Welcome to my blog! Here you’ll find my periodic musings about the music business, copyright, creativity and other legal and artistic endeavors. While blog posts may be considered attorney advertising, my aim is to write short, pithy pieces with helpful information. Sometimes I’ll just write about something I find interesting, like cats. Enjoy!
On June 2, a divided panel of the Ninth Circuit affirmed the district court’s granting of summary judgment to defendants and vacated an award of attorney’s fees in the case of VMG SalSoul, LLC v. Ciccone. Plaintiff alleged that Madonna’s mega-hit, Vogue, infringed both the copyright in the composition and the copyright in the sound recording of the song, Love Break, recorded several years earlier by defendant, Shep Pettibone, who also worked on the recording of Vogue. Pettibone sampled, altered and incorporated the “horn hit” from Love Break into Vogue.
The “horn hit” consists of two forms, a single and a double hit, and occurs 27 and 23 times, respectively during the course of the 1982 recording of Love Break that is 7:26 in duration. By contrast, the “horn hit” sampled in Madonna’s 1990 recording of Vogue, is sampled solely from the single hit and is pitched a half tone higher than the original “horn hit” in Love Break. There are two versions of Vogue in issue: the “radio edit” that’s 4:53 in duration and contains one “single hit” and three “double hits” and the “compilation version” that’s 5:17 in duration and contains one “single hit” and five “double hits.” The single “horn hit” lasts less than a quarter of a second and the double “horn hit” also clocks in at less than a second in duration. The Court’s opinion includes the musical notation for both versions of the “horn hit” as heard in Love Break and in Vogue. You can listen to the respective recordings here and here.
The Ninth Circuit had previously established the de minimus exception to copyright infringement for musical works in the 2003 case, Newton v. Diamond, where the court noted that the unauthorized use “must be significant enough to constitute infringement,” and that a plaintiff “must show that the copying was greater than de minimus.” Quoting Newton, the Court stated that a “use is de minimus only if the average audience would not recognize the appropriation.” After analysis, including listening to both recordings, the court held that the appropriation of both the underlying musical work and the master recording of the two versions of the “horn hit” was de minimus.
Addressing the alleged copyright infringement in the sound recording, the Court stated:
After listening to the audio recordings submitted by the parties, we conclude that a reasonable juor could not conclude that an average audience would recognize the appropriation of the horn hit. That common-sense conclusion is borne out by dry analysis. The horn hit is very short – less than a second. The horn hit occurs only a few times in Vogue. Moreover, the horn hits in Vogue do not sound identical to the horn hits from Love Break. As noted above, assuming that the sampling occurred, Pettibone truncated the horn hit, transposed it to a different key, and added other sounds and effects to the horn hit itself. The horn hit then was added to Vogue along with many other instrument tracks. Even if one grants the dubious proposition that a listener recognized some similarities between the horn hits in the two songs, it is hard to imagine that he or she would conclude that sampling had occurred.
In applying the de minmus exception to sampling of sound recordings, the Ninth Circuit explicitly broke with the Sixth Circuit, the only other circuit to directly address the issue. In the 2005 case, Bridgeport Music v. Dimension Films, the Sixth Circuit adopted a bright-line rule, summarized by the Ninth Circuit as follows: “For copyrighted sound recordings, any unauthorized copying – no matter how trivial – constitutes infringement.”
Plaintiff, however, argued that there was a statutory basis for treating sound recordings differently from other copyrighted works and that the de minimus exception should not apply. The Court looked at Section 102, the list of copyrightable types of works, and found no basis to treat sound recordings differently from other copyrightable works, such as literary works. Similarly, in addressing the “bundle of rights” of Section 106, the Court concluded:
Again, nothing in that provision suggests differential treatment of de minimus copying of sound recordings compared to, say, sculptures. Although subsection (6) deals exclusively with sound recordings, that subsection concerns performances; nothing in its text bears on de minimus copying.
Plaintiff’s main statutory argument apparently was premised on the third sentence of Section 114(b), which reads as follows:
The exclusive rights of the owner of copyright in a sound recording under clauses (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording. As the Court pointed out, this section is a limitation on a copyright owner’s rights and states that “sound alike” recordings that do not incorporate a separate master recording (i.e., no sampling) are permissible.
Addressing this provision dealing with sound-alike recordings, the Court stated:
But the quoted passage does not speak to the question that we face: whether Congress intended to eliminate the longstanding de minimus exception for sound recordings in all circumstances even where, as here, the new sound recording as a whole sounds nothing like the original.
The Sixth Circuit’s Bridgeport decision was premised on an interpretation of Section 114(b) that the Ninth Circuit explicitly rejected, knowing that doing so would create a split in the circuits and uncertainty in this area of the law. The Court noted that as a practical matter, the circuit split already exists as district courts outside the Sixth Circuit have almost uniformly declined to follow Bridgeport Music’s bright line rule. However, the Court did reverse the award of attorney’s fees: “It plainly is reasonable to bring a claim founded on the only circuit-court precedent to have considered the legal issue, whether or not our circuit ultimately agrees with that precedent.
In dissent, Judge Silverman defended the Bridgeport precedent:
I find Bridgeport’s arguments well-reasoned and persuasive. Equally compelling is, I think, Congress’s Silence in the wake of Bridgeport, especially in light of the fact that the Sixth Circuit explicity invited Congress to clarify or change the law if Bridgeport’s bright-line rule was not what Congress intended. While it’s true that congressional inaction in the face of judicial interpretation is not ironclad evidence of Congressional approval, it’s not chopped liver, either. In this case, Bridgeport has not been hiding out in the woods, waiting to be found; it has been governing the music industry in Nashville and elsewhere for eleven years.
My own view is that the Ninth Circuit got it right here. There is no reason to treat sound recordings differently from other types of copyrighted works and the de minimus exception should apply where appropriate. Sampling is merely a form of aural collage art and there is no doubt that a court would find the incorporation of small snippets a copyrighted work of visual art such as a painting or photograph in another painting, photograph or sculpture either to constitute fair use or a non-actionable de minimus appropriation. In sum, Madonna has made de minimus usage as in vogue in copyright as she has long done with her clothing.
[Note: This piece was previously posted on NewMusicBox, a site for composers and fans of contemporary classical and other experimental music, on September 24, 2015.]
It’s another presidential election cycle and—in addition to PAC moneymen, countless commercials, polls, trolls, sound bites, and sniping—there’s the new tradition of one candidate or another pissing off some well-known recording artist by using the artist’s song without consent. Already we’ve had Neil Young trashing Trump’s use of “Rockin’ in the Free World.” REM is suing Trump, along with Sen. Cruz, over their use of “It’s the End of the World as We Know It (And I Feel Fine).” “Survivor” is suing over the use of “Eye of The Tiger” during Gov. Huckabee’s rally in support of Kim Davis, the county clerk who was jailed for refusing to issue any marriage licenses since she’d have to issue them to same sex couples. And the election is still more than a year away!
