Music

Subscribe to Music

John Simson writes:

The House of Representatives unanimously passed the Music Modernization Act last week by a vote of 415-0! Imagine our divided Congress passing anything with no opposition. This is actually not uncommon with music industry issues when the interests of both the major user companies and major owner companies align so there is little or no opposition.

U.S. Capitol Building, Washington, D.C.What exactly is the Music Modernization Act? The House version is the combination of three separate bills, two of which have been percolating for several years: The CLASSICS Act and the AMP Act. The CLASSICS Act will “fix” a major loophole in U.S. Copyright Law, the protection of pre-1972 recordings; the AMP Act will fix a smaller loophole in the Copyright Law as to how Music Producers, Remixers and Engineers get paid by SoundExchange. (We will discuss the specifics of these two parts of the bill in another post). The third piece of the MMA, its main driver and the reason why it is so critical to the music industry going forward is an overhaul of Section 115 of the U.S. Copyright Act, the compulsory license for the use of compositions. For those unfamiliar with copyright law, a “compulsory license” means that a user such as a record company can license a composition by paying the owner a license fee that is determined by statue without the necessity of negotiating directly with the owner. The reproduction of compositions on records and CDs is a compulsory license, referred to as a “mechanical license.”

A Brief History In Time

Over a decade ago, before Spotify, Apple, Tidal and most other on-demand services were operational, the Recording Industry Association of American (RIAA) and the National Music Publishers Association (NMPA) reached an agreement: for a nominal payment by the record companies to the publishers, the publishers would allow the development of on-demand services and wait and see to determine what fees should be charged for this new kind of service. Most important in this deal: the publishers received recognition that this use would be treated as a mechanical license, even though this does not necessarily follow from the nature of on-demand streaming. It is certainly true that a user of these services does have temporary reproductions on their devices, sometimes called tethered downloads because they are tethered to your subscription. On the other hand, were you to cancel your subscription, these reproductions disappear. They are also limited in that you cannot legally make copies of them as you would for a permanent download. However, this new recognition of a mechanical right in an on-demand stream was not accompanied by any major change in the section 115 Compulsory License that governs such mechanical reproductions.

What resulted was a disaster. Trying to shoehorn a new streaming mechanical into a 1909 law that was created for the reproduction of piano rolls, essentially one song at a time licensing, did not work. The 1909 law had adapted adequately to the transition from piano rolls to 78’s to LP’s and other limited media, with a limit of 15-20 compositions unless a box set where it might balloon to 60-80 titles. But the application of the law to on-demand streaming services that needed to license 30 million songs was impossible.

For streaming services, the task was daunting to obtain all of these licenses one at a time. The music industry had also undergone a fundamental change. For all past distributions of recordings, the record company stood as the gateway to the payment whether from retail establishments or from digital download services like iTunes. The record label would receive payment for the recordings as well as the for the compositions on behalf of music publishers and then pass through the publishing monies to the appropriate publishers or their representatives based upon the Section 115 licenses or other similar licenses they had negotiated. But this practice ended with on-demand streaming mechanicals. Record companies in their licenses with Spotify and others specifically required the service to license the publishers separately as they realized how great the burden would be to handle the mechanical royalty payments for the streaming services.

A Massive Problem to Solve

Over the years, the Harry Fox Agency (HFA) administered many of the Section 115 mechanical license agreements. Their agreement was a bit easier than the Copyright Office license. The Copyright Office license required monthly accountings while HFA’s was quarterly. But HFA never represented all works so attempting to get full coverage through HFA licenses was spotty at best. Over the years, they quoted 60-70% coverage but frequently couldn’t tell you which of your tracks wasn’t covered. Other services were also created to administer this right but the main problem persisted: there was no industry-wide database to inform a user where to go to get a license and the different services administering licenses were incomplete in their coverage. A user was at grave risk of infringement lawsuits for distributing unlicensed works.

Closeup of earbuds and smartphone

The MMA’s Proposed Solution

Long after the 1909 Act was enacted to govern the reproduction of compositions, another compulsory license for music was passed in 1995: the Digital Performance in Sound Recordings Act (DPRA). The DPRA provided a new license for non-interactive webcasters, satellite and cable services to stream sound recordings. This license provided that any service that wanted to stream could do so if they followed certain rules and provided payments and data. Section 114 of the Copyright Act which created this new compulsory license was also distinct from Section 115 in one major way: while Section 115 requires notice to the publisher 30 days in advance of distribution, Section 114 had no notice requirement at all. Any non-interactive service could stream any commercially released sound recording without prospect of being sued by the owner of the recording if the service provided data of what they were streaming and made payments based upon the terms of their license. The organization that was created to administer the Section 114 license is SoundExchange. (In full disclosure, I assisted in the development of SoundExchange at the RIAA in 2000 and served as its Executive Director from 2001-2010.)

