New Paper by Copyright Law Experts Takes on Copyright Infringements by States

On May 13, the Regulatory Transparency Project published a paper titled "Holding States Accountable for Copyright Piracy." The paper was co-authored by a distinguished group of copyright experts: Alden Abbott, Kevin Madigan, Adam Mossoff, Kristen Osenga, and Zvi Rosen. Professor Mossoff is a member of the Free State Foundation's Board of Academic Advisors. This paragraph from the introduction sets forth the paper's purpose: 

This paper identifies how copyright law and sovereign immunity came into conflict recently, explains why this conflict matters, and proposes a solution: Congress should enact new legislation that holds states accountable for when state officials pirate the fruits of creative labors of citizens by stealing their copyrighted works. 

The conflict alluded to is the result of the Supreme Court's decision in Allen v. Cooper (2020). Along with a discussion of legal principles and copyright case law, the paper profiles some specific cases in which states or state entities infringed on copyrights and inflicted serious harms on copyright owners but escaped legal liability under copyright law. 

For another discussion of Allen v. Cooper and the need for a legislative response to shore up protections for copyright owners, see my July 2020 Perspectives from FSF Scholars paper, "Congress Should Stop States From Infringing Copyrights." States should not be financially responsible for copyright infringement just like everyone else, and Congress should seek ways to ensure that justice is served when states infringe copyrights.

The U.S. Copyright Office is currently undertaking a study of the copyright infringements and state sovereign immunity. The Office's study is expected to produce a report for public release later this year. 

IPEC's 2020 Report Highlights Federal Agencies' Pro-Copyright Initiatives

On January 7, the Intellectual Property Enforcement Coordinator (IPEC) released its Annual Intellectual Report to Congress for 2021. The report summarizes the Trump Administration's IP enforcement strategy and policy initiatives across numerous federal agencies. 

The IP Report rightly extols the constitutional basis for copyrights as well as its vitality to American prosperity: 

Intellectual property is integral to our nation’s economic competitiveness and the growth of our innovative economy. For instance, copyrights are not only economically important, but a key part of our culture and society. A well-functioning copyright system is essential. The U.S. copyright system is grounded in our Constitution, and built on centuries of extensive jurisprudence, statutes and regulations. 

Among other things, the IP Report recounts the Trump Administration's elevation of the IPEC within the Executive Branch: 

[U]nder the leadership of President Trump and with the support of Congress, the White House Office of the U.S. Intellectual Property Enforcement Coordinator (IPEC) was established as a new component agency of the Executive Office of the President and part of the National Economic Council, ensuring that in the decades to come the IPEC will be there to advise the President, coordinate policy, and advocate for American interests abroad.

The IP Report also overviews the Trump Administration's efforts through foreign trade agreements such as USMCA and other diplomacy efforts to ensure Americans' copyrighted works and other IP are better protected overseas. And the report includes appendices describing IP protection and enforcement initiatives undertaken over the last few years by Executive Branch Departments, the Office of the U.S. Trade Representative, as well as the U.S. Copyright Office. The Justice Department's appendix, for instance, highlights notable criminal infringement prosecutions. And the Copyright Office's appendix discusses the Section 512 Study Report that was released in May 2020. 

 

The need for an overhaul of Section 512 is the subject of my January 12 Perspectives from FSF Scholars paper titled "Congress Should Hold Big Tech Accountable for Copyright Violations." This year, expect Free State Foundation scholars to have more to say about needed pro-IP policy actions. 

MEDIA ADVISORY: Congress Passes Copyright Reforms on Streaming Piracy and Small Claims

The following statement may be attributed to Free State Foundation Senior Fellow Seth Cooper regarding the passage of   the Protect Lawful Streaming Act and the Copyright Alternative in Small-Claims Enforcement Act (CASE Act) – both of which were included in the omnibus spending bill for 2021.