Are the artists’ claims likely to be successful? Readers of my prior posts can probably postulate that my answer will be “it depends.” Let’s see what you can and can’t do when using recordings of songs in connection with political campaigns. While some of the dos and don’ts involve some now-familiar copyright and music licensing principles, others potentially involve the federal trademark statute and various states’ laws on the right of publicity as noted in ASCAP’s FAQs on music in political campaigns.
Who can forget The Donald riding down the escalator to the Neil Young classic to announce his candidacy? That use is probably permissible. If a venue, such as a hotel, convention center, or other public gathering place has licenses from the PROs (ASCAP, BMI, and SESAC), then the use of the music is almost likely allowed and there’s not much the songwriters can do about it. The songwriters probably have a better case against Kim Davis and her cohorts, as the organizers of the impromptu outdoor post-prison rally probably didn’t obtain PRO licenses for the event.
Notice I mentioned songwriters and not recording artists. There has long been a public performance right in musical works and that right is codified in Section 106 of the Copyright Act. However, as I’ve mentioned in other posts, the US is one of less than a handful of nations, including North Korea and Iran, that doesn’t have a public performing right in sound recordings for traditional television and radio broadcasts or for playing the recording over loudspeakers. Although legislation has been introduced in recent years and the Copyright Office endorses such a right, currently the only public performance right in a sound recording is in “digital transmission,” i.e., internet streaming, and Sound Exchange is the U.S. collective that licenses those rights and pays out royalties on behalf of artists and labels.
Readers of my most recent post on fair use would not be surprised that the use of the clips of politicos and other notables on newscasts would be clear examples of fair use under Section 107 of the Copyright Act. Before you even get to the four factors of Section 107, the statute states that items like “criticism, comment, news reporting, teaching, scholarship, or research” are among the uses typically found to be fair. And TV networks and stations have PRO licenses to cover the music use.
Both songwriters and recording artists would have a compelling case under copyright law if a candidate used a song in a commercial without permission. Using pre-recorded music in any audio-visual work requires synch licenses from both the copyright owner of the song (the music publishers) and the copyright owner of the recording of the song (the label). As I explained in my last post, a fair use argument for this kind of usage would almost certainly fail, given that these uses are typically licensed. Nor could a candidate claim that the use of the music is permitted as First Amendment “political” speech. The First Amendment protects the right of individuals (and according to the Supreme Court, corporations) to freedom of expression, especially political speech. It doesn’t generally give you the unfettered right to use someone else’s expression, however.
But consideration of Copyright Act provisions isn’t the end of the inquiry here. Artists may also claim violations of Section 43(a) of the Lanham Act, the federal trademark statute. Although it’s generally applied to false advertising claims, the statute could be used to claim that the association with an artist creates a “likelihood of confusion” based upon a misleading “association… with another person, or as to the origin, sponsorship, or approval of his or her goods, services…” or in other words, a false or misleading endorsement of the candidate. So, regardless of PRO licenses, candidates would be well advised to get permission if they wanted to use anyone’s hit as a theme song.
Moreover, it’s possible that a candidate could violate an artist’s actual trademark, which would constitute a direct violation of the Lanham Act, which—like the Copyright Act—can subject an infringer to money damages and injunctive relief. While it’s not likely that a candidate would use a band’s trademarked logo, names and phrases associated with recording artists and other entertainers often are trademarked. Just see how fast Michael Buffer’s legal eagles will swoop down on you if you use the phrase, “let’s get ready to rumble” in any kind of commercial activity. Many artists, including Madonna, have trademarked their names, and Taylor Swift recently filed a whole bunch of trademark applications for phrases associated with her 1989 album. As any copyright maven knows, titles, names, short phrases, and slogans can’t be copyrighted. But they can be trademarked for all kinds of uses from apparel to greeting cards.
Then there’s the “right of publicity” (sometimes referred to as the right to privacy), which, unlike copyright and trademark, is governed by individual state’s laws. While many states have statutes governing this right, including New York and California, other states enforce these rights based on common law (judicial precedents). The right of publicity typically includes the use of an individual’s name and likeness for commercial purposes. That’s why songwriter, label, management, and other agreements typically have provisions granting the use of the person’s name and approved likeness and bio for a variety of uses. While most composers would hardly object to their music publisher or label using their name and image to promote their works, these rights don’t automatically flow with the copyrights to songs or recordings of them. A candidate’s using a song without permission could constitute a violation of the artist’s publicity/privacy rights.
And there’s another wrinkle to the right of publicity. In some states, like California, a celebrity’s right to exploit his persona extends beyond the grave. In others, like New York, the right terminates when the individual does. So, in addition to wills, trusts, and other documents, if you’re a celebrity, a very important aspect of estate planning is deciding upon your domicile at the time of your eventual demise.
So, what have we learned here? Campaigners, much like cover bands, should be careful about using songs. If you’re paying tribute to a band by simply performing covers of their songs in a venue that’s got PRO licenses, then you’re almost certainly okay. But if you start selling hats, T-shirts, and mugs emblazoned with the band’s logo, a picture of its members, or a well-known phrase from one of their songs, or use the songs to sell products or services, then you’d better be prepared to pay tribute in the form of cold cash as you could run afoul of trademark and publicity laws.
One would think that politicians and their advisors would know this by now. Given that there are artists on every point in the political spectrum, a candidate could simply solicit one sympathetic to their views and avoid all sorts of tsuris. So when it comes to using someone else’s stuff, whether in political campaigns or artistic collages, when in doubt, leave it out. Or as I’ve said before, you might want to seek consent of the rights holder (or the advice of competent counsel) before putting it in.
[Note: This is part two of a two-part article that was previously posted on NewMusicBox, a site for composers and fans of contemporary classical and other experimental music, on September 17, 2015.]
In my previous post, I sped through the history of fair use from Justice Story to the current statute and strolled through a few examples of the analysis that’s typically used when applying the four factors of Section 107 of the Copyright Act, the statutory test for fair use.
But while courts always construe the statutory factors, the “real” fair use test—at least since the mid-1990s—is nowhere in the statute. Instead, the dispositive inquiry is whether the usage is “transformative.” So, what is “transformative use” and where did it come from?
A) Transformative Use, Music and Parody
The “transformative use” test comes from an influential 1990 Harvard Law Review article by Judge Pierre N. Leval. But since neither articles, books, nor blog posts have any legal effect unless adopted by a court (or legislature), it’s the Supreme Court’s casting of Judge Leval’s concept that defines “transformative use.” In the 1994 case, Campbell v. Acuff-Rose Music, the high court, citing the Leval article in its analysis under the first factor, defined “transformative use” as follows:
The central purpose of this investigation is to see, in Justice Story’s words, whether the new work merely “supersede[s] the objects” of the original creation (“supplanting” the original), or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “transformative.” (Citations omitted).
