Copyright Law, Capitol Hill and the Music Business: Can This Marriage Be Saved?

On Wednesday, I attended a luncheon sponsored by the Association of Independent Music Publishers. Like last month’s AIMP lunch, the room was packed with my PRO, music publishing and copyright lawyer colleagues. This time it was for a panel discussion on copyright reform and the music business. The panel, moderated by attorney Michael Sukin, consisted of Jacqueline Charlesworth, General Counsel of the US Copyright Office, Steve Marks, General Counsel of the RIAA and David Israelite, President of the NMPA.

Charlesworth, who started the discussion with a brief PowerPoint recap of recent developments, joked that she was asked by Sukin to sit between Messrs. Marks and Israelite – and she did. In the past, RIAA and NMPA were perhaps more frenemies than besties, with sometimes divergent interests. Charlesworth summarized the various House hearings on copyright and the music business as well as the Copyright Office’s music licensing study which is still in progress. She said there is a consensus that Section 107, the current fair use statute, does not need to change as the four statutory factors were adequate guidance for the courts.

Charlesworth also gave a recap of the hearing regarding Section 512 DMCA takedown notices, with most agreeing that the process doesn’t work. She also addressed the status of the proposed Songwriter Equity Act, which I’ve previously discussed, and the RESPECT Act, which would provide that pre-1972 recordings (which are not protected under federal copyright law) would be subject to the statutory licenses for streaming recordings. This would mean that online services would have to pay royalties regarding the streaming of recordings of classics from the Big Band era to the Beatles and beyond. Recently, two courts have determined that even absent federal copyright protection such royalties would need to be paid under California state law.

Steve Marks discussed royalty payments to labels by streaming services and the disparity among them. He said Pandora pays about 50 cents per user per month in royalties to labels whereas Spotify pays $7 per user per month. One is on a statutory license for a non-interactive service (i.e., users can’t select individual songs) whereas the other is interactive, and therefore subject to market rates. You can guess which is which. He said this disparity doesn’t make sense since the user experience is similar and the distinctions between interactive and non-interactive are increasingly blurred. He agreed that the current music licensing “system” is broken, using as an example of one instance where 1500 separate licenses were needed for one 20-song album. I’m thinking that’s an awful lot of split copyrights and samples to be cleared.

Both Marks and Israelite stressed that statutory rate-setting provisions should be amended to reflect a free market benchmark, i.e., what a willing buyer and seller would negotiate. Marks also stated that with respect to music services he favored pursuing new licensing models, including blanket, collective and bundling of rights. He also stated that both labels and publishers should be paid directly by services (i.e., no pass-throughs) with all rights holders having audit rights.

Israelite stressed that like health care reform and immigration reform, copyright reform means different things to different constituencies. To what he characterized as “extreme academics”, copyright reform means looking at copyright through the prism of the public good and getting material into the public domain as quickly as possible. They and their Silicon Valley funders believe that copyright duration should be shortened and that fair use and application of compulsory licenses should be expanded.

By contrast, Israelite said most of the creative community view copyright as a property right that needs to be strongly protected in order to incentivize creators to create new works. Historically, Israelite pointed out, copyright reform had always been about strengthening copyright protections.

Israelite spoke eloquently on the stifling effect statutory and Consent Decree regulations have on songwriters and music publishers, pointing out that labels have about 8% of their income regulated while publishers have 75% of theirs subject to Congressional or Consent Decree oversight. As a result, Pandora pays 50% of its revenue to labels but only 4% of its revenue to publishers who are subject to rates dictated by statutes and Consent Decrees. The panelists all touched upon the current Justice Department review of the ASCAP and BMI Consent Decrees, a topic I discussed here.

Very little of the discussion covered new ground. However, what was interesting was the degree of mutual support that RIAA and NMPA had for their respective interests. For example, Israelite expressed strong support for copyright protection for pre-1972 recordings and a terrestrial public performance right for sound recordings. Similarly, Marks expressed support for Consent Decree reform and to amend the Copyright Act in Sections 112 and 114 to have rates regarding musical compositions set using a fair market benchmark.

This more closely united front is undoubtedly the result of common perceived “enemies” that did not exist historically such as Google/YouTube, Apple/iTunes, Pandora, Spotify and anti-copyright academics such as Lawrence Lessig. None were singled out by name. And of course, the music industry needs these online services as much as they need the content that labels and publishers provide.

While none of the panelists felt that major changes to copyright law as a whole would be forthcoming anytime soon, they did feel that some changes with respect to music could happen in 2015. And something else to watch is RIAA and NMPA’s working on ways to address “micro-licensing” issues: license requests that often aren’t handled because the dollar value is too low to justify the administrative costs. Finding a way to effectively deal with these micro-licenses potentially lead to many millions in additional revenue while helping users whose requests are too often ignored.

A Peek from the Peaks of the PROs: the ASCAP, BMI and SESAC CEOs Speak

Yesterday, the Association of Independent Music Publishers (AIMP) sponsored a luncheon where veteran entertainment lawyer Bob Donnelly interviewed the CEOs of the three performing rights organizations (PROs): ASCAP’s John LoFrumento, BMI’s Mike O’Neill and SESAC’s Pat Collins. The meeting took place before a packed house in the performance space at the barbecue joint, Hill Country, in Manhattan and it was the heads of the organizations, rather than any of the musicians they represent, who took the stage for a discussion that lasted about 90 minutes.