The Senate and House deserve thanks for passing these needed reforms and strengthening copyright protections against online infringements that cost copyright owners hundreds of millions of dollars each year.  The Protect Lawful Streaming Act targets illicit commercial streaming operations with tougher criminal penalties. As I recently stated in a blog post, operators of illegal movie and music streaming services faced less severe penalties than operators of online piracy sites for downloading copyrighted content. There obviously was no reason for that disparity in the law. By increasing criminal infringement penalties for streaming piracy, Congress has helped make it worthwhile for prosecutors to go after illegal commercial streaming operations. 

By passing the CASE Act, Congress has provided many copyright owners with access to justice through a less expensive and voluntary small claims venue for hearing infringement claims. The six-figure costs of hiring attorneys as well as fees and legal costs of going to federal court make civil copyright enforcement beyond the reach of copyright owners of modest means. Now copyright owners will soon have a less expensive and simpler process for resolving copyright infringement claims, including certain types of online infringement claims.

Morning Consult Op-Ed on Combatting Digital Piracy

Free State Foundation President Randolph May and I today published an op-ed in The Morning Consult titled "World IP Day 2020 – Protect Americans' Copyrights From Digital Piracy." This just-published op-ed addresses online piracy and counterfeiting of copyrighted goods in digital media. Many thanks The Morning Consultfor running our op-ed. 

The need to combat international digital piracy of copyrighted works receives a fuller treatment in our new book, Modernizing Copyright Law for the Digital Age – Constitutional Foundations for Reform (Carolina Academic Press 2020). The new copyright book is available both in print and e-book formats.

Free State Foundation President Randolph May and I will be participating in a Federalist Society teleforum to discuss themes from our new book Modernizing Copyright Law for the Digital Age – Constitutional Foundations for Reform. The book is available for purchase at Amazon and at Carolina Academic Press. 

The teleforum will take place on March 31 at 12 p.m. EDT. We are honored that Professors Adam Mossoff and Michael Risch will be joining us for the teleforum. Additional information is available at the Federalist Society's website. Call in and listen, and feel free to offer your own questions on copyright modernization reform to the teleforum panelists. 

House of Representatives Passes Small Copyright Claims Bill

October 22, the U.S. House passed H.R. 2426, the Copyright Alternative in Small-Claims Enforcement Act of 2019. Also known as the "CASE Act," the bill would provide copyright owners of modest means a less expensive, voluntary venue to bring infringement claims. My September 22 blog post discussed the merits of the CASE Act. It is important access to justice legislation. Bravo to the House for giving the bill a 410-6 passing vote. Hopefully, the Senate will promptly approve the CASE Act. 

Pre-72 Sound Recording Owners Now Receive Royalties They Deserve

October 11 marked the one-year anniversary of the signing of the Music Modernization Act of 2018. Free State Foundation President Randolph May and I supported the MMA, including its provision to ensure that copyright owners of sound recordings made before early 1972 receive federal protections for public performances of their recordings via digital audio transmission just like post-72 sound recordings.  

According to SoundExchange's "Digital Radio Report" for the third quarter of 2019: "SoundExchange is already administering the majority of the MMA’s provisions, distributing more than $10M in royalties to creators of pre-72 recordings and millions more to producers."

The U.S. Constitution’s Article I, Section 8 Copyright Clause empowers Congress to secure exclusive rights in creative works so that the creators of such works can enjoy the fruits of their labors. The MMA appears to be fulfilling that constitutional imperative.  

Congress Should Pass Bill for Small Copyright Claims

When copyrighted works are infringed on user-upload websites, many copyright owners are deterred from seeking civil justice by potential attorneys' fees and court costs. Legislation pending in both chambers of Congress, if passed, would provide copyright owners of modest means a less expensive venue to bring infringement claims. The House of Representatives and the Senate should promptly vote to approve the Copyright Alternative in Small-Claims Enforcement Act or “CASE Act” (H.R. 2426 and S. 1273). 