In recognizing that Section 115 needed an overhaul to survive in the digital age, both users and owners got together and created a proposal to essentially mirror the Section 114 provisions removing the requirement of notice to publishers in advance of distribution: the result is that if this law passes, on-demand services can simply pay and provide data and be immune from lawsuits. Another “problem” with the current section 115 is that if a songwriter/publisher does not register their work with the Copyright Office AND an on-demand service sends a notice to the Copyright Office that they can’t find that songwriter/publisher, the service owes the songwriter/publisher NOTHING until they finally register their work. While the service has to pay a filing fee to the Copyright Office of roughly ten cents ($.10), the songwriter/publisher gets nothing! The updated law will fix that. Now, the on-demand service provider pays the new collecting society, to be created by the MMA for everything, and content owners claim against what is paid into the society.

One major striking difference between Section 114 and the proposed MMA is that there is very little language in Section 114 about the collecting society that could be formed by content owners. Section 114 did provide an anti-trust exemption to allow all content owners to create an “agent” or multiple agents to negotiate compulsory license voluntary rates with users, participate in Copyright Royalty Board (CRB) proceedings to set rates if voluntary negotiations failed and to collect and distribute payments to those entitled to royalties. Initially, the collective under Section 114 was subject to Copyright Office regulation but that role now falls under the auspices of the CRB.

Statutory language in the proposed MMA not only authorizes the creation of a new collecting society but sets forth in great detail many aspects of the organization’s structure, including the composition of the Board, composition of various committees, retention periods for undistributed royalties and much, much more. Where SoundExchange grew somewhat organically, this new collective is being created by statute.

Some outside groups have pushed back against the composition of the Board that would be created by the MMA to govern the collecting society. They don’t like that it is overwhelmingly controlled by music publishers with very few seats given to songwriters. They point to the SoundExchange Board which is an equal board between recording artists and record label representatives as evidence that this new organization needs more songwriter members; but they fail to point out that mechanical royalties unlike performance royalties, have always been paid directly to music publishers who recoup advances from these royalties and then split the money with their songwriters. Given this historical backdrop and practice, this is essentially a land grab by songwriters. (It should also be pointed out that songwriters seem to have no problem affiliating with BMI which has no songwriters on its Board of Directors!)

One issue that should be fixed in the MMA concerns “black box” money: those royalties collected that can’t be distributed, either due to the failure of a publisher or self-published songwriter to register with the new collective or due to bad data being supplied by the user. Currently, the legislation provides a three-year holding period and then a distribution proportionate to the overall market share of copyright owners. SoundExchange’s early experience with black box money is illustrative and leads to the conclusion that the new collective should wait at least five years to flush its undistributed royalties. It will take time for songwriters and independent publishers to get up to speed, to try and find their repertoire which may be poorly reported. It will take time for older songwriters and publishers to learn about these new developments. Congress may be passing new legislation which affects rights but Congress typically doesn’t expend any money to educate the community about these new rights and how they may be exercised.

Hopefully, the on-demand services that want this new legislation so badly that they are willing to pay the costs of running the collective, will highlight the changes on their services. While these services are primarily consumer-facing, it would be highly appropriate for them to send messages to songwriters and music publishers telling them about the new regime and how to ensure they are collecting their rightful share.

Hearings on the bill have begun in the Senate Judiciary Committee.

The MMA is a long overdue fix to the problems of Section 115 and while it won’t cure all of them it is an important step in the right direction.

John Simson is counsel in the firm’s Entertainment Department, based in its Washington, D.C. office.

Music festival and audienceFox associates Megan Center and Elizabeth Patton wrote a duo of posts for Fox’s advertising law blog Above the Fold examining a trademark dispute surrounding the term “Coachella.” The case relates to entertainment festivals not associated with the organizers of the well-known annual event in Indio, California. As Megan lays out in her post:

“Robert Trevor Simms (Simms) purported to create a film festival known as FILMCHELLA. Prior to filing for the injunction, Coachella Music Festival, LLC and Goldenvoice, LLC (collectively, Coachella) sent numerous cease and desist letters to Simms demanding that Simms change its name with no success. As such, Coachella was forced to file for a preliminary injunction to prevent Simms from using the terms, “Filmchella”, “Coachella for Movies” and “Coachella Film Festival” due to alleged trademark infringement. Coachella argued that Simms’ use of these terms will cause consumer confusion, dilution of its marks and other irreparable harm.”

The U.S. District Court for the Central District of California recently granted a preliminary injunction in the case to Coachella’s organizers. Elizabeth also provided an update yesterday on a flurry of motions filed by the parties in the case.

