publications – would conflict with that system and undermine incentives for creative enterprise. States should be mindful of preemption principles and not seek to mandate the licensing or licensing rates for copyrighted works.

Supreme Court Hears Oral Arguments Copyright Case on "Transformative" Works

On October 12, the U.S. Supreme Court held oral arguments in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith. The case involves a series of prints and illustrations by the late Andy Warhol that are based on a copyrighted 1981 photo of the late music artist Prince. One image from that series was published – without authorization of the owner of the photo – on a magazine cover in May 2016. At issue in the case is the fair use doctrine and the nature or role of "transformative" works in fair use analysis. 

The Petitioner, Andy Warhol Foundation, presented  the question to the Court in a hedged manner: 

Whether a work of art is "transformative" when it conveys a different meaning or message from its source material (as this Court, the Ninth Circuit, and other courts of appeals have held), or whether a court is forbidden from considering the meaning of the accused work where it "recognizably deriv[es] from" its source material (as the Second Circuit has held). 

Fair use is an affirmative defense to copyright infringement, and it consists of four non-exclusive factors that are to be considered in evaluating whether the use of a copyrighted work is "fair:" (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Under Supreme Court precedents such as Campbell v. Acuff-Rose Music, Inc. (1994), courts typically analyze the first factor according to the degree to which the use is "transformative" – that is, "whether the new work merely supersedes the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." 

 

However, Section 106(2) secures to copyright owners the exclusive right to prepare "derivative works" based upon the copyrighted work. According to Section 101:

A "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted." A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole represent an original work of authorship, is a "derivative work."

Some insightful commentaries have been published about Andy Warhol Foundation v. Goldsmith, and Free State Foundation scholars likely will address the case more definitively once the Supreme Court has issued its decision. Until then, a general observation here is that the Petitioner's seeming overemphasis on an artist's subjective intent or interpretation of a copyrighted work as rendering a secondary work "transformative" and thus a fair use would, if adopted by the Court, encroach significantly on a copyright owner's exclusive right to prepare derivative works. During the oral arguments, Justice Amy Coney Barrett appeared to make this point – or at least a similar point – when she stated to the Petitioner's counsel: "And it seems to me like your test, this meaning or message test, risks stretching the concept of transformation so broadly that it kind of eviscerates Factor 1 and puts all of the emphasis on Factor 4." 

Additionally, I second FSF President Randolph May in commending the Committee for Justice for its amicus curiae brief in this case. As explained in his August 18 blog post, CFJ's amicus brief skillfully sets forth the conceptual underpinnings of copyright law as it pertains to the fair use doctrine. And their brief applies that background understanding to the transformative works claims being made in Andy Warhol v. Goldsmith.

Court Declares Maryland's Compulsory Licensing Law for Ebooks Unconstitutional

On Monday June 13, the U.S. District Court for the District of Maryland entered a final judgment in AAP v. Maryland. At issue in the case is a state law that forced publishers of literary works in ebook and digital audiobook formats to license their works to public libraries on what the state or state courts decide are "reasonable terms." In February of this year, the District Court issued a preliminary injunction that barred Maryland's enforcement of the forced access law. Based on its earlier opinion, the court declared on June 13 that "[t]he Maryland Act is unconstitutional and unenforceable." The court's judgment is fully justified, as it is solidly based on preemption principles and judicial precedents. 

Free State Foundation President Randolph May and I analyzed the court's opinion in from February in our March 2022 Perspectives from FSF Scholars, "State Laws Forcing Publishers to License Ebooks to Libraries Are Unlawful." As we explain in our Perspectives: "[U]nder Section 106 of the Copyright Act, copyright owners possess exclusive rights to decide who can distribute or make available their copyrighted works and on what terms and conditions. State laws that force publishers to license copyrighted works to libraries clearly conflict with federal law." Our Perspectives made the point that the court's opinion in AAP v. Frosh should be persuasive to state legislators or other courts considering similar laws 

 

According to Supreme Court jurisprudence, "conflict preemption" occurs when state laws pose "an obstacle to the accomplishment of a significant federal regulatory objective" or when it is impossible for a party to comply with both federal and state laws. In AAP v. Maryland, the District Court correctly concluded that the Maryland law is conflict preempted because it poses an obstacle to the objectives and purposes of the Copyright Act in securing copyrights owners' exclusive right to distribute. Copyright owners enjoy an exclusive right to distribute their works to persons of their choice. 