Rather than having a panel discussion, Donnelly interviewed each leader separately while the other two left the room, supposedly to avoid any possibility of collusion. O’Neill, who spoke last, joked that he LoFrumento had a nice chat while Collins was interviewed. And after the meeting, a senior BMI executive confirmed to me that the theatrics were not legally required and further stated that “if I were going to collude with ASCAP I wouldn’t do it in front of the entire music industry.”

Topics included the Department of Justice (DOJ) review of the ASCAP and BMI Consent decrees and the proposed Songwriter Equity Act, subjects I’ve previously written about here and here. The ASCAP and BMI Rate Court proceedings with Pandora were also a major topic of discussion as was the development of the MusicMark portal for registering works.

Much ink has been spilled over the Pandora decisions in the ASCAP and BMI Rate Courts, entities I’ve previously discussed. In short, both Rate Court judges largely sided with Pandora, with LoFrumento noting that all of ASCAP’s proposed rate-setting benchmarks were rejected by Judge Cote and O’Neill discussing BMI’s similar fate. One of the central issues in both cases was the ability of a publisher to withdraw certain digital rights from the PROs and license them to users directly while remaining a member of the particular PRO for all other uses, such as terrestrial broadcast and live performances. Both Judges said “no” with O’Neill stressing that the ASCAP judge said the publishers were “all in” while the BMI judge said that the publishers would be “all out,” meaning none of their repertoire would be covered by a BMI license if they withdrew. Both cases are on appeal.

The attempts by major publishers such as Sony/ATV to withdraw digital rights and do deals directly with licensees could have a significant impact on PRO revenues and the ability for independent publishers to obtain comparable terms. That said, the consensus was that partial withdrawal of rights should be permitted, instead of the Rate Court rulings of “all in” or “all out” as this flexibility fosters competition. Regarding withdrawal, Donnelly asked both LoFrumento and O’Neill what would happen if a publisher were to withdraw rights but the writer did not. Both were equivocal, with O’Neill elaborating that the situation would require a case-by case evaluation of many factors, including provisions in the publisher and writer contracts and the status of any advances.

In the discussion of the Rate Court Proceedings, the Songwriter Equity Act and the DOJ Consent Decree Review, all three leaders stressed that the rules for music licensing (emphasizing performance, but including mechanicals) need to be changed from current benchmarks to market rates, with consideration of what a willing buyer and seller would negotiate as the appropriate rate-setting inquiry. All maintained that the current rate-setting system has significantly undervalued music for decades.

LoFrumento, Collins and O’Neill were all in favor of scrapping the ASCAP and BMI Rate Courts, which lead to very lengthy and costly litigation, and replacing them with arbitration. For example, LoFrumento stated that 10% of ASCAP’s costs are paid to outside counsel. The CEOs favor a three-member arbitration panel whose members would have music industry expertise and would serve limited terms, unlike Rate Court judges who serve indefinitely.

Given the discussion of Consent Decree reform, competition was a theme throughout the discussion. When asked about SESAC being at a disadvantage because, unlike ASCAP and BMI, it has to earn a profit for its private equity owners, Collins stated that they, like all private companies, have to compete and that “nobody joins SESAC to be paid less.” However, he conceded that unlike ASCAP and BMI, SESAC does not disclose what percentage of their revenue is paid to writers and publishers. And O’Neill, when asked about Irving Azoff’s new venture that includes licensing performing rights, chuckled and replied: “Competition is good no matter what, even if it’s bad.” He went on to say that BMI started as a competitor to ASCAP and that competition made both companies stronger.

The three leaders all seemed to agree that the future for the PROs is for each to be an efficient portal for licensees, a one-stop shop for music users. This would entail some form of bundling of music rights ( e.g., mechanical and synch rights, in addition to performing rights) which would need to be allowed under the Consent Decrees. They also indicated that while technology continues to allow for movement from sampling to a census of performances, some areas, such as “general licensing” including payment on performances in clubs, do not lend themselves to a census.

With regard to creating a more efficient environment, both LoFrumento and O’Neill touted their collaboration with SOCAN on MusicMark, a portal which allows publishers to register works only once if they use common works registration or electronic batch registration formats and those works will be registered with all three organizations. MusicMark, however, is not being built as a hub for licensing, which would still be done separately by each of the PROs.

When asked why SOCAN, rather than SESAC was an initial collaborator, O’Neill replied that SOCAN, unlike SESAC, already has both ASCAP and BMI data and they were the logical partner to help reconcile the data. LoFrumento stated he expects MusicMark to be operational in 2015 and the goal is to create a hub where others, including SESAC, HFA and CMRRA could participate. When asked if SESAC plans to join, Collins stated “we applaud the initiative and have an interest in being part of it and we’ll see how it goes but we’re not part of it today.”

