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.  

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.   

It's Time for the Senate to Vote on the MMA

I just read a report in Communications Daily (@Comm_Daily) that there are now 51 co-sponsors in the Senate of the Music Modernization Act. This is good news. In the August 9 blog which I have pasted in below, my colleague Seth Cooper explains what the MMA would do to modernize the music licensing and compensation system and why it is so important.

Of course, 51 out of a 100 is a majority in the U.S. Senate -- and other places as well. But, as we all know, a Senator or two can prevent a vote from occurring, even for legislation like the Music Modernization Act, which is thoroughly bipartisan and has widespread support.  

As Seth said on August 9, "the Senate should act promptly to vote on the Music Modernization Act."

 Thursday, August 09, 2018

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 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.

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.  

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. 

Music Industry Grew Significantly in 2017

The Recording Industry Association of America (RIAA) recently released its 2017 Revenue Statistics, which show significant growth in the music industry over the last few years. In 2017, music streaming revenues were $5.7 billion, more than triple what they were in 2014 at $1.8 billion. Streaming applications now generate 65% of music industry revenues. Moreover, the number of paid music subscriptions grew by more than 55% from 2016 to 2017. Overall, the retail value of revenues throughout the entire music industry grew by $1.2 billion from 2016 to 2017.

While there are still problems with online piracy that need to be addressed, the growth of the music industry would not be possible with strong copyright protections, which enable artists and creators to earn a return on their labors.

The CLASSICS Act Would Update Pre-1972 Law

Yesterday, Senators Chris Coons (D-DE) and John Kennedy (R-LA) introduced the Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act, or CLASSICS Act. This bipartisan legislation would require digital services to pay copyright holders and artists for the use of sound recordings made before February 15, 1972. Current federal copyright law fails to provide important copyright protections to music artists and other copyright holders in sound recordings made before 1972. As a result, copyright holders do not enjoy the same right under federal law to receive royalties for public performances of pre-1972 sound recordings that others enjoy for later recordings. 

In this July 2017 blog, FSF Senior Fellow Seth Cooper discusses the House version of this bill, also called the CLASSICS Act, and how it would protect the rights of copyright holders of pre-1972 sound recordings.

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.

*     *     *

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.

Copyright Bill Would End Unequal, Inequitable Treatment of Pre-72 Sound Recordings

Current federal copyright law fails to provide important copyright protections to music artists and other copyright holders in sound recordings made before 1972. As a result, copyright holders do not enjoy the same right under federal law to receive royalties for public performances of pre-72 sound recordings that others enjoy for later recordings. A new bill in Congress offers a workable, straightforward, and long overdue solution to this glaring problem.

On July 19, Representatives Darrell Issa and Jerrold Nadler introduced HR 3301, the “Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act” – or “CLASSICS Act.” If adopted, digital audio transmissions of pre-72 sound recording would no longer be excluded from federal protections for public performances of copyrighted sound recordings. HR 3301 would also provide a streamlined way for resolving pre-existing state law claims for digital audio transmissions of pre-72 sound recordings. The CLASSICS Act strongly merits consideration without delay by the 115th Congress.

As Free State Foundation President Randolph J. May and I described in our book, The Constitutional Foundations of Intellectual Property: A Property Rights Perspective (2015), copyright is a unique kind of private property right, rooted in an author’s creative labor. The U.S. Constitution’s Article I, Section 8, IP Clause authorizes Congress to protect an author’s exclusive right to the proceeds of his or her work. Federal copyright law establishes baseline protections for copyright holders – including exclusive rights to proceeds from public performances of sound recordings.

Without any apparent explanation, the Copyright Act of 1976 excluded federal protection for the owners of copyrighted sound recordings made before February 15, 1972. Digital music services such as Sirius XM and Pandora have publicly performed pre-72 sound recordings via digital audio transmissions without paying royalties to copyright holders in the manner they routinely pay for post-72 sound recordings. Although the 1976 Act largely preempted state copyright laws, Section 301(c) left intact state jurisdiction over rights in sound recordings fixed before 1972. This state of affairs has resulted in a handful of lawsuits against digital music services based on state copyright law. Courts have largely – but not entirely – recognized that owners of pre-1972 recordings have property interests under state law and that those interests may not be misappropriated without compensation.

In a 2015 report, the U.S. Copyright Office reiterated its view that “pre-1972 recordings should be brought under the protection of federal copyright law.” According to the Copyright Office, federal recognition of public performance copyright protections in pre-72 sound recordings “would serve the interests of licensing parity by eliminating… market distortion” and also “allow for a federal compensation mechanism for the artists responsible for pre-1972 works.”

The CLASSICS Act, HR 3301, is perhaps the most promising legislative proposal to date for extending federal copyright protections to public performances of pre-72 sound recordings. Passage of HR 3301 would bring needed parity to federal law. HR 3301 would end free-riding commercial usage of valuable copyrighted sound recordings. Certainly, this would be in step with Congress’s constitutional duty to secure copyright holders’ exclusive rights to the proceeds of their intellectual property. Going forward, copyright holders 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.  

Further, the CLASSICS Act would clear up existing uncertainties tied to state copyright laws. If adopted, the HR 3301 would preempt state law claims based on public performances of pre-72 sound recordings that meet the requirements of federal law. The bill also provides a streamlined option for settling prior lawsuits based on state copyright lawsuits claims. Within nine months after the HR 3301’s effective date, if digital music providers pay royalties for all public performances of pre-72 sound recordings taking place during the last three years, all state law claims against such providers would be federally preempted.

Importantly, a press release by the CLASSIC Act’s sponsors states that HR 3301 has a broad base of support from a diverse array of participants in the music marketplace. Listed supporters of the bill include the Recording Industry Association of America (RIAA), Pandora, musicFIRST, the Internet Association, SoundExchange, and the American Federation of Musicians. This cross-section of support bodes well for the bill’s prospects in this Congress.

The sponsors of the CLASSIC Act should be commended for introducing the bill. HR 3301would at long last recognize the rights of copyright holders in pre-1972 sound recordings, and justly ensure they receive compensation for commercial uses of their intellectual property. Congress should give HR 3301 prompt attention.