Ninth Circuit Turns Down State Copyright Claims in Narrow Decision

On August 23, a panel of the U.S. Court of Appeals for the Ninth Circuit determined that the California copyright statute's protections for the "exclusive ownership" of sound recordings made before 1972 did not include the right of public performance. In so doing, the Ninth Circuit reversed a District Court decision that I wrote about in a March 2015 blog post. Back in 2015, state copyright claims regarding public performances of pre-72 sound recordings had fared well in court. But as the Ninth Circuit observed in Flo & Eddie, Inc. v. SiriusXM Radio, Inc., those claims did not find favor at the appellate level. 

In sum, the Ninth Circuit panel in Flo & Eddie determined that the there was no common law recognition of public performances in sound recordings when California first used the term "exclusive ownership" into its 1872 copyright statute. And the Ninth Circuit panel concluded there was no evidence sufficient to overcome the presumption that the common law rule of no public performance rights was changed by the statute's use of that term in 1872 – or in 1982, when California revised the statute.

The legal question about whether public performance rights in pre-72 sound recordings is offered under state law seemed to be a strong candidate for resolution by California's highest court of law rather than by federal courts. In fact, that question was certified to the California Supreme Court in a related case called Flo & Eddie, Inc. v. Pandora Media, Inc. But the California Supreme Court dismissed that case before deciding the question. That dismissal was prompted by Congress's passage of the Music Modernization Act of 2018 (MMA). 

The MMA, signed into law by President Donald Trump, finally recognized public performance rights in copyrighted sound recordings pressed before 1972. Thus, on a prospective basis, copyright owners of pre-72 sound recordings enjoy public performance rights when their creative works are digitally transmitted on satellite radio or by Internet webcasters. And most claims regarding public performances of pre-72 sound recordings prior to the MMA were resolved in a major class action settlement. Although the MMA preempted most state law claims regarding pre-72 sound recordings, Flo & Eddie's claims remained alive – at least until the Ninth Circuit's decision. But in light of the MMA and the legal settlement, the Ninth Circuit's decision ultimately is a narrow one. 

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.  

IP Enforcement Coordinator's Report Spotlights Copyright Protection Progress

In late February, the Intellectual Property Enforcement Coordinator (IPEC) released its Annual Intellectual Property Report to Congress. The Report provides "an overview of the Trump Administration's intellectual property enforcement strategy and policy efforts" across multiple agencies. IPEC's coordination and development of U.S. IP policy is intended "to promote innovation and creativity, and to ensure effective intellectual property protection and enforcement, domestically and abroad." 

Although the Trump Administration's enforcement policy "includes all areas of intellectual property and innovation policy," its policy activities regarding copyright protections merit attention. In 2018 progress was made in better securing copyrights. But there is plenty more that the Trump Administration and the 116th Congress can do to modernize and strengthen protections for Americans' creative works. 

One achievement touted in the Report is the passage of the Music Modernization Act of 2018. In an op-ed for The Hill and in several blog posts, Free State Foundation President Randolph May and I urged Congress to adopt reforms contained in that legislation. The Act (1) secured federal copyright protections for public performances via digital audio transmission of pre-1972 sound recordings; (2) established a streamlined process for producers, mixers, and sound engineers to directly receive royalty payments; and (3) facilitated more timely and accurate payment of songwriter "mechanical license" royalties and also provided blanket licenses for digital streaming services. As I explained in a February blog post, the widely endorsed MLC Coalition will be submitting to the U.S. Copyright Office a proposal for creating a collective entity to administer mechanical license royalties pursuant to the Act. 

An appendix in the IPEC Report highlighted the Copyright Office's expected release of its public study report on the "moral rights" of authors. Moral rights provisions in foreign nations typically restrict or prohibit sales or transfers of authors' rights to be acknowledged as creators of their works as well as their rights to control the integrity or future use of their works. In a Perspectives from FSF Scholars, Randolph May and I made the case that "current U.S. copyright law as well as contract law protect authors’ and creative artists’ rights to control whether they receive credit for their copyrightable works and whether their works are adapted into new media or transformed." We concluded: "Importing additional foreign-based moral rights restrictions into U.S. copyright law would create legal uncertainties, destabilize existing voluntary contract arrangements, reduce market freedom, and threaten the market value of copyrighted works."