Infringements of copyrighted works deprive the owners of their exclusive rights to the proceeds of their property and labors, jeopardizing their livelihoods. Yet existing law make it burdensome for songwriters, recording artists, filmmakers, and other creative artists with limited resources to protect their copyrights and seek damages for infringement of their works. For starters, copyright owners face time-consuming burdens of patrolling user-upload sites for unauthorized uses of their works and issuing and re-issuing numerous notices to online platform services. Additional obstacles are posed by provisions in the Digital Millennium Copyright Act of 1998 (DMCA) regarding counter-notices and disputed takedown requests.

Under the DMCA, if a copyright owner submits a takedown notice to an online platform provider, the provider must make the takedown notice available to the user who posted the alleged infringing content. A user who objects to the takedown can file a counter-notice, requiring the online provider to repost the allegedly infringing content. And if a counter-notice is filed, a copyright holder still seeking to vindicate his or her rights must hire a lawyer and file a lawsuit in federal court within ten days. 

There is ample hardship in retaining an attorney to bring a copyright infringement lawsuit within ten days. Moreover, the federal court litigation is too costly for many copyright owners. As of 2019, filing and administrative fees to bring a civil case total $400. Attorneys’ fees and other litigation costs run much higher. The American Intellectual Property Law Association’s 2015 “Report of the Economic Survey” found that the median litigation costs of a copyright infringement lawsuit valued at less than $1 million was $150,000 at the time discovery was concluded. 

Not surprisingly, the U.S. Copyright Office has recognized that “federal court is effectively inaccessible to copyright owners seeking redress for claims of relatively low economic value, especially individual creators who are of limited resources.” In its September 2013 “Copyright Small Claims” report, the Office concluded that “the most promising option to address small copyright claims would be a streamlined adjudication process in which parties would participate by consent.” The Office's legislative proposal for a small copyright claims court provided the basis for the CASE Act.

H.R. 2426 and S. 1273 would establish a Copyright Claims Board as a voluntary, alternative forum to federal courts for alleged copyright infringements where total recovery is for $30,000 or less, exclusive of attorneys' fees and costs. The Board would consist of three appointed Copyright Claims Officers serving six-year terms. Under the CASE Act, copyright owners could initiate small claims proceedings before the Board by providing notice to respondents, who would have 30-days to consent or opt-out. Failure to timely respond could result in a default against the respondent. Importantly, the Copyright Claims Board would provide a venue for copyright owners to seek relief for DMCA-related claims for online infringement on user-upload websites. 

The CASE Act provides that both parties before the proposed Copyright Claims Board would make written submissions. Hearings would be conducted remotely. Similar to a typical small claims court, the Copyright Claims Board would have simplified procedures with limited discovery. The Board could dismiss without prejudice any claim that it believes to be unsuitable for the small claims process. Decisions by the Board would be binding only on the parties before it. And Board decisions would be subject to limited review by the Register of Copyrights for “abuse of discretion.” Such decisions could later be filed in federal court for enforcement, but they also could be challenged in federal district court for fraud, misconduct, or other improprieties. 

Both H.R. 2426 and S. 1273 have been reported out of their respective committees, with overwhelming bipartisan support. Passing the CASE Act would be an important achievement in copyright reform for the 116th Congress. The legislation wouldprovide a less expensive and simpler process for addressing many copyright infringement claims, including some DMCA-related claims. The House and Senate should soon vote on the CASE Act and provide copyright owners of modest means greater access to justice.

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.

MLC Coalition for Songwriter Royalties Stands on Rock Solid Ground

On February 4, the Mechanical Licensing Collective (MLC) Coalition announced it has received an impressive list of endorsements from all major associations and organizations in the U.S. music industry. The MLC Coalition will be making a submission to the U.S. Copyright Office in order to create a collective entity for administering mechanical licensing royalties pursuant to the Music Modernization Act of 2018 (MMA). 

For songwriters, federal copyright law secures protections in their musical compositions but also subjects their compositions to compulsory mechanical licensing. Mechanical licenses grant third parties rights to record, reproduce, or sample original music compositions in exchange for payment of mechanical licensing royalties to songwriters. Mechanical licensing royalty rates are either established by contractual agreement or set by the Copyright Royalty Board. 