*****

Regardless of what type or genre of music one writes, income from public performances has always been, and continues to be, a critical component of any composer’s income. All composers should be aware of the continuing market, legislative and legal challenges the PROs face – and the entities that are posing these challenges to their ability to earn a living. It’s not often that the CEOs of all three PROs share the same stage – even if not at the same time – and the fact that each of them sees becoming a one-stop for a variety of music rights licenses as critical to their future success is something worth noting.

Stax of Songs in Competing Claims to Produce a Jukebox Musical

Some of the most successful recent Broadway shows have been “jukebox” musicals. You know, shows that consist of taking a well-known recording artist’s hits and then staging them with a strung-together story. Think Jersey Boys, Motown: The Musical and Beatiful:The Carole King Musical. Shows like these are popular with producers because of the perceived minimized risk in promoting known musical quantities with a built-in audience.

However, producing such shows are not without risk, particularly when it appears that somebody may have either forgotten or conveniently ignored the distinction between copyright in a sound recording and copyright in the underlying song that’s embodied in the sound recording. I’ve previously written about these two separate copyrights in the synch licensing context:

To use pre-recorded music in an audio-visual work, whether it’s a feature film, TV show, video game or a video on a web site, like YouTube, you need the permission of both the copyright owner of the recording (typically a record label) and the permission of the copyright owner(s) of the underlying song that’s embodied in the recording (typically one or more music publishers).  Why? Because the Copyright Act says so.  The permission that you need is called a “synchronization” license – as you’re synchronizing music to picture – or a synch, for short.

So, for example, if you wanted to put the classic Otis Redding recording of (Sittin’ on the) Dock of the Bay in your next feature film, you’d need to get the permission both from the copyright owner of the song (Irving Music) and the permission of the record label (Stax). However, if you simply want to cover the song (as many artists, such as Sara Bareilles, have done), either live or on a recording, you only need the permission of the publisher, here obtained through BMI for a live gig or through Harry Fox to release a cover record.

This brings us to Evergreen Media Holdings, LLC v. Wood Creek Capital Management, LLC, a lawsuit that was recently filed in federal district court in Connecticut. This action involves competing plans to create a jukebox musical from megahits recorded on the legendary Stax label, such as songs written and recorded by Otis Redding and Isaac Hayes. The plaintiffs allege that they have obtained exclusive rights to create a stage show of songs recorded on Stax from the music publisher, Rondor Music, which controls the copyrights to the songs.

Defendants are alleged to have made a deal for both a live stage show and a film musical with Concord, which apparently owns the rights to many of the master recordings originally released on Stax – but not with Rondor. Defendants issued a press release touting their upcoming project and plaintiffs were naturally none too pleased by this.

Although the right to use copyrighted works are at the core of the dispute, the lawsuit is not a copyright infringement action as no theatrical production has yet been created or produced. Rather, the complaint alleges tortious interference by defendants, violations of the Connecticut Unfair Trade Practices Act and seeks a declaratory judgment that plaintffs have the sole right to create a Stax musical .

Taking the complaint at face value, it appears that with respect to the creation and performance of a live show, plaintiffs have obtained the rights to the songs (but not to any recordings of the songs) while defendants have permission to use the recordings but not the songs embodied in them. The creation of a book musical requires that the producers obtain so called “grand” or dramatic public performing rights to the songs. Such dramatic rights are controlled and licensed directly by the copyright owners of the songs (music publishers) and not through ASCAP, BMI or SESAC, which license only “small” or non-dramatic public performing rights. Small rights licensing by performing rights organizations include performing songs in concert or by way of broadcast or internet transmission. No permission from the record label is needed.

So, it would appear that plaintiffs have a pretty strong case as it looks like they have the necessary rights to put on a show and defendants don’t. However, defendants would not be without their own bargaining chips. Concord may well control the right to use the Stax name and logo and plaintiffs would be hard-pressed to market their musical without reference to the label. It’ll be interesting see if these parties can ultimately reach a harmonious accord.

The Justice Department Is Knocking on ASCAP & BMI’s Doors

The United States Department of Justice recently announced it would be conducting a review to examine the effectiveness of the ASCAP and BMI Consent Decrees. In announcing this review, DOJ stated:

The Department understands that ASCAP, BMI and some other firms in the music industry believe that the Consent Decrees need to be modified to account for changes in how music is delivered to and experienced by listeners. The Department’s review will explore whether the Consent Decrees should be modified and, if so, what modifications would be appropriate.

It’s usually not a good thing when the Feds come knocking on your door. Here, however, ASCAP has publicly applauded DOJ’s inquiry:

We are gratified by the Department of Justice’s decision to open a formal review of the ASCAP and BMI consent decrees. Since the ASCAP decree was last reviewed in 2001 – before even the iPod was introduced – new technologies have dramatically transformed the way people listen to music. ASCAP members’ music is now enjoyed by more people, in more places, and on more devices than ever before. But the system for determining how songwriters and composers are compensated has not kept pace, making it increasingly difficult for music creators to earn a living.