The IPEC Report also referenced the Copyright Office's ongoing public study of Section 512 of the Digital Millennium Copyright Act of 1998 (DMCA). Section 512 contains the so-called "notice-and-takedown" provision under which copyright holders are entitled to give notice to an online service provider when infringing content is posted on its network or website. A provider receives immunity if it “responds expeditiously to remove, or disable access to, the material that is claimed to be infringing.” 

Unfortunately, owners of copyrighted sound recordings, movies, and other creative works suffer steep financial losses from mass online infringement. They also experience difficulties navigating the DMCA's outdated legal processes. The DMCA was adopted before user-upload sites such as YouTube became prevalent. In a Perspectives paper, Randolph May and I called attention to the urgent need to update the law, and we highlighted ways that Congress can reduce notice-and-takedown compliance burdens for copyright holders and improve protections from online infringement. That same paper also called on Congress to adopt a voluntary small claims court for resolving disputes over alleged online infringement involving copyright owners of modest means. 

Additionally, the IPEC Report identifies ongoing criminal copyright investigations and prosecutions by federal law enforcement. A Report appendix noted that the U.S. Justice Department "continues to pursue significant, large-scale piracy and counterfeiting operations." It cited the March 2018 sentencing for criminal copyright infringement of the owner of Sharebeast.com, which "operat[ed] a massive file-sharing infrastructure that distributed approximately 1 billion copies of copyrighted musical works through Internet downloads." Indeed, the Report cited the Recording Industry Association of America's (RIAA) description of Sharebeast.com as "the largest online file-sharing website specializing in the reproduction and distribution of infringing copies of copyrighted music operating out of the United States." The RIAA estimated $6.3 billion in total loss to its members. Furthermore, according to the Report, the FBI had pending "23 investigations of copyright infringement related to software,""41 investigations of other copyright infringement," and "8 investigations of copyright infringement related to signal theft" of video programming at the end of fiscal year 2018. 

Randolph May and I published a Perspectives paper on how Congress ought to modernize criminal copyright law to combat online piracy. For starters, Congress should make online piracy via Internet streaming a felony. Prosecutions for criminal copyright infringement are not numerous, and they are limited to willful infringement of protected works. However, civil copyright enforcement is oftentimes inadequate for curbing large-scale online piracy operations like Sharebeast.com. In another Perspectives from FSF Scholars, we emphasized the need to modernize international agreements by requiring foreign nations to step up criminal copyright enforcement against large-scale online piracy. 

The IPEC Report is valuable in spotlighting key achievements and ongoing initiatives by the Trump Administration to strengthen protections for IP, including copyrighted works. In 2019, the Trump Administration and the 116th Congress ought to commit to building on that progress to better secure Americans IP rights and to advance our economy in the Digital Age. 

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.   

President Trump Signed the Music Modernization Act

Yesterday, President Trump signed the "Orrin Hatch-Bob Goodlatte Music Modernization Act" (H.R. 1551), which creates a compulsory blanket licensing system for music recordings, updates the rate standards applicable to music licensing, provides copyright royalties to pre-1972 artists, and provides compensation to producers, mixers, and sound engineers.

President Trump released the following statement when he signed the bill:

The Music Modernization Act closes loopholes in our digital royalty laws to ensure that songwriters, artists, producers, and providers receive fair payment for the licensing of music. 

Streaming has made music more accessible than ever, yet our laws have not kept up with the pace of technology.  As such, artists of all varieties and all career stages are losing out on revenue that they have rightly earned

This legislation will help ensure that artists from eras long ago, in addition to modern day, can retire in security, and that current and upcoming artists can make a living by creating amazing works that captivate their fans and entertain our nation — and the world. 

FSF scholars have advocated for Congress to pass the Music Modernization Act in order to better secure copyright protections and royalty payments for recording artists, songwriters, and other music professionals.

Further Readings:

Randolph May and Seth Cooper, "A Constitution Day to Strengthen Copyright Protection," Perspectives from FSF Scholars, Vol. 13, No. 35, (September 17, 2018).

Seth Cooper, "Senate Should Vote on the Bill to Modernize Music Copyright," FSF Blog, (August 9, 2018).

Seth Cooper, "Senate Should Advance Consensus Bill to Modernize Music Copyright," FSF Blog, (May 15, 2018).

Randolph May and Seth Cooper, "World IP Day – An Opportune Time to Modernize Music Copyright Protections," Perspectives from FSF Scholars, Vol. 13, No. 14, (April 23, 2018).

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.