 

FSF President May and I also focus on the problems of price regulating ebooks in our May 2022 Perspectives, "State Restrictions on Ebook License Prices Are Preempted by Federal Law." In that Perspectives, we explain that "[p]rice regulation of ebook licensing to libraries is unwise and contrary to federal copyright law. States interested in expanding public libraries' ebook collections should instead dedicate additional money from state treasuries to libraries."

Supreme Court Clarifies Meaning of Safe Harbor Provision for Copyright Registration

On February 24, the U.S. Supreme Court issued its decision in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. (2022). At issue in the case is the meaning of Copyright Act Section 411(b), which is a procedural provision for copyright registration that functions as a safe harbor in the event that the copyright registration application includes inaccurate information. Section 411(b)(1)(A) provides that a copyright registration application is valid regardless of whether it contains any inaccurate information, unless "the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate."  

The Ninth Circuit narrowly interpreted Section 411(b) to mean that the safe harbor only saves a copyright registration from invalidation for failure to understand the law, but not for failure to understand the facts. But the Supreme Court reversed the Ninth Circuit and determined that Section 411(b)'s safe harbor encompasses both mistakes of law and mistakes of fact. 

As the Supreme Court stated, "[l]ack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration." However, the court did note its recognition in civil cases that willful blindness may support a finding of actual knowledge. 

 

Copyright registration is important because it is a prerequisite to filing civil copyright infringement claims. Registration also entitles a copyright owner to statutory damages and attorney's fees. Free State Foundation President Randolph May and I discuss aspects of civil copyright enforcement in chapter 8 of our book Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020). 

New York Bill to Mandate Ebook Access and Prices Draws the Veto It Deserves

On December 29, New York Governor Kathy Hochul wisely vetoed a bill that would have imposed compulsory licensing and rate regulation on copyrighted books made available in electronic formats. New York Assembly Bill 5837, if it had become law, would have granted to New York public libraries a state-level special right of access to ebooks, audiobooks, and other digital literary works that belong to copyright owners. Such access would have been based on rates deemed reasonable by courts in that state. But New York's AB 5837 clashed with the rights of copyright owners that are secured by federal law and its terms clearly were preempted. The veto of the bill was well deserved. 

New York's AB 5837 is roughly identical to a bill that was recently signed into law in Maryland. Some of the serious legal problems with that state's mandate were described in my blog post from December 14, 2021: "Maryland's Unlawful Compulsory License for Ebooks Should Have a Short Shelf Life." In short, the Copyright Act confers broad, exclusive federal jurisdiction over copyrights. Attempts by states to directly regulate access to copyrighted works clash with copyright owners' exclusive rights to decide prices and terms regarding who can reproduce, distribute, display, and publicly perform their works. 

Free State Foundation President Randolph May and I also wrote about federal jurisdiction over copyrights in our books The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective (Carolina Academic Press, 2015) and Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Notably, not a single legislator in New York or in Maryland voted against either of those bills to impose state-level forced access mandates on ebooks and other copyrighted works. Before any state legislatures consider similar legislation, I recommend that their members electronically access the following reading materials: Sections 106 and 301(a) of the Copyright Act. 

Maryland's Unlawful Compulsory License for eBooks Should Have a Short Shelf Life

Copyright protections secured by federal law preempt state laws that interfere with them. Yet the Maryland legislature apparently ignored or didn't realize that when it enacted Maryland House Bill (HB) 518 in May of this year. The law, if it goes into effect in 2022, would grant Maryland public libraries a state-level compulsory license to access eBooks, audiobooks, and other digital literary works belonging to copyright owners at state-regulated rates. But a lawsuit filed in U.S. District Court on December 9 almost certainly means that the state's law will have a short shelf life. 

Maryland HB 518 seeks to give Maryland public libraries a special right of forced access to privately-owned digital literary works on supposed "reasonable terms." But under the U.S. Constitution's Copyright Clause and Section 106 of the federal Copyright Act, copyright owners possess exclusive rights to decide who can reproduce, distribute, display, and publicly perform their works and under what conditions. Indeed, the Copyright Act is the exclusive source of law governing the exclusive rights of copyright owners. As a result, Maryland HB 518 is expressly preempted by federal law – and it's not a close call. 