In my prior post about the proposed Songwriter Equity Act, I briefly described why the ASCAP and BMI Consent Decrees are out of step with today’s digital music marketplace:

[S]ince the 1940s, ASCAP and BMI have operated under Department of Justice Consent Decrees which were last amended in 1994 (BMI) and 2001 (ASCAP), long before the advent of digital download and streaming services. The ASCAP and BMI Consent Decrees are each overseen by a federal District Judge in the Southern District of New York. When a user (e.g., Pandora) or group of users (e.g., the radio broadcasters) can’t agree with ASCAP or BMI on an appropriate license fee, the parties can have a “Rate Court” proceeding before the judge overseeing the ASCAP or BMI Consent Decree. The Rate Court judge then must determine a “reasonable rate” for the particular user. However, there are certain limitations placed on the judge by the Copyright Act as to how to determine a “reasonable rate” for the user(s) in question.

The ASCAP and BMI Consent Decrees were entered into as part of a settlement of anti-trust litigation. At the time, it seemed like the PROs had a certain amount of market power when dealing with radio and later, TV stations. The PROs now argue that the playing field has dramatically changed in the ensuing decades and it’s new players like Apple (iTunes) and Google (YouTube) and telecommunications companies like Verizon and Comcast that have the real power and that therefore the Consent Decrees should either be amended or scrapped because of this and other shifts in the marketplace. And by including the functioning of the Consent Decrees in its music licensing study, the Copyright Office may ultimately share the PRO’s view.

And now, it’s possible that DOJ may share the PRO’s view, which is critical since DOJ, not the Copyright Office, has the authority to modify these decrees. One major concern is that under both Consent Decrees, a user who doesn’t like the rate that ASCAP or BMI proposes can simply send a letter to the Rate Court Judge requesting a proceeding to determine a “reasonable rate” and that user is then automatically licensed. That, when combined with the Rate Court Judge’s recent decisions, which do not necessarily reflect a market rate (see my previous post), often leads to lower fees for songwriters than comparable fees paid to labels and recording artists.

For example, Van Dyke Parks wrote yesterday that if the 2 cent mechanical royalty of 1914 were adjusted for inflation, the comparable payment in today’s dollars would be 2 dollars, not the 9.1 cents that songwriters currently receive. By contract, Parks points out, record labels and artists, typically split 40 cents of a 99-cent iTunes download whereas publishers and songwriters, whose livelihoods are far more regulated by the government, have to split that 9.1 cents mechanical royalty.

The Justice Department is soliciting comments from the public regarding the ASCAP and BMI Consent Decrees until August 6, 2014. Send them to:  ASCAP-BMI-decree-review@usdoj.gov.  If you are a songwriter or music publisher, you may want to consider letting DOJ know that compelling the PROs into issuing licenses and then having a fee determined by a single federal judge in a proceeding that can cost in the millions of dollars and where, unlike labels, ASCAP and BMI can’t conduct a real arm-length negotiation, is something that needs to be changed – and soon.

Raging Bulls, the Supreme Court and Running the Clock on Copyright Infringement

Yesterday, the U.S. Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer. This case is a copyright infringement action regarding the iconic MGM film, Raging Bull, which garnered Robert De Niro a Best Actor Oscar for his portrayal of boxer Jake LaMotta (but failed to win one for its director, Martin Scorsese). The key issue here in this case is whether the doctrine of “laches” bars a plaintiff from being able to bring a copyright infringement lawsuit. Spoiler alert: by a 6-3 decision, reversing the 9th Circuit, the high court decided that the doctrine did not bar the lawsuit, primarily because such actions are already subject to the Copyright Act’s three-year statute of limitations.

As a subplot, a lot of ink has already been spilled over how the Justices sided with respect to this decision. Justice Ginsburg, a member of the Court’s so-called Liberal wing, wrote the majority opinion and was joined by her Liberal colleagues, Justices Kagan and Sotomayor, as well as Conservatives Scalia, Thomas, Alito. Justice Breyer, who generally sides with the Liberals, wrote the dissent and was joined by Chief Justice Roberts, a Conservative, and Justice Kennedy, who is frequently the swing vote in 5-4 decisions. Unlike cases with particular social implications, such as those involving the free exercise of speech or religion under the First Amendment, decisions involving statutory construction are often decided 9-0, or with splits that don’t adhere to particular ideologies or political party lines.

Getting back to the main story, I’ll spare you the lengthy exposition which features the vesting of renewal rights in pre-1978 copyrights, the distinction between “legal” and equitable” remedies and the merger of law and equity in federal cases with the 1938 adoption of the Federal Rules of Civil Procedure. You can read the 39-page opinion for that.

Here’s what creators, assignees and licensees of copyrighted works, such as screenplays, films and music, need to know. First, for those who may not know, “laches” is the doctrine by which a court will, in extraordinary circumstances, deny plaintiff the right to proceed with a lawsuit where he unreasonably delays in bringing that lawsuit. Second, the Copyright Act’s three-year statute of limitations in section 507(b) might be described as applying on a “rolling basis.”

Generally, the clock begins to run on filing a copyright infringement action from the time the claim, “accrues,” which is usually when the first infringement takes place. For example, if a you’re a songwriter and someone steals your song and puts out a record in June, 2014, you would have three years from that time to file a copyright infringement action or forever hold your peace. Or would you? Let’s assume that the infringing record is a hit and remains in for print for more than 20 years, including re-releases in various new formats. Despite being aware of the infringements all along, you don’t file a lawsuit until 2034, twenty years after the initial release of the infringing recording and after the label has expended a lot of money in producing, distributing, marketing and re-issuing the record.