If that sounds kind of vague, it is. And while ambiguity is often cultivated in the arts, it’s not so good in a legal standard. And as applied, it sometimes seems like a transformative use of Justice Stewart’s “I know it when I see it” test.
In Campbell, the Supreme Court established that parody can be a form of fair use. The case concerned 2 Live Crew’s use of part of the Roy Orbison hit, “Oh, Pretty Woman,” in their similarly titled song, “Pretty Woman,” despite being denied permission for the usage. The band used the introductory guitar riff and the first part of the chorus before moving on to new material that was deemed to mock the original tune. The Court found that 2 Live Crew’s use of Orbison song was “transformative” in that it did not merely reproduce and appropriate the original composition.
In reaching this conclusion, the Court established 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: first, only so much as is necessary to conjure up the original work was to be used; and second, the parody must comment in some way on the original work. In other words, it wouldn’t be a “fair use” parody to write new lyrics to an underlying song that talked about something else. And as the Supreme Court noted, a parody protected by fair use need not be funny or artistically successful.
In other words, one can’t write new lyrics to every line in a Michael Jackson song as an ode to multifarious foodstuffs and expect it to be a protected parody. That’s why Weird Al gets permission for his “parodies” even though he obliquely cites fair use on his website.
These principles were more recently applied in Bourne Co. v. Twentieth Century Fox Film Corp., a 2009 decision from the Southern District of New York (district courts being the federal trial courts) involving the Family Guy episode, “When You Wish Upon a Weinstein.” The show featured a song called “I Need a Jew” that used elements of the Disney classic, “When You Wish Upon a Star.” Defendants, including the show’s auteur, Seth MacFarlane, had sought permission from Bourne but were denied.
MacFarlane had the chutzpah to use it anyway and the court concluded that Peter Griffin’s plaintive pleading was a fair use parody of Jiminy Cricket’s crooning in Pinocchio. Relying on Campbell, the Supremes stated: “[t]he Court finds that the new work is transformative; consequently, the first factor weighs in favor of a finding of fair use.”
B) Transformative Use in Dramatic and Visual Arts Cases
But now let’s look at a 2015 parody case from the same court involving another of the performing arts. In Adjmi v. DLT Entertainment, Ltd, the Southern District held that an Off-Broadway stage play, 3C, was a fair use parody of the iconic seventies sitcom, Three’s Company. There, “[t]he parties agree that 3C copies the plot, premise, characters, sets and certain scenes from Three’s Company.” After applying the four factors, the Court held:
The Play is a highly transformative parody of the television series that, although it appropriates a substantial amount of Three’s Company, is a drastic departure from the original that poses little risk to the market for the original.
Apparently, as long as you’re not mocking music, it seems you can take an awful lot of material, including entire scenes, so long as you’re making some sort of statement about the original.
But most fair use cases don’t involve parodies. Moving to the visual arts, Blanch v. Koons, addresses notorious appropriation artist Jeff Koons’s incorporation of—among other images—a cropped, rotated, and altered portion of a copyrighted photograph of a woman’s legs and feet from a shoe ad into a massive collage painting. The Second Circuit (circuit courts being the federal appeals courts between the district courts and the Supreme Court) held that Koons’s use of the magazine ad photo was transformative in that his change of colors, background, media, and size of the objects had an entirely different purpose and meaning from the original, as Koons’s work was commenting on “the social and aesthetic consequences of mass media.”
In the 2013 case Cariou v. Prince, the Second Circuit moved the dial further towards finding transformative (and therefore fair) use in appropriation art. At issue were 35 of Cariou’s black and white photographic portraits of Jamaican Rastafarians that were published in a book and which Richard Prince incorporated into large-scale artwork that altered the images, including cropping, coloring, and obscuring faces with painted “lozenges.” Some of Cariou’s and Prince’s works were reprinted in the court’s opinion. The Court found fair use with respect to 25 of the photos, reversing the district court’s contention that the “transformative use” had to comment somehow on the original photos as in parody cases:
The law imposes no requirement that a work comment on the original or its author in order to be considered transformative, and a secondary work may constitute a fair use even if it serves some purpose other than those (criticism, comment, news reporting, teaching, scholarship, and research) identified in the preamble to the statute.
As to the remaining five Cariou photos, the Court noted that “Prince did little more than paint blue lozenges over the subject’s eyes and mouth, and paste a picture of a guitar over the subject’s body.” What’s striking, however, is that even with respect to these uses, the Second Circuit thought that even they could be deemed to constitute fair use and kicked the case back to the district court to make that determination. As we’ll see, the Cariou court’s expansive view of transformative use has its critics.
The Second Circuit has also ruled that the copying of entire posters, albeit in greatly reduced size, in a 480-page coffee table book about the Grateful Dead was fair game. The images appeared along with timelines and commentary about the band. The Court’s opinion stated that “the first fair use factor weighs in favor of [defendant] because [defendant’s] use of [plaintiff’s] images is transformatively different from the images’ original expressive purpose and [defendant] does not seek to exploit the images’ expressive value for commercial gain.” In reaching this conclusion, the Court cited an earlier case which held a search engine’s use of thumbnail reproductions of images was highly transformative. In case you were wondering, this is why I’m pretty sure my reduced-scale cell phone photo of the Chutzpah game reprinted in last week’s post is likely a transformative fair use.
C) A Fair Use Remix: Applying the Standards From Non-Music Cases to Musical Examples
But as this post is running long and my readers’ patience is no doubt growing short, let’s see what happens when we apply standards from these other cases to a few music hypotheticals:
1. As we know, reproducing an entire visual work, although in greatly reduced size, can be considered a transformative, and ultimately fair, use. Now imagine posting an entire John Adams or John Corigliano score, or even the complete sheet music to a Taylor Swift song – in miniature – without permission.
2. We also know from the Three’s Company case that taking entire scenes from a TV show is now fair game if you’re doing a parody of the underlying work. Now envision using a whole scene from an Adams opera or Sondheim musical or an entire Beatles song in a musical parody.
3. We’ve also learned from the appropriation art cases that taking recognizable portions of copyrighted works and creating a collage or visual remix can be a transformative fair use. Now try claiming fair use when taking twenty seconds of a recording of “Satisfaction” or any other famous song and putting it into a film or sampling several snippets of it in your own recording.
4. As was demonstrated in the Koons and Cariou cases, the recasting—including changing the color and background of a work—can be a transformative use. Now picture “recasting” the setting of an orchestral work by “coloring” it for concert band.
I’m guessing that most of my musician readers are chuckling at these, knowing that it would take chutzpah to claim any of the above to be a “fair use” of the music. Working backwards, we call the fourth example making an “arrangement” for which permission is clearly required. The two uses in the third hypothetical are typical examples requiring synch and sampling licenses, respectively. As for the second hypothetical, we know from the Family Guy decision that the more restrictive standard set out in the 2 Live Crew case two decades earlier still applies to musical parodies. And anyone who posts an entire piece of copyrighted music stands a good chance of being subject to a DMCA takedown notice or worse, as reprints of only a few bars are typically licensed.