Songwriters have sometimes suffered from lack of timely receipt of mechanical licensing royalties, particularly for digital audio transmissions of sound recordings of their songs by digital music service providers such as Spotify and Pandora. Apparently, digital music service providers have experienced difficulties in accurately identifying and locating songwriters for purposes of making royalty payments. The 115th Congress passed the MMA to alleviate this mechanical licensing royalties problem by facilitating proper payments to songwriters. Over the course of several Free State Foundation blog posts, we supported passage of the MMA.

The MMA authorized the Register of Copyrights to designate a mechanical licensing collective that would have authority to perform functions such as offering and administering blanket licenses for usage of music compositions by digital music providers, collecting royalties from digital music providers and distributing them to songwriters and other copyright owners in music compositions, making efforts to identify music compositions embodied in sound recordings and to identify and locate the copyright owners of those compositions, as well as maintaining a database for musical works necessary to administer mechanical licensing. By March 21, the MLC Coalition will make its submission to the Copyright Office in connection with this provision of the MMA.

Given the widespread consensus support from performance rights organizations, music publishers, the recording industry, and digital music service providers, the MLC Coalition is ideally suited to administer the mechanical licensing functions spelled out in the MMA. In making its forthcoming submission to the Copyright Office, the MLC Coalition stands on rock solid ground.   

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.

U.S. House Votes Unanimously to Modernize Music Copyrights

On April 26 – World IP Day – the U.S. House of Representatives passed the Music Modernization Act (H.R. 5547) by a 415-0 vote. This welcome news follows closely on the unanimous vote of approval by the House Judiciary Committee on April 11.

FSF President Randolph May and I emphasized the merits of H.R. 5547 in our April 21 op-ed published at The Hill: "World IP Day – An Opportune Time to Modernize Music Copyright Protections." In short, the bill includes important updates to federal copyright law 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, theMusic Modernization Act would: (1) secure to copyright holders of sound recordings made before 1972 federal copyright protections for public performances of their recordings via digital audio transmission; (2) establish a streamlined process for producers, mixers, and sound engineers to directly receive royalty payments via SoundExchange; and (3) enable more timely and accurate payment of songwriter "mechanical license" royalties and also provide blanket licenses for digital streaming services. 

For more on the Music Modernization Act, read our World IP Day op-ed in The Hill. Prior blog posts also analyze music copyright reforms from previous bills that have since been combined in H.R. 5547.  

Congress Should Modernize Civil Copyright Enforcement for the Digital Age

Online infringement of copyrighted content – including sound recordings and motion pictures – is pervasive on popular Internet-based user-upload services. Numerous and repeated instances of infringement on sites such as YouTube deprive copyright owners of their exclusive right to the proceeds of their property and creative labors.

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 regarding online infringements of copyrighted content.

In particular, the Digital Millennium Copyright Act of 1998 (“DMCA”) needs to be revised in order to keep pace with the last two decades of changes in Internet technology and online user habits. Among other things, the DMCA’s Section 512 “notice and takedown” provision should be updated in order to provide copyright owners with more efficient means for enforcing their exclusive rights and combating online infringement. Also, Congress should establish a U.S. Copyright Office-administered small claims court to resolve disputes over takedowns of infringing online content and other low-value infringement matters.

Read our paper for more. Also consider the principles and policies for copyright reform that we discuss in several other Perspectives from FSF Scholars papers on intellectual property (IP):