One might think that the statute of limitations would totally bar such a lawsuit. One would be wrong. You, as plaintiff songwriter, can still sue, but you can only base your claim on infringements that occurred during the prior three years, i.e., 2031-2034. Anything that happened between 2014 and 2031 would be time-barred. With that in mind, let’s look at the relevant facts in the Raging Bull case.

After retiring from the ring, Jake LaMotta collaborated with his friend, Frank Petrella, to tell his story. They wrote several versions, one of which was a 1963 screenplay which was registered with the Copyright Office with Mr. Petrella as sole author. Frank Petrella subsequently died, prior to the commencement of the “renewal” term for you copyright geeks, and the screenplay became the sole property of his daughter, plaintiff, Paula Petrella. Although Paula first had her lawyer contact MGM in 1998 regarding alleged infringement of the screenplay, she didn’t file suit until January, 2009, nearly thirty years after the release of Raging Bull, along with re-releases in VHS, DVD and licenses to cable and satellite TV companies.

Although Ms. Petrella only sought relief for infringements for the prior three years (and therefore anything that happened prior to 2006 was not involved), MGM viewed the lawsuit as the waste product of a raging bull and that laches should bar her complaint. MGM felt it unfair to have to defend a lawsuit that plaintiff could have brought decades earlier when memories fade, witnesses die and documents are lost. The District Court, Court of Appeals and the dissenting Supreme Court Justices agreed.

The majority of the Supreme Court, however, felt that laches was not a bar a lawsuit in light of their being an applicable statute of limitations. A plaintiff has a right to decide whether to pursue and infringement action, and subject to the statute of limitations, when to do so. Moreover, the same evidentiary concerns that MGM raised, also affect plaintiff, who bears the burden of proof. The Supreme Court did point out that the doctrine of “estoppel” could bar a copyright infringement action where the plaintiff engaged in deceptive or misleading conduct regarding the defendants.

So, just because the statute of limitations may have passed regarding first infringements, it doesn’t mean the clock’s run out on later ones. As always, if you think you have an infringement claim that you might want to pursue, you should consult your local copyright lawyer.

Higher Costs for Creators to Protect Their Rights

It seems like individual creators just can’t catch a break. As of yesterday, it became much more expensive for the majority of creative artists, particularly songwriters, recording artists and multi-media artists, to protect their works by registering them with the U.S. Copyright Office. While one does not need to register to obtain copyright protection, there are a couple of key incentives in the copyright law that make registration strongly advisable. First, registration is a prerequisite to filing a lawsuit for copyright infringement. Second, you can only obtain statutory damages and attorney’s fees if the work was registered prior to the infringement taking place. How do you know when you’ll be infringed? You don’t, hence the incentive to register as copyright lawsuits are very expensive and statutory damages are often preferable to actual damages which may be either too modest to make a lawsuit practical or too difficult to measure.

The Copyright Office published a new schedule of fees that went into effect as of May 1, 2014. A basic online registration still costs $35.00. So far, so good, right? Unfortunately, that $35.00 fee applies only to: “single author, same claimant, one work, not for hire.” What if you’re a songwriter who wants to register a whole bunch of works? Or what if you’re a lyricist who collaborates with a composer? Or what if you create mixed media works or remix works? You used to be able to register most of these for that same $35.00 fee.  Now, unless you are the sole creator and copyright owner of a single work that online registration is now going to run you $55.00. That’s a pretty big jump.

The Copyright Office certainly has the right to raise fees from time to time and these increases are supposedly to account for the cost of providing the various services, such as registrations, recording transfers, searches, etc., that the office provides.  Fair enough, but I wonder if the Copyright Office simply applied these increases across the board. Or, did they consider keeping fees for registrations lower to help individuals and small businesses while more substantially raising other costs that typically apply only to litigants and big businesses, such as those listed under “Optional Services Related to Registration”? Just a thought…

Anyway, it’s now much more costly for creators to protect their rights.

 

 

Synching Up Copyright, Contracts, Amazon and Warner Music Group

A little over a week ago, I attended through meetup.com, a panel discussion on synchronization licensing. As a refresher, synchronization licensing, or “synch” licensing, is the permission required to incorporate copyrighted music into audio-visual works, such as films TV shows, ads, videogames and, yes, YouTube videos. The panel was put together by Legal Hackers and included computer types, artists (including one who produced a video of a 7-foot clown singing – quite well, I might add, a cover of Lorde’s “Royals”) a music publisher and a copyright lawyer.

If this discussion had occurred a few years ago, I would have expected it to have a copy-left, copyright-is-bad slant. However, in this digital, DIY climate, even the video remix artist on the panel recognized the importance of copyright and was quite knowledgeable about synch licensing. Everyone seemed to agree that artists should be paid, but obtaining synch licenses is a real obstacle because of what economists would call high “transactions costs.”