Mind you, I’ve only cited a handful of the myriad fair use cases and all of them so far have been from courts in New York City. While federal courts throughout the country hear copyright cases, the New York decisions are particularly influential because of the copyright-based industries centered there, such as publishing, music, theater, advertising, and fashion. And not surprisingly, Judge Leval, the progenitor of transformative use, served as a judge both in the Southern District and on the Second Circuit.
If you’ve read my arrangements post you may be thinking that this whole “transformative use” thing sounds a lot like making a “derivative work,” something the copyright owner has the right to grant or deny approval. You’re not alone and last year at least the Seventh Circuit, in finding fair use in another appropriation art case, agreed:
We’re skeptical of Cariou’s approach, because asking exclusively whether something is “transformative” not only replaces the list in §107 but could also override 17 U.S.C. §106(2), which protects derivative works. To say that a new use transforms the work is precisely to say that it is derivative and thus, one might suppose, protected under §106(2). Cariou and its predecessors in the Second Circuit do not explain how every “transformative use” can be “fair use” without extinguishing the author’s rights under §106(2). We think it best to stick with the statutory list, of which the most important usually is the fourth (market effect). [Citations omitted]
[Click here for my more recent and detailed discussion of tranformative fair use versus protected derivative works in light of Judge Leval’s Google Books opinion.]
So why does music seem to have more restrictive standards for fair use than other creative arts? A clue is in the quotes from the cases. With respect to music, there’s a well-established market for these uses, including licensing arrangements, reprints, synchs, and samples, all of which are treated as derivative works. And courts are very reluctant to disrupt the marketplace— even one as dysfunctional as music licensing. This goes back to the first principles of the Copyright Clause, to Justice Story’s fair use test from nearly 175 years ago (“…the degree in which the use may prejudice the sale, or diminish the profits…”) and the fourth factor of Section 107. Ironically, it was the famous Southern District “Thou shalt not steal” case that essentially created the sampling marketplace.
And given the steep decline in mechanical royalties and the paltry payments from streaming, permissions, synch, and sampling uses are among the few areas where musical creators can reasonably be compensated. Do we really want to change this in order to expand fair use? While doing so would greatly enlarge the creative pallet available for new works, it would deny the owners of existing works the fundamental right to say “no” to uses of their works they don’t like and limit the creators of both the underlying and new works to profit from them. Whether or not such a reshaping of the fair use landscape is a good thing or not is a policy debate to be had elsewhere.
The Court held that a copyright owner must consider whether the online usage is protected by fair use prior to sending a takedown notice under the Digital Millennium Copyright Act of 1998 (DMCA). In reaching this decision, the Ninth Circuit confronted the issue of whether a fair use is an “affirmative defense” or a “right” and, at least for purposes of the DMCA, views it more like a right as fair use is “authorized by law.” Of course, any “consideration” of fair use involves application of the detailed analysis discussed above, including the application of “transformative use” under the Section 107 factors and increasingly complicated case law.
So how should one determine if a use is fair or foul? Especially if you’re a musician, you should be guided by the preamble to Section 107 and focus on traditional areas like “criticism, comment, news reporting, teaching, scholarship, or research.” Otherwise, be prepared to seek permission or at least the counsel of an experienced lawyer so that you don’t take a gamble on fair use and make schlimazels of your collaborators, commissioners, publishers, and presenters.
[Note: This is part one of a two-part article that was previously posted on NewMusicBox, a site for composers and fans of contemporary classical and other experimental music, on September 10, 2015.]
When I was a kid, my siblings and I played a board game called Chutzpah, which is a lot like Monopoly only the “properties” weren’t things like Boardwalk, Park Place, and Marvin Gardens but Son Marky’s Bar Mitzvah with Velvet Yarmulkes, Weekend in the Catskills, and Yacht Named Gevalt III. And rather than draw cards labeled Community Chest or Chance, you had four options: Schlemiel, Schlemazel, Chutzpah, and Do You Want to Take a Gamble. And instead of getting thrown in jail, you’d miss a turn if you landed on a “tsoris spot”—which is not the same as a tourist spot, I assure you!
For those of you who didn’t grow up in New York or laughing to Jewish comedians, here are brief explanations for these lovely Yiddish words. You’re at a dinner party and the guy next to you spills hot soup in your lap. The spiller is the schlemiel and you, the spillee, are the schlemazel. Tsoris means all manner of troubles, like getting the proverbial boil on your behind. And the concept of chutzpah (blandly translated as “guts” or “nerve” and more colorfully exemplified by variations on the theme of having a brass pair) is best illustrated with this classic example: a young man murders his parents and then pleads for mercy because he’s an orphan.
So, you wanna play? C’mon over to my place and I’ll break out the original 1967 edition. In the meantime, try your hand at the titular test, otherwise known as “Everything You’ve Heard about Fair Use is Probably Wrong.” It’s always a gamble as to whether something is or isn’t a fair use and, in my humble opinion, courts have recently shown a lot of chutzpah in making the determination.
Today’s “spot the fair use” game (not to be confused with “spot the looney”) consists of just two multiple choice questions:
1. How many of the following statements are true?
A) People have fair use rights.
B) There are specific rules on what is and isn’t a fair use.
C) Fair use determinations are governed by a particular provision of the Copyright Act.
D) Every determination of fair use must be made on a case-by-case basis.
E) Fair use is a defense to copyright infringement.
2. Assuming each example involves a use of a work still under copyright, which of the following constitutes fair use?
A) Reprinting or quoting four bars of music
B) Posting a 30-second clip of song or a movie on your web site
C) Putting only one line of a lyric on a T-shirt
D) Creating a painting that incorporates but modifies a pre-existing image
E) All of the above
F) None of the above
G) It depends
As for the first answer, the correct response is C, D and E. The answer to the second question is G. (That’s also the answer you’re most likely to get when you ask a lawyer a question, assuming he doesn’t first respond with two more questions.)
Now, in order to explain these answers, I’ll need to provide a little background with the caveat that, for true copyright mavens, my jaunt into the forest of fair use jurisprudence is kind of like the Classic Comics or Cliff’s Notes version of a copyright casebook.
Fair use was originally an English common law (case law) doctrine that was first incorporated into US law in the 1841 Supreme Court case Folsom v. Marsh. Writing for the Court, Justice Story (yes, that was his name) set forth a multi-factor test to determine fair use: “Look to the nature and objects of the selections made, the quantity and value of the materials used, and the degree in which the use may prejudice the sale, or diminish the profits, or supersede the objects, of the original work.” Ever since the current federal Copyright Law became effective in 1978, a restatement of Justice Story’s fair use test has been codified in Section 107 of the statute, which states:
Notwithstanding the provisions of sections 106 and 106A, 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.
