Who Did the Copyright Office Neglect in its Music Marketplace Report?

Most musicians and composers owed royalties. Why do I say that? Because the Copyright Office failed to factor in to its “Guiding Principles” the core copyright issue for all musicians and composers below the upper levels of music earnings─ they can’t afford to enforce their rights. The 245 page “Copyright and the Music Marketplace” barely mentions the issue, and when it advocates a solution it throws musicians and composers back to where they are today. Unpaid.

The report’s first guiding principle is that music creators should be fairly compensated. Lip service has been paid to that goal throughout the waves of copyright legislation for more than a century. But the players who shape the legislation to fit their goals and business plans are not the music creators.

The report recommendations assume that fair, or at least fairer, compensation will trickle down to composers and musicians because of unifying rights licensing, making more payment data public, and adding new streams for rights income. This is surprising since 17 months ago the Copyright Office said the inability to enforce them makes existing rights empty. The report’s new recommendations to unify licensing, provide information, and add new royalty streams only work if they are enforceable by musicians and composers with shallow pockets. They are the overwhelming majority.

The report seems like something from a different organization from the Copyright Office that recommended establishing a copyright small claims court in 2013. Evidence of this is the report’s recommendation to change the part of the Copyright Act dealing with statutory licensing to stream sound recordings. Statutory licensing is government licensing.

If a service meets the technical requirements, it gets a copyright license to stream music from the government at predetermined rates and avoids the need to negotiate directly with rights owners. SoundExchange tries to collect the royalties for the licenses at the rates set by a copyright rate court that is the source of unhappiness and gets a lot of attention in the report. Criticisms of the rate setting process are valid, but they mostly are an issue for large organizations with some of the best legal talent in the industry. Independent musicians and composers don’t fight the rate-setting battles.

SoundExchange knows first-hand about the challenges of collecting streaming royalties and distributing them to performers and rights owners. It pointed out to the Copyright Office there are a lot of deadbeats who get licenses and don’t pay. The report agrees with SoundExchange that deadbeats shouldn’t keep getting licenses. Its solution is a termination notice procedure to end streaming licenses just like the termination process already part of the Copyright Act section on mechanical licenses.

Mechanical licenses allow anyone to make a new recording of a musical composition whether the copyright owner likes it or not. Licenses can be directly negotiated with rights holders, but statutory mechanical licenses can be gotten from the government at predetermined rates and the rights owners can’t prevent it. If a mechanical rights license holder releases their record but doesn’t pay royalties, the law allows the rights owner to give a 30 day termination notice. If the people with the new record still don’t pay, the law says they are copyright infringers and gives the rights owner all the copyright infringement remedies─ injunctions, damages, and attorney fees if you win.

It sounds good for the rights owner. All she has to do is sue the deadbeat mechanical license holder in federal court and win. Taylor Swift can do that. Most other musicians and composers can’t. Congress recognized that in 2006 and told the Copyright Office to look at the problem. They produced a report, but nothing changed. They tried again and in 2013 produced a report almost as big as the Music Marketplace.

In “Copyright Small Claims,” the Copyright Office faced the enforcement issue head on. It is 200 pages of documenting the enforcement affordability gap and proposing a modest compromise small claims court to give independent creators a fighting chance to collect up to $30,000 of the royalty money they’re owed. http://copyright.gov/docs/smallclaims/usco-smallcopyrightclaims.pdf .

That was September 2013. Music Marketplace was made public this month. It mentions the Copyright Small Claims report one time─ at footnote 470 where they are discussing valid complaints about the rate court being too slow and expensive by the likes of Netflix. It is a public company with 57 million members worldwide and earnings of about $1.5 billion. Copyright Small Claims?

The 2013 report quotes testimony and comments over and over on the lack of affordability of rights enforcement. Examples:

“…federal litigation is expensive and time-consuming, and therefore out of reach for many copyright owners. The problem is especially vexing in the context of small claims, where the injury may be limited or difficult to measure. If exclusive rights are unenforceable, they are weakened as the pillars of the copyright law, and public respect for our nation’s creativity is eroded in turn.”

“The problem of modest-sized copyright claims, on the one hand, and costly enforcement, on the other, appears to be especially acute for individual creators.”

Search the Music Marketplace for words from 2013 like “out of reach” or “affordably…pursue infringers” or “unaffordable and impractical for most occurrences of typical infringement.” You’ll get no hits.

The introduction to Copyright Small Claims recognized “As provided in the Constitution, the rights granted to authors are not merely to be articulated, but also “secur[ed].” The Music Marketplace is an important milestone in the discussion about data and money in the music industry. Its preface says it aspires “to broadly consider the existing music marketplace.” The existing marketplace is full of artists who can’t afford to secure their rights, and they are not considered.

About Craig Pinkus

Craig Pinkus is a partner in the Intellectual Property Group. He also is a member of the Litigation and the Sports, Entertainment and Media Groups. He assists clients with a broad range of disputes and transactions involving all areas of intellectual property, entertainment, and other complex business arrangements. He has conducted trials and arbitrations throughout the United States and has argued appeals before the Seventh, Sixth and Federal Circuit Courts of Appeal, the Indiana appellate courts, and United States Supreme Court.
This entry was posted in Copyright Enforcement, Sound Recordings and tagged . Bookmark the permalink.

1 Response to Who Did the Copyright Office Neglect in its Music Marketplace Report?

  1. Aaiplbd says:

    Thank you for an excellent overview registration of copyrights in music, you helped me a lot!


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