Proposed solutions included compulsory licenses, as with audio-only “mechanical” licenses” like those issued by The Harry Fox Agency and/or some form of “blanket” license similar to those that ASCAP and BMI provide. The problem is, many artist contracts have approval rights for synchs because unlike a simple cover, putting their music to video, especially if it’s to a product, service or cause they don’t like, can drastically change the meaning of the music. So, there’s no clear solution yet, but it will probably involve technological improvements in song identification and licensing procedures.

Speaking of contracts that make it more difficult for creators to earn income from their works, Amazon is launching a new streaming service to compete with the likes of Spotify, Pandora and YouTube. I was recently asked by a client to advise as to whether he should sign up. Having reviewed the Amazon contract, the executive summary of my advice, in which others concur, is “don’t.” Among other things, Amazon states it can change the royalty rates at any time. That’s bad enough. But the contract also says you can’t take your works out of their service unless you also take your music down from all the other services. That’s even worse.

Amazon is obviously a 900 pound gorilla with very clever lawyers but I think they may be a little too clever here as other lawyers are pointing out that these provisions are perhaps a tad overreaching. But going back to basic economics, moral outrage from the blogosphere won’t make Amazon change its terms. That will only happen if content owners refuse to sign up and Amazon doesn’t have enough music to offer to be able to compete.

And speaking further of contracts, it’s just been reported that Warner Music Group’s labels have entered into a $11.5 million settlement with various artists, including Sister Sledge, relating to payment for distributions of downloads and mastertones (ringtones). This class action lawsuit focused on whether these distributions were “sales” or “licenses” of the artists’ master recordings. In a typical recording contract, sales are typically paid in a 10-15% of the sale price and subject to all forms of deductions and recoupment, depending upon the language of the contract. License fees, on the other hand (such as a synch license for using the song in a film or TV show, for example), are typically split 50-50% between the label and the artist. In older recording contracts, the language may not be clear as to how these newer technologies should be handled. You can guess which side made which argument.

The takeaway: you – or at least your lawyer – should always carefully read any contract.

GoldieBlox and the Beastie Boys: Parody, Piracy or Publicity Ploy

This article was originally posted on the ScoreStreet blog on November 27, 2013.

In case you’ve not tuned into the TV news, the blogosphere or social media in the past couple of days, you may have missed the uproar over a small company’s use of the Beastie Boys’ song Girls in a YouTube video ad that quickly went viral. Goldieblox, which describes itself as “building games for girls to inspire future engineers,” produced a video with young girls using the company’s products in a Rube Goldbergesque contraption. This was set to a re-recording of Girls, sung by young girls with the lyrics changed from the original to one of empowerment.

The Beastie Boys are well-known for refusing to allow their music to be used in commercials and it was widely reported that Adam Yauch had a provision in his will prohibiting such exploitation. So, it wasn’t surprising that Goldieblox did not seek permission to use Girls – particularly in a way that substantially altered the original.

Instead, GoldieBlox felt it was just right to file for a declaratory judgment, seeking a determination in federal court that their use of the song in the commercial did not constitute copyright infringement, claiming  “fair use” in the nature of a “parody.”  There already have been numerous blog posts analyzing the matter to varying degrees.  I simply want to use the Goldieblox – Girls situation to illustrate some fair use principles and to dispel some misconceptions.

First, there is no doubt that the use of the song by GoldieBlox without permission would constitute infringement unless there was a valid defense to the infringement. In that regard, “fair use” is not “right” as some like Larry Lessig and his acolytes have maintained. Rather, it is a defense to copyright infringement.  Moreover, there are no hard and fast rules as to what is, or is not, fair use. For example, it is not automatically a fair use to use 30-seconds or less of a recording or to copy four or fewer bars of a piece of music.  Unfortunately, what constitutes fair use has to be determined on a case-by-case basis in accordance with Section 107 of the Copyright Act, which reads as follows:

§ 107. Limitations on exclusive rights: Fair use

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

As for “parody” being a defense to copyright infringement, that was established in the 1994 U.S. Supreme Court decision, Campbell v. Acuff-Rose.  In that case, the band, 2 Live Crew, used a portion of the Roy Orbison hit, Oh, Pretty Woman,” in their song, Pretty Woman, despite having been refused permission by the copyright owner of Oh, Pretty Woman, Acuff-Rose Music.  In that case, the Court went through a lengthy fair-use analysis and found that 2 Live Crew’s use of Oh, Pretty Woman was “transformative” in that it did not merely reproduce and appropriate the original song.

In so doing, the Court set forth guidelines for determining whether a use would be a “parody” in the legal sense, i.e., one for which permission of the copyright owner of the parodied work would not be required. Among the criteria are 1) that only so much as is necessary to conjure up the original, parodied work was to be used and 2) that the parody must comment on the original work. In other words, it would not be a “fair use” parody to write new lyrics to an underlying song that talks about something else. That is why Weird Al gets permission for his “parodies.”  To constitute a parody protected by fair use, the “parody” need not be funny or artistically successful.

How does this apply to the GoldieBlox situation? It has been pointed out that the original Beastie Boys’ song is misogynistic and that the GoldieBlox version changes the lyrics to a message of female empowerment.  However, more than a mere conjuring of the original song was used. Basically, the whole song was used – and to shill a product, however positive the message embodied in the ad may be.