So what do we learn from parsing the previous paragraph? First, fair use is governed by a specific statutory provision. Second, as the Supreme Court made clear in the 1994 case Campbell v. Acuff Rose Music (concerning 2 Live Crew’s parody of the Orbison classic, “Oh, Pretty Woman” and which I’ll be discussing in my next post), a determination of fair use involves the application and weighing of the four statutory factors and therefore “is not to be simplified with bright line rules, for the statute, like the doctrine it recognizes, calls for case by case analysis.” Third, as Judge Easterbrook reminded us in a case from last year, “[f]air use is a statutory defense to infringement.” It’s not a “right,” despite whatever Prof. Lessig and his acolytes may write. So there’s your answer to the first question.
Explaining the answer to the second question involves applying the foregoing factors to each situation, although in the interest of brevity, I won’t apply all four to each example.
A. Reprinting or quoting four bars of music
Let’s look at the third factor first. Which four bars are you using? Is it the main hook in the chorus of your favorite pop song or four measures of the verse? Or for a classical work, would you be using four bars of the iconic brass theme from Fanfare for the Common Man or a few measures from the percussion parts? Not all four measures of a work are of equal importance—especially in songs. Let’s also consider the first factor. Are you reprinting four measures from a Beatles song in a scholarly article on their use of modal harmonies or are you taking the title hook from “She Loves You” and putting it in your own commercially released song (fourth factor as well)? In each example, the first use is more likely to be considered a fair use than the second.
B. Posting a 30-second clip of song or a movie on your web site
Again, considering the third factor, which thirty seconds are you using? It makes a difference whether you’re posting a critical “spoiler” scene from a newly released blockbuster (which also affects the fourth factor) as opposed to a clip from the official trailer which is intended for promotional purposes. Also, are you posting clips because you’re a fan of the band or the film and you’re linking to places where you can legitimately purchase the works or are you using these clips to link either to pirate sites or as a means to get eyeballs on your site to sell your own stuff? This involves consideration of the first and fourth factors.
C. Putting only one line of a lyric on a T-shirt
I’ll bet you can see where this is going: Which line—one from the chorus that includes the song’s title (although titles are not copyrightable) or a line from the middle of the third verse (third factor)? Are you selling these for profit or using them as an inspirational slogan to raise funds for a charity (first and fourth factors)?
D. Creating a painting that incorporates but modifies a pre-existing image
Okay, I’ll bet you’re getting pretty good at this game by now. Are you incorporating the entire image, the main focus of the image, or just something in the background of the image (third factor)? Are you incorporating a black and white photograph and adding color, changing the perspective, or distorting the image (second factor)? Are you selling your painting in a gallery or using it to demonstrate painting techniques to art students (first and fourth factors)?
Now what if I said that everything I just told you is wrong (or at least not entirely right) because the courts had the chutzpah to change the rules of the game? And what if I also told you that fair use is far more narrowly applied to music than to any other art form? Would you still want to take a gamble that your usage of somebody else’s stuff isn’t infringing? Getting it wrong could bring you a lot of tsoris. So tune in next week when I discuss how the application of the concept of “transformative use” sometimes seems like a “parody” of traditional fair use analysis.
I’m honored to have been asked to write a series of posts during September on music and copyright for NewMusicBox, the online magazine of NewMusic USA, an organization that supports creators, performers and presenters of “new music” (sometimes referred to as contemporary classical or experimental music, including jazz) by American composers. Although these posts will eventually find their way to my blog, right now you can read them here.
As we’re nearing the end of the month, my four NewMusicBox posts have all been published:
Do You Have The Chutzpah To Take A Gamble On Fair Use? (Part I of a two-parter)
Are Transformative Fair Use Principles Four To Musicians? (Part II of a two-parter)
I hope you enjoy these articles and find them informative.
[Note: A slightly edited version of this post has been published in Vol.35, No.9 of The Licensing Journal (Wolters Kluwer, October 2015)]
A guitarist contacted me recently. He creates arrangements of popular songs and puts the PDFs of the music for sale on his website. The first thing I asked him is whether he got permission from the copyright owners of the songs to post his arrangements, being pretty sure he hadn’t. He was quite surprised and disappointed when I told him that what he was doing was flat-out illegal. So many well-meaning musicians still either don’t know about, or don’t understand the concept of, derivative works.
Section 101 of the Copyright Act defines a derivative work as follows:
A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a “derivative work”.
Note that “musical arrangement” is right near the top of the laundry list. And of course copyright mavens know that Section 106 sets forth the “bundle of rights” that a copyright owner possesses. These include the exclusive right to, or authorize others to, “prepare derivative works based upon the copyrighted work.”
So that means our guitarist, however well-intentioned, doesn’t “own” his arrangements of pop tunes and he can’t sell or even give away copies of them, whether they’re in the form of a lead sheet, guitar tabs, a fully scored chart or ancient runes – unless he gets permission from the copyright owner (More on that later).
But talking about derivative works and rights bundles of intangible property is kind of esoteric and doesn’t always convince wrongdoers of the error of their ways. So I’ll remind these folks that nobody would give a rodent’s posterior about “your” arrangement but for the fact that the song was written, recorded and made famous by someone else. So when you’re using somebody else’s music and trading off their art and good will, it’s only fair that you get their permission and give them a piece of the action.
But, my guitarist exclaimed, there’re all these other sites out there that do this – what about them? I explained that individual music publishers, as well as organizations like the Music Publishers Association, in conjunction with the National Music Publishers’ Association (yes, I know, it’s kind of like the People’s Front of Judea versus the Judean People’s Front for Life of Brian fans), have sent DMCA take down notices to many unlicensed sheet music, guitar tab and lyric sites. Simply because some infringing sites are still up doesn’t mean they won’t be taken down later or even sued for copyright infringement.
And as I’ll often explain, just because a rights holder doesn’t go after some infringers, it doesn’t mean they can’t go after you. It’s like complaining to the cop who pulls you over for speeding about all the other cars he could’ve pulled over and didn’t.
However, not “owning” an arrangement of a copyrighted musical work isn’t the end of the story. There are actually lots of things you can do without getting permission. For example, you can perform your version for your own amusement – or for that of your friends and relatives. Section 106 grants copyright owners only the exclusive right to public performances. That’s why it’s no infringement to sing in the shower – even if your private performances constitutes an aesthetic infraction. Copyright Act Section 101 defines a public performance as one at “a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” The definition also includes broadcasts and streaming.
Our gutsy guitarist can even publicly perform his arrangement, provided the venue has licenses from the appropriate performing rights organizations (PROs), ASCAP, BMI and SESAC. PROs license venues to perform the songs in their respective repertoires and artists are free to perform their own renditions of the songs. So if our guitar guy gets a gig at a local club that’s properly licensed he’s good to go.