Federal copyright protections for literary works were foremost in the minds of the Founding Fathers when they drafted and ratified the Constitution of 1787. Free State Foundation President Randolph May and I wrote about this extensively in our book The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective (Carolina Academic Press, 2015). The Constitution's Article I, Section 8 Copyrights Clause granted Congress the power "To 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." And as James Madison observed in Federalist No. 43, the Constitution gave Congress that authority because "[t]he States cannot separately make effectual provisions for either of the cases, and most of them have anticipated the decision of this point, by laws passed at the instance of Congress."

The Copyright Act's exclusive jurisdiction over the exclusive rights of copyright owners is stated –  in unmistakably broad terms – in Section 301(a)'s preemption provision: 

On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.

In our most recent book, Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020), FSF President May and I strongly urged Congress to reject any future imposition of compulsory licensing and rate regulation on copyrighted works because such onerous restrictions are antithetical to the property rights and free market foundations of American copyright law and policy. Similarly, Maryland and other states should refrain from trying to impose compulsory licenses and rate controls on copyrighted works. 

In view of the strong legal claims raised against Maryland HB 518 in the pending case of Association of American Publishers, Inc. v. Frosh, it is most likely that the law will never go into effect. Other states should learn from HB 518's bad example and not seek to repeat it. 

Tennessean Op-Ed on Modernizing Copyright Law for the Digital Age

Free State Foundation President Randolph May and I today published an op-ed in The Tennessean titled "Three Ways to Modernize Copyright Laws in the Digital Age." The just-published op-ed touches on themes we addressed in more detail in our new book, Modernizing Copyright Law for the Digital Age – Constitutional Foundations for Reform(Carolina Academic Press 2020). Our thanks go to The Tennessean for publishing our op-ed. Be sure to check it out at The Tennessean's website. Our new book is available both in print and e-book editions. 

Teleforum on Modernizing Copyright Law - Audio Available

On March 31, Free State Foundation President Randolph May and I participated in a Federalist Society teleforum to discuss themes from our new book Modernizing Copyright Law for the Digital Age – Constitutional Foundations for Reform. The discussion ranged from DMCA reform, small copyright claims relief, AM/FM terrestrial radio's exemption, and the natural rights basis for copyrights. Audio for that teleforum can now be downloaded or streamed from the Federalist Society's website. Our thanks go to the Federalist Society, to moderator Prof. Adam Mossoff, and to teleforum participant Vice Dean and Prof. Michael Risch. Our new book is now available for purchase at Amazon and at Carolina Academic Press. 

New Book: "Modernizing Copyright Law for the Digital Age"

In Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform, Randolph May and Seth Cooper connect constitutional principles and historical insights to recommendations for updating U.S. copyright law to meet the challenges of the Digital Age.

Copyright owners and copyright-intensive industries are vital engines of prosperity in our Digital Age economy. But current U.S. copyright law fails to protect adequately copyrighted works from infringement enabled by modern-day digitization and Internet connectivity. The law needs updating to curb the billions in economic losses caused annually by bad actors in America and abroad.

In reforms grounded in constitutional principles, Modernizing Copyright Law for the Digital Age addresses areas such as international trade, public contracts, private contracts, compulsory licensing and rate regulation, antitrust, and so-called moral rights. This timely book details steps that Congress should consider for updating copyright policy in hot-topic areas, including music royalties, Copyright Office reform, civil enforcement, criminal enforcement, and international protections.

The book is now available from Amazon here or from Carolina Academic Press here.

George Washington: Pro-Copyright

Today, President's Day, the U.S. government observes George Washington's birthday. No doubt most people are aware of many of the accomplishments of the Father of our Nation. Yet comparatively few are aware that George Washington was pro-copyright. As President, he signed the first federal law protecting creative works – the Copyright Act of 1790. Free State Foundation President Randolph May and I discussed this and more in our 2016 Perspectives from FSF Scholars paper, "George Washington: Indispensable to Intellectual Property Rights in America."

Expect to hear more on copyright-related topics in 2020, as this month marks the publication of our new book with Carolina Academic Press, titled "Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform." Hot off the press, our book is now available for order at CAP's website. 