So, is the use a parody protected by fair use? You now have the tools to do your own analysis. My own view is that using substantially all of a song for an advertisement for a product should not constitute fair use. But, as I said, that determination must ultimately be decided by a federal district judge.  And as of now it seems unlikely that will happen. Apparently, GoldieBlox has changed its tune; the company uploaded a new video without music or lyrics and has issued an apology – of sorts– to the surviving members of the Beastie Boys.

Although we may not have a court decide whether the GoldieBlox use of “Girls” was parody or piracy, one thing is absolutely clear: it was a brilliant publicity ploy for the company.

Happy Birthday, You’re Sued!

The mere filing of a copyright case doesn’t usually make a major splash in the media but when it involves the most performed song in the world, even The New York Times takes notice.  Apparently, filmmaker, Jennifer Nelson, was making a documentary about the song, “Happy Birthday to You” and didn’t like the idea that Warner/Chappell Music insisted on her taking a $1500 license to use the song in the film as she – and probably most people – think it’s in the public domain.  So yesterday, Ms. Nelson filed a birthday suit of sorts: an action in federal court seeking a declaratory judgment that the song is, in fact, in the public domain and no permission is needed to use it.

So, in little more than the time it takes to sing the song, I’m going to use it as a way to review a few basic copyright law principles that are sometimes misunderstood. Let the questions begin!

What is the public domain? The public domain is the body of works, music, novels, plays, texts, etc., that is no longer (or never was) protected by copyright and is therefore free for anyone to use or adapt.

When is a song in the public domain? As they say in Facebook status land, “it’s complicated.”  For songs written since 1978, a U.S. copyright lasts for the life of the author (or last surviving author if there’s more than one) plus seventy years. If there’s no author, such as a work-for-hire, the term is 95 years. For older works, the U.S. used to have a system of an initial term and then the copyright had to be renewed for, you guessed it, the “renewal term.” For these older copyrights, the initial term was 28 years and the renewal term, through various extensions, was increased to 67 years, for a total of 95 years.  There’s more to it than this, but basically, if a work was written prior to 1923, it’s most likely in the public domain here. Maybe you’re thinking that’s an awfully long time when the Constitution says that copyrights are supposed to be “for limited times.” Larry Lessig thought so when he challenged the 1998 Sonny Bono Copyright Term Extension Act but the U.S. Supreme Court strongly disagreed.

Do I need to get a license to sing “Happy Birthday to You” to my kid at my backyard barbecue? Even assuming the song is still under copyright – and as we’ll soon see that’s a big assumption – the answer is still “no.” U.S. Copyright law gives copyright owners a certain bundle of rights. Among them is the exclusive right to authorize “public performances.” A backyard barbecue, a birthday party in your basement and most other gatherings among “a normal circle of a family and its social acquaintances” is a private performance for which no permission is needed.

What if I sing the song at a gig or at a party of 500 of my closest friends and acquaintances? You’re probably safe to sing the song – or any other copyrighted song. Most public venues where music is performed (concert and catering halls, clubs and stadiums) or broadcast (TV and radio stations) have licenses from “performing rights organizations” such as ASCAP, BMI and SESAC. These companies issue “blanket” licenses to venues and broadcasters (and web sites, too) which allow the licensee to perform all the works in their respective repertories as much as they want.

Why would a filmmaker need a license? The permission that Warner/Chappell sought from Ms. Nelson for her film is known as a “synchronization” or “synch” license because the user is synchronizing music to picture. Whenever a pre-existing copyrighted song is used in any audio-visual work, such as a film, TV show, TV ad or videogame, a synchronization license is required from the copyright owner, usually a music publisher. If you’re using pre-recorded music, then you need permission from both the music publisher of the song and the copyright owner of the recording, typically a record label.

What if I post a video of my kid dancing to a Justin Bieber song? Putting aside issues of taste, technically, you’d need synch licenses from the music publisher(s) of the song and from The Bieb’s label although the actual performance of the video may be covered if the site has licenses from the performing rights organizations. As a practical matter, unless your home video is generating millions of views or you’re selling truckloads of DVDs it’s unlikely that anyone will come after you for a technical violation.

So, is “Happy Birthday to You” in the public domain? That’s for the court to decide, but if the facts are as alleged in the complaint and as cited in the  news reports and elsewhere, it seems that the song would be “PD” as we music types say.  The melody is said to come from a song called “Good Morning to All” written in 1893 and, the combination of music and lyrics is said to have appeared in print in 1912, possibly earlier. By my reckoning, if these are the facts, both 1912 and 1893 are prior to 1923. At least one legal scholar, Richard Brauneis, has written a 68-page article (with 320 footnotes!) in which he concludes that the song is in the public domain.

How can Warner / Chappell claim the song is still under copyright? Again, the facts will play out in the lawsuit, but it seems that W/C has a 1935 copyright registration, crediting different writers as the creators of the song. The complaint alleges that this registration is for a piano /vocal arrangement of the song.  Another of the things in the “bundle of rights” a copyright owner gets is the right to make a “derivative work” of the underlying work, such as an arrangement or adaptation. Turning a novel into a film constitutes making a derivative work, which is why the novelist gets paid when the film is made.