And our guitarist could even make and distribute a recording of his arrangement – provided that he gets a compulsory “mechanical” license under Section 115 of the Copyright Act or the equivalent either directly from the copyright owner(s), usually one or more music publishers, or The Harry Fox Agency (HFA). HFA is a clearinghouse many publishers use to issue mechanical licenses on their behalf. Since the license is compulsory, the copyright owner can’t say “no” so long as the recording artist (i.e., guitar guy), pays the statutory royalties, currently 9.1 cents per unit distributed for a recording of a song that’s five minutes or less.
The Section 115 license specifically allows artists doing cover recordings to record their own arrangements of the work:
A compulsory license includes the privilege of making a musical arrangement of the work to the extent necessary to conform it to the style or manner of interpretation of the performance involved, but the arrangement shall not change the basic melody or fundamental character of the work, and shall not be subject to protection as a derivative work under this title, except with the express consent of the copyright owner.
Minor variations in the melody are generally OK. As for what constitutes a change in the “fundamental character” of the song, that’s not clear except that it’s well established that you can’t change lyrics without permission.
However, the compulsory mechanical license only applies to audio-only recordings like CDs and MP3s. Our gutsy guitarist still couldn’t legally post a video of his performance or use his arrangement of the song in a movie, TV show, video game or other audio-visual work unless he got permission from the owner of the arranged song to do so. That permission is called “synchronization” or “synch” license, since you’re synching sound to picture. YouTube does have synch deals with some, but by no means all, of the music publishers.
But what if our guitarist actually wanted to get permission to print and distribute his arrangement of the song? He would need to contact the music publisher(s) of the work for permission. ASCAP, BMI and SESAC all have searchable databases and if you put in the title of the song you can usually find out who controls the rights to it as well as contact information for the publishers listed.
Armed with that information, our intrepid guitarist should then send a request, including a copy of the arrangement, to the “permissions” or “business affairs” department of the publisher who has the right to say yea or nay and to set the terms for the license to arrange. The process for getting a synch license (or clearing a sample, or reprinting lyrics) is much the same as getting permission to arrange. Find the publisher(s) on the PRO databases, and send a written request to the “business affairs” or “licensing” department explaining what you want to do and how much of the work you intend to use.
So in sum, while there are some things you can’t do without permission (e.g., sell sheet music or post videos), there’s still a lot you can do legally with an arrangement of a song – even though you don’t “own” it.
A lot of people are wondering what it means for the music industry since it was reported that the National Music Publishers Association (NMPA), the leading trade organization for US music publishers, has sold its wholly-owned mechanical licensing subsidiary, The Harry Fox Agency, Inc. (HFA) to SESAC, Inc., the smallest of the three domestic music performing rights organizations (PROs). While I don’t have a crystal ball, I suspect that this strategic acquisition is part of the trend to transform PROs from mere licensors of performing rights to broader music rights and data mining clearing houses.
Published reports in Billboard and elsewhere state that SESAC’s winning bid of about $20 million over others, including PROs, BMI and SOCAN, was the culmination of a process that began a year ago when NMPA put HFA up for sale. As to why BMI, but not ASCAP was a bidder, it may have to do with the Consent Decrees under which the two organizations have operated for decades.
ASCAP’s Consent Decree (last amended in 2001) and BMI’s Consent Decree (last amended in 1994) are similar but far from identical. Specifically, under Article IV(A) of its Consent Decree, the only music right ASCAP is permitted to license is the public performing right (although it can also serve as an agent to collect royalties from the sale of blank digital audio tape). BMI, under Section IV(B) of its Consent Decree is only specifically precluded from being a record label or a record or sheet music distributor.
That said, until recently, BMI traditionally refrained from entering other aspects of the music business, such as mechanical (songs used in audio-only recordings) and synchronization (songs used in audio-visual use in film, TV, video, etc.) licensing out of concern that the Department of Justice (DOJ) would seek to impose more stringent restrictions. However, this is one instance where the Internet really has changed everything, with ASCAP and BMI welcoming the ongoing DOJ review.
The revenue for licensed digital performances (e.g., streaming) is growing and the online environment knows no geographic boundaries. So while the traditional analysis focused on competition for domestic public performing rights among the three US PROs, foreign PROs, which often bundle performance and mechanical rights, have been creating competitive transnational alliances. And, as extensively discussed in the Copyright Office’s Music Licensing Report earlier this year, the major publishers (which are free to bundle all music rights) sought to withdraw digital performance rights from ASCAP and BMI because they felt Consent Decree and other legal restrictions (i.e., de facto compulsory licensing and statutory rate setting standards) artificially suppressed the fees these PROs could obtain from licensees such as streaming services.
However, the judges that oversee the ASCAP and BMI Consent Decrees held that such “partial withdrawals” were invalid. So, among other things, ASCAP and BMI are seeking modification of their Consent Decrees to allow partial withdrawal of digital rights and the bundling of various music licenses (e.g., performance, mechanical and synchronization). The Copyright Office Report supports relaxing the Consent Decree restrictions as well as amending the Copyright Act to have all licenses that are set by a tribunal (whether Rate Court or the Copyright Royalty Board) to be determined on a willing buyer/seller standard.
Conventional wisdom holds that DOJ is likely to relax ASCAP and BMI’s Consent Decree restrictions. SESAC doesn’t have a Consent Decree but has been subject to anti-competition litigation. What this means for the PROs is far from secret. Last year, at a public forum held by the Association of Independent Music Publishers (AIMP), the CEOs of the three PROs shared the stage and their thoughts about the future of their businesses. All three agreed that the future for the PROs is to offer efficient one-stop licensing for music users who often require several distinct music rights, including mechanicals currently offered by HFA (and music publishers who don’t license through HFA), synch rights which are controlled by each individual publisher, and even performing rights in sound recordings (currently licensed by SoundExchange), especially if such performing rights are statutorily extended to radio broadcasts, as endorsed in the Copyright Office’s Music Licensing Report. Indeed, the Report recommends that the PROs and other licensing collectives morph into broader “music rights organizations” (MROs).
And while SESAC is principally owned by a private equity firm, BMI probably had more than $20 million in its war chest to offer NMPA but didn’t. Why? ASCAP and BMI together represent north of 90% of US songwriters and music publishers. With HFA going to SESAC, that shifts the domestic competitive landscape, giving even more reason for DOJ to relax Consent Decree restrictions, which is probably more valuable to BMI. Moreover, even with mechanical income falling to about 21% of music publishing income from about double that at the peak of the CD market (and with overheads staying static or increasing due to processing millions of micro-payments, reason enough for NMPA to sell), the data HFA has regarding the 48,000 publishers it represents and the 6.7 million musical works it’s licensed on 21.4 million recordings, is probably more valuable to the much smaller SESAC than to BMI.
So what happens now? First, I don’t see SESAC significantly trying to grow its market share as a PRO. Their business model in that arena will likely continue to be, as it states on its web site, “a selective organization, taking pride in having a repertory based on quality, rather than quantity.” So I don’t see SESAC courting writers and publishers in a more concerted manner although adding HFA may make them a more viable alternative to ASCAP and BMI. In fact, I don’t foresee significant changes in writer-publisher relations at any of the three PROs.