Troubled ALI Copyright Project Should Be Abandoned

The American Law Institute's (ALI) Copyright Restatement Project previously has come under fire for its attempt to produce a statement that effectively rewrites federal copyright law. Now, a December 3 letter by Senator Thom Tillis and four U.S. House members rightly criticizes the ALI's effort to reword and supplement copyright statutes passed by Congress. Given the serious concerns voiced by those federal lawmakers and by others, and the unusual nature of the Copyright Project, the ALI should abandon it. 

As Free State Foundation President Randolph May and I explained in a February 2018 blog, the ALI's historic restatements of the laws of property, contracts, torts, and more are treatises intended to objectively describe and summarize common law doctrines in the states. However, federal law is based almost exclusively on federal statutes and federal courts have exclusive jurisdiction over copyright claims. In their letter, Senator Tillis and his House colleagues point out that "laws created through federal statute, including federal copyright law, are ill-suited for treatment in a Restatement." Register of Copyrights Karyn Claggett made this same point in January 2018 when she wrote to the ALI that "[t]here can be no more accurate statement of the law than the words that Congress has enacted… and those that the Copyright Office has adopted in its regulation." 

In their letter, Senator Tillis and the U.S. House members observed that the ALI's Council approved two sections of the proposed ALI Copyright Restatement in mid-October of this year. Sections approved by ALI's Council must also be approved by its membership before they are made public. Yet earlier copyright section drafts have been publicly criticized by the Register, academics, and copyright lawyers for misconstruing the meaning of federal copyright statutes and for filling in statutory gaps with the ALI drafter's preferred views. Gap filling by ALI Reporters is inconsistent with the historic purpose of restatements: restating what the law is. Rather, such gap filling is likely to produce a restatement of what ALI reporters think the law ought to be. 

Indeed, the ALI's Copyright Project appears to be pursuing a course that was sharply criticized by the late Justice Antonin Scalia. In Kansas v. Nebraska (2015), Justice Scalia wrote: "Over time, the Restatements' authors have abandoned the mission of describing the law, and have chosen instead to set forth their aspirations for what the law ought to be." In addition to confusing black-letter copyright law with aspirational viewpoints, inserting ALI reporter conclusions about unsettled points of law into a Copyright Restatement poses serious methodological concerns. As Senator Tillis and his colleagues put the question to the ALI: "When there are gaps in the statutory or case law, how do the Reporters decide when to fill in those gaps as opposed to declining to take a position?" 

Senator Tillis and the U.S. House members directed several other pointed questions to the ALI that touch on purpose, methods, bias, and more. Those questions should be taken seriously, and the ALI should heed the warning given by these federal lawmakers. Many states have passed laws or resolutions to curb or reject the influence of the ALI's recent Insurance Liability Restatement. To their credit, Senator Tillis and his colleagues indicate their willingness to similarly push back against any future Copyright "Restatement" that effectively rewrites federal copyright law. As they wrote to ALI: "Since copyright law is predominantly federal law, codified in Title 17, it would be Congress, and not the states, that would take action in this case."

Perhaps earlier, ALI Reporters could have expressed their views on copyright law and policy through a Statement of Principles or some other vehicle. But because the ALI has shown an unwillingness to rethink its approach, the best thing the ALI can do now is abandon its Copyright Restatement Project. 

CASE Act Would Make Copyright Protections for Small Claims a Reality

Online infringement of copyrighted sound recordings and movies is widespread on popular user-upload Internet websites like YouTube. Mass infringement on user-upload sites deprives copyright owners of their exclusive right in their creative works – including their right to the proceeds of their creations. Unfortunately, the heavy costs of civil litigation in federal court, including lawyer fees, make it uneconomical for many copyright owners to obtain justice under law. 

On July 18, the Senate Judiciary Committee will consider S.1273, the Copyright Alternative in Small-Claims Enforcement Act – or CASE Act. Introduced by Senators John Kennedy, Dick Durbin, Thom Tillis, and Mazie Hirono, the bipartisan CASE Act would establish a Copyright Claims Board within the U.S. Copyright Office. The Copyright Claims Board would administer a voluntary small-claims process for addressing many types of copyright infringement claims. Such a small claims process would make it simpler and less expensive for independent creators, including songwriters and recording artists, film makers, photographers, and graphic artists, to vindicate their intellectual property rights. The Senate Judiciary's schedule vote on the CASE Act is welcome news, and a hopeful step toward modernization of copyright law for the Digital Age. (A companion bill, H.R. 2426, also has been filed in the 116th Congress.)