• Randolph J. May and Seth L. Cooper, “The Logic of International Intellectual Property Protection,” Perspectives from FSF Scholars, Vol. 11, No. 3 (January 13, 2016).
• Randolph J. May and Seth L. Cooper, “The Public Contract Basis of Intellectual Property Rights,” Perspectives from FSF Scholars, Vol. 11, No. 13 (April 19, 2016).
• Randolph J. May and Seth L. Cooper, “Liberty of Contract and the Free Market Foundations of Intellectual Property,” Perspectives from FSF Scholars, Vol. 11, No. 27 (July 29, 2016).
• Randolph J. May and Seth L. Cooper, “Intellectual Property Rights and Compulsory Licensing: A First Principles Approach to Reform,” Perspectives from FSF Scholars, Vol. 11, No. 39 (November 11, 2016).
• Randolph J. May and Seth L. Cooper, “The Common Purposes of Intellectual Property and Antitrust: Promoting Creative and Innovative Output,” Perspectives from FSF Scholars, Vol. 12, No.19 (June 6, 2017).
• Randolph J. May and Seth L. Cooper, “Modernizing the Copyright Office for the Digital Age Economy,” Perspectives from FSF Scholars, Vol. 12, No. 37 (October 30, 2017).
• Randolph J. May and Seth L. Cooper, “Unalienable Rights and Alienable Intellectual Property: Why ‘Moral Rights’ Should Not Be Imported into U.S. Copyright Law,” Perspectives from FSF Scholars, Vol. 12, No. 46 (December 11, 2017).

Copyright Bill to Modernize Music Royalties and Streaming Filed in Senate

On January 24, S. 2334 – the Music Modernization Act of 2018 – was introduced in the U.S. Senate and referred to the Judiciary Committee. Sponsored by Sen. Orrin Hatch, and with bi-partisan co-sponsorship, S. 2334 is the Senate counterpart to HR 4706. The Music Modernization Act would reform Sections 114 and 115 of the Copyright Act by facilitating more timely and accurate payment of songwriter royalties and by streamlining blanket licenses for digital streaming services. If adopted, the Music Modernization Act would also move mechanical licensing royalties for music compositions to the “willing buyer/willing seller” standard, which seeks to “most clearly represent the rates and terms that would have been negotiated in the marketplace” among willing parties. The legislation has the support of songwriters, music publishers, and digital streaming services.

The House version of the Music Modernization Act was one of three bills that were briefly profiled in my January 16 blog post: “Congress Should Advance Consensus Music Copyright Reforms in 2018.” As explained in that post, several provisions of the Copyright Act regarding sound recordings and music compositions need to be updated to better secure copyright owners’ rights to the proceeds of their creative labors. The Music Modernization Act (S.2334/HR 4706), the CLASSICS Act (HR 3301), and the AMP Act (HR 881), would all help achieve those ends. Congress should seize the opportunity to make those reform proposals into reality in 2018.

Congress Should Advance Consensus Music Copyright Reforms in 2018

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.

*     *     *

Each of these three bills has multiple co-sponsors in the House of Representatives. And each enjoys a broad base of support among music copyright industry associations and organizations. Consistent with the Constitution’s charge to promote the progress of the arts by securing the exclusive rights of authors, including creative artists, Congress should give these three music copyright bills timely consideration.

A Day to Remember Our Constitution's Protections for IP Rights

On Constitution Day – September 17 – we celebrate the framers signing of America’s written fundamental law. Among its sections and clauses, the Constitution’s provision for intellectual property (IP) rights deserves renewed appreciation by the public and support by Congress. Stronger security for IP rights enhances our economic climate and fulfills an important constitutional obligation.

Copyrighted works and patented inventions increasingly are vital to our nation’s prosperity in today’s digital Internet-connected global economy. A report by the U.S. Department of Commerce found that value added to our economy by copyright- and patent-intensive industries totaled approximately $1.8 trillion in 2014, amounting to about 10.6% of the U.S. gross domestic product. Also, jobs supplied by copyright-intensive industries totaled 5.6 million in 2014, while patent-intensive industries provided 3.9 million jobs.

The vibrant growth in IP’s value to our economy has been driven by digital technology and Internet connectivity. However, modern means of production and distribution also render IP vulnerable to online theft and infringement. Although often overlooked, the Constitution entrusts Congress with the responsibility to meet such challenges and ensure the security of copyrights and patent rights. The conceptual and historical backdrop of that responsibility are examined in the book, The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective, that I co-authored with Free State Foundation President Randolph May.