Rather, I think that the game plan for all three PROs is what SESAC states in the news release posted on its web site:
SESAC’s acquisition of HFA is part of a previously announced strategy under its new leadership team to pursue a simplified and more efficient, multi-right, multi-territory licensing model utilizing an ongoing focus on information technology and data science to meet the developing needs of music users, distributors, writers, composers, publishers and other stakeholders. The transaction enables SESAC to enhance value by offering music streaming and other digital platforms greater efficiency and transparency in the music licensing process, thereby delivering better monetization outcomes for its affiliated writer and publisher clients.
As much bigger companies, ASCAP and BMI already have plenty of data, even without adding HFA’s to the mix. And reading between the lines (as was hinted at by the three CEOs at last year’s AIMP forum), lies the ancillary and potentially very lucrative business of mining, packaging and selling the vast stores of data the PROs collect to entities both inside and outside of the music industry, thus taking a page from the Google and Facebook playbooks.
If the ASCAP and BMI Consent Decrees are relaxed, then all three PROs can more freely pursue diversified business strategies. This could lead to higher performance royalties to writers and publishers through both more competitive negotiations and, by leveraging the data they collect, lower overheads – but potentially at the cost of control of “proprietary” information and transparency if the PROs expand beyond core music licensing businesses.
And there is also the risk that HFA, now to be owned by a for-profit privately held business as opposed to a trade organization controlled by its member music publishers, may impose higher tolls to access data and could potentially lead to less, rather than greater industry-wide licensing transparency. But the likelihood of this occurring will be diminished if ASCAP and BMI offer mechanical and other forms of licensing. And I don’t think SESAC will have HFA cease licensing ASCAP and BMI composers. That would be a bad business move, especially since SESAC will want to maintain as much current music data as possible.
Anyway, that’s how I see it. That said, the only certainty about the music business is that it’s always unpredictable.
Update: 14 September 2015:
It’s now been reported that the sale of HFA to SESAC has been approved by the NMPA Board and membership. The sale is now complete and SESAC now officially owns HFA.
Update: 1 October 2015:
It’s now been reported, quoting SESAC’s CEO, that up to 30% of HFA employees are being let go because of what is euphemistically called in HR-speak, “redundancies” between the SESAC and HFA staffs.
On a certain level, the June 18 decision from the Fourth Circuit in Copeland v. Bieber is fairly routine, with only the click-bait of pop star defendants Justin Bieber and Usher setting the case apart from any other copyright infringement case involving music. However, since this is an appellate decision, unlike the jury verdict in the Blurred Lines case which involved far more ink spilling and hand wringing, one might think there would be some precedential value here.
As we’ll see, this precedential value is somewhat limited as the Court merely reversed the granting of defendants’ motion to dismiss and remanded the case back to the trial court. However, the case does provide a primer as to what needs to be proved in a copyright infringement action involving music as well one in the limitations of trying to describe distinctions in two different songs.
Plaintiff Copeland alleges that Bieber and Usher infringed plaintiff’s song, entitled Somebody to Love in three different versions of their song, also called Somebody to Love. Absent direct proof of copying, a plaintiff must prove defendant(s) had access to his work and that the allegedly infringing work is “substantially similar” to plaintiff’s work. Defendants did not deny access to plaintiff’s song – only that their work and his were not “substantially similar.”
Here’s where the fun begins. To analyze whether there’s substantial similarity between the two works, the Court actually considers two different types of similarity: intrinsic similarity and extrinsic similarity. “Intrinsic similarity” is whether the intended audience, here the general public, taking into account all elements of the work (including non-copyrightable ones such as the song’s title or “feel”) could reasonably determine that the two songs in question are “substantially similar.”
On the other hand, “extrinsic similarity” purports to be an objective view of the original elements (and only the original elements, i.e., the copyrightable expression) in the two works. In other words, this is where two experts go to battle by picking apart specific original components of the two songs (such as the melody and lyrics) in a process the Court referred to as “analytic dissection.” (Parenthetically, despite plenty of analytic dissection by two highly qualified experts in the Blurred Lines case, the jury – and the popular press – seemed to focus far more on intrinsic, rather than extrinsic similarities.)
The Fourth Circuit undertook a de novo review as to whether a reasonable jury, taking into account the “total concept and feel” (which, again, may include both copyrightable and non-copyrightable elements), could find sufficient “intrinsic” similarity to support a finding of infringement. The Court started by listening to all four songs (plaintiff’s and the three versions of defendants’). The Court treated the three versions of defendants’ song as one: “By the unscientific intrinsic standard, the three Bieber and Usher songs are not just substantially similar to one another; they are the same.”
The Court first noted that although plaintiff’s song and defendants’ were in different genres (“the Copeland song is squarely within the R&B subgenre, while the Bieber and Usher songs would be labeled dance pop, perhaps with hints of electronic”), such differences in feel are not dispositive on the issue of substantial similarity:
For if a difference in genre were enough by itself to preclude intrinsic similarity, then nothing would prevent someone from translating, say, the Beatles’ songbook into a different genre, and then profiting from an unlicensed reggae or heavy metal version of “Hey Jude” on the ground that it is different in “concept and feel” than the original.
Fair enough. But what was the “intrinsic” similarity” the Fourth Circuit found which required reversal? The Court focused on similarities in the chorus or “hook” of both songs, which is typically the most important – and most repeated – part of any song. The Court then noted certain substantial similarities, in addition to the use of the uncopyrightable element of the title in the chorus:
It is not simply that both choruses contain the lyric “somebody to love”; it is that the lyric is delivered in what seems to be an almost identical rhythm and a strikingly similar melody. To us, it sounds as though there are a couple of points in the respective chorus melodies where the Bieber and Usher songs go up a note and the Copeland song goes down a note, or vice versa. In our view, however, a reasonable jury could find that these small variations would not prevent a member of the general public from hearing substantial similarity…. In both the Copeland song and the Bieber and Usher songs, the singing of the titular lyric is an anthemic, sing-along moment, delivered at high volume and pitch.
That’s pretty much the extent of the analysis, folks. Without the ability to hear, as the Court did, plaintiff’s and defendants’ songs side by side, how is this at all helpful? As anyone who’s clicked on my bio knows, I studied music in college, have represented composers and songwriters of various stripes and have done a fair amount of songwriting myself. And I can’t make much sense of the Court’s musical descriptions – and I doubt most other practitioners would find much guidance here, either.
In copyright cases involving visual works, courts routinely include pictures of the works in question, either directly in the text of the opinion or in an appendix. In this digital age, there’s no reason not to do the same with musical works, such as having a link to recordings on YouTube, SoundCloud, or the parties’ web sites. The Court, as the Supreme Court does with its summary syllabus, can include an appropriate disclaimer. Perhaps then these cases wouldn’t reflect the oft-quoted quip (that may have originated with Martin Mull) that “writing about music is like dancing about architecture.”