In our Perspectives from FSF Scholars paper “Modernizing Civil Copyright Enforcement for the Digital Age Economy: The Need for Notice-and-Takedown Reforms and Small Claims Relief,” FSF President Randolph May and I make the case for why Congress should update civil enforcement provisions by establishing a small claims process for copyright infringement claims within the Copyright Office.

Signing of USMCA Spotlights International Copyright Protections

On November 30, President Trump and leaders from Canada and Mexico officially signed the proposed United States-Mexico-Canada Agreement (USCMA). Completion of the trade agreement's negotiation was announced in October. If approved by Congress, USMCA will replace the North American Free Trade Agreement (NAFTA). 

USMCA contains several provisions to better secure Americans' copyright protections. FSF President Randolph J. May and I address many of those provisions in our Perspectives from FSF Scholars paper, "Modernizing International Copyright Agreements to Combat Copyright Infringement." Among its pro-copyright provisions, USMCA would help American owners of sound recordings the full scope of public performance rights. Additionally, USMCA provides for stepped up enforcement through increased civil and criminal penalties for infringing activities such as "stream-ripping" and "camcording." 

However, USMCA incorporates language similar to the Section 512 "notice-and-takedown" provision contained in current U.S. copyright law. Section 512 is outdated and ineffective in protecting digital music and video content from mass infringement on popular user-upload websites. Future trade agreements and treaties should avoid that language. Congress and the Trump Administration should work to reform and update the notice-and-takedown system. We discuss these aspects of Section 512 in further detail our Perspectives paper, "Modernizing Civil Copyright Enforcement for the Digital Age Economy: The Need for Notice-and-Takedown Reforms and Small Claims Relief."

Senate Should Vote on the Bill to Modernize Music Copyright

Congress last overhauled the Copyright Act back in 1976, and provisions in the old law are often a poor fit for today’s digital music marketplace. Right now Congress has a stellar opportunity to make overdue updates to music copyright law. In April, the House of Representatives unanimously passed the Music Modernization Act. The Senate Judiciary Committee unanimously passed a similar bill in June. Rather than let this important legislation get sidetracked now, the Senate should act promptly to vote on the Music Modernization Act. 

The Music Modernization Act is an omnibus bill that would better secure copyright protections and royalty payments for recording artists, songwriters, and other music professionals. If passed by the Senate and signed into law, the bill would: (1) secure to copyright owners of sound recordings made before 1972 federal copyright protections for public performances of their recordings via digital audio transmission; (2) set up a streamlined process for producers, mixers, and sound engineers to receive direct royalty payments via SoundExchange; and (3) enable more timely and accurate payment of market-based “mechanical license” royalties to songwriters while providing blanket licenses for digital streaming services. 

Despite unanimous votes in the House of Representatives (H.R.5547) and in the Senate Judiciary Committee (S.2823), there are reports that the Music Modernization Act is being held up by just a few members of the Senate on account of the bill applying a uniform market-based “willing buyer/willing seller” royalty rate and providing full protection terms to pre-72 sound recordings. But these objections don’t hold up. They should not keep the Senate from taking a timely vote on the Music Modernization Act.

First, the “willing buyer/willing seller” royalty rate standard is the most sensible standard for achieving the purpose of music copyright law, and the Music Modernization Act’s expansion of that standard to pre-72 sound recordings and to music compositions is commendable. 

Under many circumstances, music copyright holders are subject to a compulsory licensing system in which licensees must pay royalties according to a rate formula set by Congress and applied by the Copyright Royalty Board. Although copyright holders are free to negotiate royalties with music service providers, those rates operate as backstops when negotiating is particularly burdensome or unsuccessful. Unfortunately, current law imposes different music copyright royalty rates depending on the delivery technology or service involved. Such a non-neutral approach is arbitrary and unjustifiable. Copyright law should not specially privilege one type of technology or service over others. Rather, it should apply the same standard across the board.  