For example, the song “Simple Gifts” is a Shaker hymn from the nineteenth century.  Most people know it from Aaron Copland’s arrangement of the tune in his ballet, “Appalachian Spring.” As the original song is PD, anyone can perform the original melody and lyrics or make their own arrangement. But, if you want to use Mr. Copland’s treatment of the work you’ll need permission from Copland’s publisher, Boosey & Hawkes.  So, if the underlying song, “Happy Birthday to You” turns out to be in the public domain, anyone can use it and make their own arrangement of it, as long as they don’t use any particular copyrighted arrangement of the work, such as ones owned by Warner / Chappell.  And, of course, you can write a new song, with your own melody and lyrics, and call it “Happy Birthday to You” as titles are not copyrightable.

Wanna Buy a Used Download?

While not nearly as exciting as the same sex marriage cases, it’s always noteworthy (at least to people like me) when the Supreme Court issues a decision about copyright. A recent high court case and an even newer one from the district court highlight some real differences between the physical and digital worlds for producers and consumers of copyrighted stuff. On March 19, the Supreme Court issued its opinion in  Kirtsaeng v. John Wiley & Sons (No. 11-697). This case involves a conflict between two provisions of the Copyright Act, the “first sale” doctrine” under Section 109(a) and the “importation” provision of Section 602(a)(1).

The “first sale” doctrine is what enables so much commerce at garage sales and  flea markets and the very existence of used book and record stores. In short, it says that once a copy of a copyrighted work, such as a book or CD, has been lawfully sold (or given away), the purchaser (or other lawful recipient) is free to dispose of that particular copy as he wishes. The copyright owner of the work no longer has a say in the matter. More on the “first sale” doctrine later.

The importation provision states that bringing a copyrighted work into the US without permission of the copyright owner violates that owner’s right to distribute copies of the particular work.  It’s easier to understand in the context of the Kirtsaeng case. Wiley is a publisher of text books. It’s common for a publisher to print different editions of texts in various geographic markets and at different prices. Often, these editions are printed overseas or licensed to an overseas publisher, printer and/or distributor.

Kirtsaeng was a graduate student who figured out that certain English-language texts published by Wiley for the Asian market were significantly cheaper than their domestic counterparts. So, he was able to finance his education by buying up foreign editions and selling them stateside for less than the US editions while still making a tidy profit. That is, until Wiley sued him for copyright infringement. Cutting to the chase of the typically lengthy and arcane Supreme Court opinion, complete with a dissent and concurrence, the Court concluded that despite the provisions of the import clause, the first sale doctrine applies to works lawfully made overseas.

Unless one is selling lots of stuff overseas or is setting out to be a text book arbitrageur, the Kirtsaeng decision is not likely to have an immediate impact on your life. However, another decision involving the “first sale” doctrine, Capitol Records, LLC v. ReDigi, Inc., (No. 12 Civ. 95 (RJS)), may have a more direct impact on music lovers. In this March 30 decision from the Southern District of New York, the court essentially held that digital really is different.

Let me explain. ReDigi is a recently launched service that claimed to allow people to sell their “used” downloads of music. A user would download the company’s software, which would go through their computer’s hard drive and locate eligible files, e.g., downloads lawfully purchased through iTunes and not ripped from a physical CD. The files would be uploaded to ReDigi’s cloud server so that customers could purchase the “used” recording at a discount. ReDigi would take a cut of the sale as its commission fee.

Capitol sued, claiming copyright infringement and other unpleasantness and ReDigi replied that it was lawfully facilitating a digitized record swap. In other words, since the downloads were lawfully purchased, the “first sale” doctrine applies, just like reselling physical copies of recordings at a garage sale. Without going into all the technicalities (and the techno-geeks among you should do so as the opinion contains a digestible discussion of the first sale, direct, contributory and vicarious infringement and fair use), the Court concluded that despite ReDigi’s claims, additional copies of the music were being made and distributed – even if the “seller” of the “used” file no longer had access to it. If the music is transferred first to the cloud, that’s one copy and if someone purchases and downloads the “used’ music file, that’s another copy. The “first sale” doctrine only applies to that particular copy; it doesn’t allow you to make and distribute more. Then, there’s the concern that ReDigi will only search the particular machine on which the software has been downloaded. Other copies of the “used” file could easily be saved on other devices.

ReDigi claimed that the Court’s analysis is a hypertechnical view of the law that prevents the first sale doctrine from operating in the digital world. The Court, however, was not convinced and cited examples of handing over your hard drive or your iPod if you want to legitimately resell your particular copy of a digital file. Because of the distribution of unauthorized copies of copyrighted works as part of its service, the Court found ReDigi guilty of direct, contributory and vicarious copyright infringement.  The Court concluded that whether these incidental copies and distributions should matter is a policy matter for the legislature – current copyright law is clear.

What does it all mean? You can bet there will be much lobbying of Congress as to whether and how the “first sale doctrine” should apply in the multinational and digital environments. But as for now, I wouldn’t advise opening a used download store.