So what’s the takeaway here? For practitioners, if there’s any similarity at all in the “hook” in two songs, especially if they both include the title phrase, a plaintiff is likely to survive a motion to dismiss. That’s a boon for litigators and a bane for pop stars. Of course, here we can expect Bieber, Usher & Co. to move for summary judgment after discovery.
And finally, it’s nice to see law clerks in a Circuit other than the Second and Ninth (and at least regarding music, the Sixth), having some fun with a high profile infringement case.
On May 18, BMI’s “Rate Court” judge, Louis L. Stanton of the Southern District of New York, ruled in BMI’s favor in its rate dispute with Pandora. However, it wasn’t until May 28 that Judge Stanton’s 60-page opinion was made public. As my former colleague, BMI’s CEO, Mike O’Neill, reminded me at the BMI Student Composer Awards on May 18, Rate Court opinions are not made public for several days until confidential information is redacted. Mike was fairly giddy that evening given that Judge Stanton gave BMI a slam dunk in finding that the rate BMI sought, 2.5% of Pandora’s revenue, was reasonable. This was particularly good news for songwriters and music publishers as well since Pandora was the clear winner in its prior Rate Court dispute with ASCAP.
BMI and ASCAP are music performing rights organizations (PROs) and both operate under decades-old Consent Decrees which are currently being reviewed by the Justice Department. Both decrees contain a provision that if either ASCAP or BMI and a licensee can’t agree upon a rate, either party can submit the dispute to their respective “Rate Court” for a determination of a “reasonable” rate, in each case a district judge in the Southern District of New York. BMI’s Rate Court Judge is Judge Stanton and ASCAP’s is Denise Cote.
Because BMI and ASCAP are heavily regulated, a Rate Court’s determination of a “reasonable” rate under the relevant Consent Decree (i.e., what a willing seller and buyer would negotiate in an arm’s length transaction) usually requires referring to one or more “benchmarks,” which as Judge Stanton explained, are “the rates set in (or adjusted from) contemporaneous similar transactions.” BMI and Pandora bitterly argued over what the appropriate benchmark(s) should be for Pandora’s internet streaming service.
The PROs’ publisher members, particularly the majors (Universal, Warner-Chappell and Sony/ATV (which now controls the EMI catalog)), felt they could negotiate better deals for digital (Internet) rights themselves than through ASCAP and BMI because of the Consent Decree restrictions. So the majors undertook a “partial withdrawal” of their grant to ASCAP and BMI to license public performances of their music to Internet streaming services, allowing the PROs to continue licensing the publishers’ works for all other purposes.
This partial withdrawal was itself the subject of Rate Court litigation, with both Judge Stanton and Judge Cote eventually ruling, albeit with slightly different rationales, that publishers could not partially withdraw their grants to ASCAP and BMI, respectively. In other words, they were either “all in” or “all out” at ASCAP and BMI and the partial withdrawals were invalid.
However, between March 2012 and December 2013 (before the Rate Courts said such deals were verboten), the major publishers entered into a series of separate deals with Pandora, with rates ranging from 2.25% to 5.85% of Pandora’s revenue. BMI also submitted as benchmarks, agreements with Pandora’s competitors, entered into between 2010 and 2013, with rates ranging between 2.5% and 4.6% of the service’s revenue. Pandora disputed not only the validity of the interregnum partial withdrawal agreements but also the agreements of its “competitors” as appropriate benchmarks.
As for the agreements made during the period of partial withdrawals, Pandora claimed they were not, in fact, arms-length negotiations, but rates that the PROs extracted under threat of infringement litigation. As for the other agreements, Pandora claimed its service was different from its competitors, and more like traditional over-the-air radio, which has a rate of 1.75% of revenues, which was also the rate for Pandora’s prior BMI license. The foregoing is very much an over-simplified distillation of more the more than 30 pages of factual background in the Court’s opinion.
After the lengthy recitation, including quoting various email exchanges, the Court began its discussion with a concise statement of its conclusion:
The evidence presented at trial shows that BMI’s proposed license fee of 2.5% of Pandora’s gross revenue is reasonable, and indeed at the low end of the range of recent licenses. The direct licenses between Pandora and Sony and UMPG [Universal] for the 2014 calendar year are the best benchmarks because they are the most recent indices of competitive market rates.
Shortly after this, Judge Stanton quotes verbatim an email chain which consists of several single-spaced pages of internal discussion among Pandora’s executives (leaving one to wonder what was actually redacted from the Court’s public opinion), in support of its conclusion that Pandora’s deals with the publishers were, in fact, market rate negotiations: “Once the rate negotiations were freed from the overhanging control of the rate courts, the free-market licenses reflect sharply increased rates.”
The Court then went on to distinguish how Pandora is not just different from traditional radio, but also from other online streaming services: “
The fact (not unusual when traditional business models are evolving and shifting) is that Pandora cannot be accurately characterized as in any specific category for which rates have been established. It has aspects of several, but it is not confined to any one in particular.
As for radio, even considering Pandora’s purchase of a traditional radio station, Judge Stanton concluded:
Pandora is not similarly situated to any RMLC [Radio Music Licensing Committee] licensee, including iHeartMedia. The rate for the ten thousand terrestrial broadcasting members of the RMLC is not a useful benchmark for Pandora.
Both ASCAP and BMI, in their respective Rate Court cases, relied upon the testimony of Peter Brodsky, Sony’s EVP and in-house counsel, to demonstrate the arm-length nature of the negotiations he had with Pandora’s attorney, Robert Rosenblum, during the “partial withdrawal” period. Judge Cote specifically found that Brodsky‘s testimony wasn’t credible. Judge Stanton took great pains set forth the specifics of these negotiations in his concluding that “I do not find Brodsky’s credibility impaired.”
Similarly, in rejecting Judge Cote’s conclusion in the ASCAP proceeding that the rates produced in the Pandora-publisher negotiations were not proper benchmarks because of the fear of “crippling copyright infringement liability, Judge Stanton stated that the record before him, many months after the closing of the record in the ASCAP case, “is far more extensive that what Judge Cote had before her.”
As with Judge Cote’s decision, Judge Stanton’s decision will likely be appealed. If, as with Judge Cote’s ASCAP decision, Judge Stanton’s BMI decision is affirmed, it will be a significant victory for the publishers of the songs streamed on Pandora, although the publishers still get a fraction of what the labels, who are not subject to Consent Decrees, get paid by streaming services. And Pandora can still take solace in its ASCAP win.
The conflicting decisions reached by the ASCAP and BMI Rate Courts regarding Pandora are another example of why the Copyright Office, in its Music Licensing Report, recommended that rate-setting for PROs and their licensees should be removed from a single life-tenured federal district judge and instead be given to the Copyright Royalty Board, with its panel of specialized judges who each serve for a limited term. While that won’t eliminate results that some may not like, at least there will be consistency in the decision-making.