Month: December 2018

Concluding our coverage of the Music Modernization Act (MMA), this article explores the final Title III of the bill, the “Allocation for Music Products Act” or AMP Act. (To read more about the bill generally, visit the prior blogs Title I and Title II.) Whereas the other two titles have focused primarily on songwriters and musicians, the AMP Act is the Copyright Act’s effort to recognize the roles of producers, mixers, and sound engineers in the creation and production of a sound recording by granting them a statutory right to royalties in from digital performance services. Critically, thanks to the AMP Act, producers, mixers, and sound engineers will not need to enter into contracts that explicitly establish compensation for digital transmissions.

As reported by IP Law Watch, the AMP Act “codifies the requested royalty allocations from artists to studio professionals that SoundExchange[1] has honored since 2004. (For more information see S. Rept. 115-339 (115th Congress Sept. 17, 2018) (Report of the Committee on the Judiciary to accompany S. 2823, The Music Modernization Act). In particular, the AMP Act allows SoundExchange to receive a “letter of direction” from an artist to “distribute, to a producer, mixer, or sound engineer who was part of the creative process that created a sound recording, a portion of the payments to which the payee would otherwise be entitled from the licensing of transmissions of the sound recording.” Although similar allocations are already in place for many, if not most, sound recordings after 1995, this authorization granted by the AMP Act is unique as it enables a more direct, and ideally efficient, process.

Because SoundExchange mainly handles sound recordings created after 1995, the AMP Act provides guidance for sound recordings predating November 1, 1995. For these sound recordings, producers, mixers and sound engineers may receive a distribution of 2% of collected receipts from licensing transmissions of the sound recording as deducted from the amounts payable to the artist provided that the producer, mixer, or sound engineer can evidence a failed attempt to obtain a “letter of direction” from the artist. In addition to these requirements, producers, mixers, and sound engineers would not be immediately entitled to the 2% distribution—there would be an “objection period” in which an artist or owner of the sound recording could raise objections.

There is one minor wrinkle to the above guidelines for sound recordings fixed before November 1, 1995: the relevant sections of the AMP Act—Section 114(g)(5)(B) (pre-1995 recordings) and Section 114(g)(6)(E)(right to receive payments)—do not go into effect until January 1, 2020. This delay is not a bad thing though; rather, it is to provide SoundExchange the necessary time to prepare and upgrade its own internal processes to best accommodate the AMP Act.

[1]SoundExchange is a non-profit collective rights management organization designated by Congress to collect and distribute digital performance royalties for sound recordings.

Continuing our coverage of the Music Modernization Act (MMA), this article explores Title II of the bill, the “Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act” or CLASSICS Act. (To read more about the bill generally and Title I, please visit our blog here.)

While Title I was concerned about contemporary songwriters and their publishers, Title II, as its name may suggest, is interested in the past. In particular, Title II allows for songwriters and record labels to obtain compensation for music sound recordings created before 1972. This is important because 1972 was the year that federal copyright protection was first extended to music sound recordings; as such, compensation claims for music sound recordings made before 1972 are only covered by state laws, and the states have been anything but consistent in this area.  The CLASSICS Act presents a clean solution to this problem by requiring digital music services to provide notice, track, and pay royalties, just as they would for music sound recordings made after 1972.

In addition, the CLASSICS Act will create “a digital performance right in favor of rights owners of sound recordings recorded before February 15, 1972 (and after January 1, 1923).” That is, in the event there is no separate voluntary license between the sound recording rights owner and the digital service, the royalties will be calculated and paid under the same system that is applied to works made after 1972. See IP Law Watch for more information.

The CLASSICS Act includes two final details that are relatively unique. First, the act provides protection for pre-1972 sound recordings as calculated by 95 years from initial publication. It is therefore possible sound recordings can gain an additional period of 3-15 years worth of copyright protection, depending on how recently the song was published. Second, and perhaps more peculiar, is that the CLASSICS Act provides an approach to “orphan works,” that is, music sound recordings for which an owner cannot be identified. The CLASSICS Act will permit “certain noncommercial uses of sound recordings that are not being commercially exploited,” so long as the person engaging in the use makes a good faith, reasonable search for, but does not find, the owner of such sound recording and notice is provided to the Copyright Office.

On September 25, 2018, the Senate unanimously approved the Music Modernization Act (MMA), now called the “Orrin Hatch Music Modernization Act” (H.R. 1551). Along with being unique for receiving unanimous approval from the House of Representatives and the Senate, the bill is notable as it provides a major update as to how artists are paid for their music; in fact, Keith Kupferschmid, CEO of the Copyright Alliance, has gone so far as to herald the bill as “the most significant improvement of music copyright law in more than a generation” and stated that he believes it will make it “easier for creators across the music industry to earn a fair living through their creativity.”

The unanimous approval of the bill has to do with how it achieves its goal of “moderniz[ing] copyright law” with regards to songwriters, publishers, record labels, digital providers, and all others involved in the creation and distribution of music in the 21^st century. The bill will modify Section 115 of the U.S. Copyright Act, by combining three prior pieces of major legislation and incorporating them as titles under the MMA as reported by The Verge:

• The Music Modernization Act, which streamlines the music licensing process to make it easier for rights holders to get paid when their music is streamed online.
• The CLASSICS Act (Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act) for pre-1972 recordings.
• The AMP Act (or Allocation for Music Producers Act), which improves royalty payouts for producers and engineers from SoundExchange when their recordings are used on satellite and online radio. Notably, this is the first time producers have ever been mentioned in copyright law.

In a series of upcoming blog pieces, we shall discuss the importance of Title II (the “Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act”) and Title III (the “Allocation for Music Producers Act”). For now, the remainder of this piece will focus on Title I, the “Musical Works Modernization Act.”

The central focus of Title I is that it changes the way in which “qualified digital music providers”—iTunes, Spotify, etc—pay royalties to songwriters and their music publishers for reproduction and distribution of their musical work. As it currently stands, Section 115 of the Copyright Act has established a process in which one can obtain an automatic right to reproduce and distribute another’s previously recorded musical composition—this right is known as a “compulsory license.” To obtain a compulsory license, the service merely has to provide notice to the copyright owner (or the Copyright Office if the copyright owner cannot be located) of the composition and agree to pay a statutory rate set by the Copyright Royalty Board (CRB).

The MMA aims to make this process easier by creating a centralized “Mechanical Licensing Collective” (the “Collective”). Instead of notices and payments going to the Copyright Office, the Collective will manage all notices and collect and distribute royalty payment when a provider fails to locate a copyright owner. The Collective will also establish a process for dealing with unclaimed royalty payments and maintain a working database of eligible works. Of particular note, the Collective will allow digital music providers to pay for a “blanket license” that would cover the use of all works in the database.

Finally, and perhaps most significantly to songwriters, the MMA will modify the standard used by the CRB when determining rates to be paid for licenses and it is looking likely that this will result in increased royalty payments for songwriters.

For additional reading, please visit: https://www.iplawwatch.com/2018/10/a-modern-melody-for-the-music-industry-the-music-modernization-act-just-passed-congress-and-awaits-presidential-approval/