The Music Marketplace Act sensibly follows the U.S. Copyright Office’s 2015 report recommendationthat “[a] single, market‐oriented ratesetting standard should apply to all music uses under statutory licenses.” Indeed, the “willing buyer/willing seller” standard is market-oriented in that it is intended to “most clearly represent the rates and terms that would have been negotiated in the marketplace” among willing parties. As mentioned above, the Music Modernization Act would apply the “willing buyer/willing seller” standard to public performances via digital audio transmission of pre-72 recordings and also make that standardthe basis for mechanical licensing royalties paid to songwriters and other copyright owners of musical compositions. Thus, the Music Modernization Act would more closely align music copyright policy with free market principles and more equitably secure the intellectual property rights in sound recordings and music compositions. 

Second, the Music Modernization Act is on principled ground in securing the same copyright protection terms for pre-72 sound recordings that apply to post-72 sound recordings. The Senate should not be deterred from voting on the Music Modernization Act because one or a few members may hold outlier opinions about how long copyright protections ought to last. 

In general, copyright protection terms for sound recordings made on or after 1972 run for the life of the author plus 70 years. This makes sense in the Digital Age, since copyrights in sound recordings are far easier to transfer and track than previously, and the economic value of such rights are potentially far greater than ever before. It is the copyright owners who have the foremost right to receive proceeds from their intellectual property. 

Recent decisions under state law indicate that pre-72 sound recordings are already protected under many or perhaps most state laws. But state litigation is complex, costly, and uncertain. An important upshot to the Music Modernization Act is that it offers a federal-level resolution to myriad state-level disputes over public performance royalties involving pre-72 recordings. Federal copyright protection terms for pre-72 sound recordings are a critical component of that resolution. 

The U.S. Constitution’s Article I, Section 8 Copyright Clause entrusts Congress with the power to secure exclusive rights in creative works so that the producers of such works can enjoy the fruits of their labors. Consistent with the purpose of the Constitution’s Copyright Clause, the Music Modernization Act would better secure music copyright protections in the Digital Age. The Senate should promptly give the Music Modernization Act a vote on its merits.

Senate Should Advance Consensus Bill to Modernize Music Copyright

On Tuesday, May 15, the Senate Judiciary Committee will hold a hearing on “Protecting and Promoting Music Creation for the 21st Century.” The hearing is timely because major aspects of music copyright law are outdated, unfairly depriving some copyright owners of financial rewards for their creative efforts.

The Senate Judiciary Committee should seize the opportunity to update music copyright law and finally provide protections that have long been missing. It should adopt legislation just like the Music Modernization Act (H.R.5447) that passed unanimously in the U.S. House of Representatives last month. H.R.5447 would improve the ability of recording artists, producers, and songwriters to exercise their rights in copyrighted music. For copyright owners of older sound recordings, the bill would also recognize their right to receive royalties when their recordings are publicly performed via digital audio transmission. 

Music copyright is grounded in the U.S. Constitution. The Article I, Section 8, Clause 8 “Copyright Clause” confers on Congress the power “to 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.” The Founding Fathers regarded copyright as 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 music artists, enjoy exclusive rights to the potential proceeds from their creative labors.

Copyright protections provide critical economic incentive for the work and expense of creating new works, including music compositions and sound recordings. Indeed, sound recordings and musical compositions are extraordinary sources of value. Retail revenues from recorded music reportedly totaled $8.7 billion in 2017. According to a report by the Recording Industry Association of America: “Streaming music platforms accounted for almost 2/3rd of total U.S. music industry revenues in 2017, and contributed nearly all of the growth.” 

However, many copyright law provisions that touch on music compositions and sound recordings need to be brought up to speed with changes caused by digital technologies and the Internet. H.R.5447 would update music copyright law by: (1) establishing a streamlined process for producers, mixers, and sound engineers to directly receive royalty payments through an entity called SoundExchange; (2) enabling more timely and accurate payment of “mechanical license” royalties to songwriters when their compositions are publicly performed via digital audio transmission and also providing blanket licenses for digital streaming services; and (3) securing to copyright holders of sound recordings made before 1972 federal copyright protections for public performances of their recordings via digital audio transmission.

The need to secure copyright protections for pre-72 sound recordings deserves special emphasis. Without explanation, federal copyright law fails to secure public performance royalty rights in sound recordings made before February 15, 1972, in the same manner it secures such rights in later recordings. Digital music services, including Sirius XM and Pandora, have publicly performed pre-72 sound recordings – but without having to pay royalties to copyright holders like they routinely pay for post-72 sound recordings. 