Logically, IP rights reflect the natural rights principle that a person has a right to the proceeds of his or her own labors. Those proceeds are a person’s private property, deserving protection by equal laws. Historically, this natural rights and property rights understanding of copyrights and patents prevailed in the newly independent American states. By the time the framers met for the Philadelphia Constitutional Convention in 1787, twelve of the thirteen former colonies had adopted state copyright laws, and a few provided patent protections for inventors.

James Madison concluded that the lack of uniformity of among state copyright laws was a vice that needed to be remedied. Other framers in Philadelphia agreed. The Constitution’s Article I, Section 8, Clause 8 — the intellectual property (IP) clause — grants 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.” As Madison observed in Federalist No. 43, conferring on Congress the power to protect copyrights and patent rights would be highly useful to individual authors and inventors and also serve the public good.

The First Congress to convene under the Constitution promptly exercised its constitutional power to secure copyrights and patent rights. In addition to establishing a system of taxes and revenues, setting up the federal judiciary, selecting the permanent capital site, and drafting the Bill of Rights, the First Congress passed the Copyright and Patent Acts of 1790. Both acts were signed by President George Washington. Those landmark laws set IP on a free market footing by expressly recognizing authors’ and inventors’ exclusive rights to contract for the sale or licensed use of their writings and inventions. The Copyright and Patent Acts of 1790 also provided civil rights of action for creators and inventors whose protected works or inventions were infringed.

In the nearly two hundred fifty years that have followed, Congress has intermittently exercised its constitutional power to further secure IP rights. Drawing upon natural rights and property rights principles, statesmen such as Daniel Webster and Henry Clay helped pass the first substantial revisions of the Copyright and Patent Acts in the 1830s. Also cognizant of natural rights and property rights principles, in 1891 the Centennial Congress secured copyright protection for foreign authors in order to ensure American authors were treated equitably overseas. In 1897, Congress made willful infringement of certain copyrighted works a crime subject to federal prosecution. And through subsequent legislation by Congress, the scope of copyright protections has expanded beyond books and engravings to include unauthorized reproductions or public performances of motion pictures and digital sound recordings. Likewise, the scope of patent protections now includes inventive designs as well as manufacturing and other production processes that embody the latest digital technologies.

Bearing those constitutional, historical, and economic considerations in mind, there is work ahead for Congress that is essential to securing American IP rights in the Digital Age:

• Inexplicably, current federal copyright law does not provide public performance copyright protections in sound recordings made before 1972. Congress should pass legislation guaranteeing that copyright holders have the same right to receive royalty payments for public performances of pre-72 sound recordings as for performances of later recordings.

• The effectiveness of Digital Millennium Copyright Act of 1998’s “notice and takedown” process for removing infringing music and other content from the Internet has been undermined by two decades of technological advances and changes in user habits. To better protect the value of creative artists’ copyrighted content from massive online infringement activity, Congress should revise and update the DMCA.

• The Copyright Office’s capabilities are outdated. Only limited online searching for copyright registration records is available and online searching for recorded copyright title transfer is unavailable. Congress should pass legislation to modernize and restructure the Copyright Office. It should give the Register of Copyrights the independence necessary to make technology upgrades and to establish a comprehensive searchable online database of copyright records. Upgrading the Office’s capabilities will reduce parties’ compliance costs and enhance the economic value of copyrighted works.

• Steep losses to the U.S. economy caused by overseas piracy of IP need to be curtailed. A 2017 report by the bipartisan IP Commission calculated that counterfeit goods, pirated software, and trade secret theft cost our economy between $225 and $600 billion annually. Congress should urge the Trump Administration to include strong IP rights enforcement provisions in foreign trade negotiations, and proposed treaties that contain such provisions should be ratified and supported by implementing legislation.

As we reflect on our Constitution’s origin as well as its guarantees for representative government and individual freedoms, we should not forget the wisdom of the framers in including the protection of copyrights and patent rights in our nation’s fundamental law. Congress should vigorously pursue its constitutional responsibility to secure IP rights and put our nation’s economy on the strongest possible footing for the Digital Age.