There is no reason for denying public performance royalty rights to copyright owners of pre-72 sound recordings. The growing importance of digital streaming to copyright owners makes the loss of financial returns for pre-72 sound recordings all the more unjust.  

Recognizing federal copyright law’s unfair treatment of pre-72 recordings, a 2015 report by the U.S. Copyright Office concluded: “pre-1972 recordings should be brought under the protection of federal copyright law.” As the Copyright Office explained, federal recognition of public performance copyright protections in pre-72 sound recordings “would serve the interests of licensing parity by eliminating… market distortion.” 

If it becomes law, H.R.5447would finally provide equal protection for pre-72 sound recordings. Going forward, copyright owners of pre-72 sound recordings would receive royalties for public performances of sound recordings via digital audio transmissions. Those royalties would be based on negotiations with digital music services or – absent agreement – on rates established by the Copyright Royalty Board pursuant to its “willing buyer/willing seller” standard that seeks to approximate market prices.  

Further, H.R.5447 would clear up uncertainties tied to state copyright laws. Absence of federal protections for pre-72 sound recordings led to multiple lawsuits against digital music services based on state copyright laws. In short, the bill would preempt all state law claims against digital music service providers that pay royalties for all public performances of pre-72 sound recordings taking place during the last three years. 

On May 10, Senator Orin Hatch introduced the similarly-titled Music Modernization Act (S.2823). Reportedly, S.2823 mirrors the music copyright reform bill passed by the House. Consistent with the Constitution’s charge “to promote the Progress of Science and Useful arts” by securing the exclusive rights of authors – including music artists – the Senate Judiciary Committee should pass H.R.5447 or companion legislation like S.2823.

House Committee Advancing Bill to Modernize Music Copyright

Our music copyright laws are outdated. But a music copyright omnibus bill introduced by the House Judiciary Committee, if adopted, would bring about several needed updates to reflect realities of the Digital Age. On April 11 the House Judiciary Committee is scheduled to mark up a new version of the Music Modernization Act. The core components of the bill have a wide base of support and a prompt vote should be a top priority of the House in the 115th Congress.

The new Music Modernization Act incorporates at least three bills previously introduced in Congress. My January 16 blog post, “Congress Should Advance Consensus Music Copyright Reforms in 2018,” provided a brief rundown for each of those proposed music copyright reforms: (1) the CLASSICS Act; (2) the AMP Act; and (3) an earlier version of the Music Modernization Act (MMA).

The CLASSICS Act would provide copyright holders of sound recordings made prior to 1972 with federal copyright protections for public performances of those recordings via digital audio transmission. This means copyright holders of pre-72 recordings would be able to receive royalties for such performances based on rates set by the Copyright Royalty Board pursuant to its “willing buyer/willing seller,” which seeks to “most clearly represent the rates and terms that would have been negotiated in the marketplace” among willing parties. For more on the CLASSICS Act, see my July 2017 blog post “Copyright Bill Would End Unequal, Inequitable Treatment of Pre-72 Sound Recordings.” 

The AMP Act would set up a process for producers, mixers, and sound engineers to directly receive royalty payments via a collective entity, SoundExchange. This would not require such royalty payments, but facilitate them when creative artists and other copyright holders agree to subdivide royalties with producers, mixers, and engineers pursuant to negotiated contract.

The MMA, as previously introduced, would enable more timely and accurate payment of songwriter “mechanical license” royalties and also streamline blanket licenses for digital streaming services. It would accomplish this by establishing a single licensing entity that would ensure that digital music services have correct information. Additionally, the bill would mechanical licensing royalties for music compositions to the “willing buyer/willing seller” standard. My blog post from January 26 called attention to the filing of the Senate version of the MMA.

Rolling all three bills into a single new Music Modernization Act makes good sense. Each component of the music copyright omnibus bill would update and improve the state of music copyright protections in accord with Congress’s obligation under the U.S. Constitution’s Article I, Section 8 Copyright Clause to secure exclusive rights in creative works. Further, all three major reform components command a broad consensus of support. And a unified bill for modernizing music copyright protections may enhance the attractiveness of a fast-track vote by the House.

Passage of the new Music Modernization Act would count as signal achievement for the 115th Congress.