Closeup of earbuds and smartphoneLos Angeles-based IP lawyer Erin M. Jacobson recently penned a piece describing the ongoing dispute between members of the music industry and music streaming service Spotify, and arguing against Spotify’s attempts to limit the type of licenses it must obtain from copyright holders in order to maintain the service. She outlines the series of copyright infringement cases brought against the company and notes the ramifications for songwriters and publishers of a potential precedent-setting court decision in favor of Spotify’s argument that its streaming does not require a mechanical license.

To read the full piece, visit Erin’s blog. It was also published on the Forbes website on September 22.

1. Registration of a song with a PRO does not provide any copyright protection.

Closeup of earbuds and smartphoneThe most common misunderstanding I encounter from songwriters is that registering their songs with one of the U.S. music performance rights organizations (“PROs”), i.e. ASCAP, BMI, SESAC or GMR, gives the songwriter some protection of their intellectual property rights in their songs. That is simply not the case. Registration of a song with a PRO simply puts the song into the licensable database of the PRO and makes the proprietor information publicly available.

Music performance rights organizations, also known as performing rights societies, act as licensing agents for songwriters and music publishers with respect to the public performance of their songs. In order to play a copyrighted song on radio (over-the-air, satellite and internet), on television (network, cable, satellite and internet), perform it live (bars, concert halls and festivals) or digitally stream it (Pandora, Spotify, etc.), a public performance license must be obtained from the writer and publisher.

Registering a song or catalog of songs with a PRO will enable a songwriter or publisher to receive public performance rights and allow them to participate in events or take advantage of collective negotiating efforts, but that is all the registration does. The PRO registration does not register the copyright in a song or provide any licensing benefits other than public performance. In order to obtain the full benefits of copyright law protection, the writer or publisher should register their songs with the U.S. Copyright Office.

Although copyright registration is not a prerequisite to copyright protection, it is certainly “cheap insurance” from an intellectual property standpoint. If registration is made within three months of publication of the song or at any time prior to an infringement of the song, the copyright owner is entitled to seek statutory damages and attorney’s fees in federal court. That means a losing infringer may have to pay the owner’s legal fees and the damages awarded to the owner may be substantially increased based on the copyright law.

In addition to registering their songs with a PRO, songwriters and publishers should take the additional step of registering the copyrights in their songs with the Copyright Office. PRO registration is beneficial for searching writer/publisher information and for performance royalty collection purposes, but songwriters and publishers should not assume that registration provides any more expansive advantages than it actually does.

2. PROs issue licenses for public performance of songs and collect performance royalties (that is basically all they do).

The right of public performance is one of the exclusive rights granted to copyright owners under the U.S. Copyright Act (see 17 U.S. Code §106). Although copyright law allows songwriters and publishers to license performance rights themselves, it would be impossible (or at least impractical) for them to negotiate licenses with every radio station, television station, concert hall, etc. So, the concept of performing rights organizations arose. PROs aggregate the performing rights of writers and publishers, negotiate licenses with users of their music, collect the income from those licenses, and distribute that income to the applicable writers and publishers after deducting their operating expenses.

PROs track performances using various reporting and sampling techniques, and they offer both catalog licenses and per-use licenses. PROs do provide certain career development assistance, legislation advocacy efforts and philanthropic help for their members and outside musicians. They consistently present concerts, expos, seminars, workshops, camps and other activities for their members and the public, but that is where their efforts stop. PROs are not huge rights clearing houses for song catalogs.

3. Registration of a song with a PRO does not facilitate issuing mechanical licenses or synchronization licenses.

PROs do not issue mechanical licenses, synchronization licenses or any music publishing licenses other than public performance licenses. Registration of a song with a PRO makes the relevant writer/publisher information searchable for the song, which may help a potential licensee locate the proprietor of a song. However, the applicable PRO does not have any involvement in procuring, negotiating or issuing mechanical licenses for recordings of songs by recording artists or synchronization licenses for uses of songs in films, television programs, video games or other audiovisual productions. Those types of licensing must be handled separately by a songwriter’s music publisher and/or attorney.

Spotify, the world’s largest music streaming service, was sued last week for over $366 million by two music publishers, Bluewater Music Services in Nashville and a group of companies affiliated with Bob Gaudio, the award-winning songwriter and member of Franki Valli and the Four Seasons.

Closeup of earbuds and smartphoneEach plaintiff claims in their lawsuit that Spotify failed to comply with the requirements of Section 115 of the U.S. Copyright Act for obtaining mechanical licenses to use the plaintiff’s songs on Spotify’s streaming service, thereby infringing the plaintiff’s copyrights. Under U.S. law, streaming companies like Spotify are not required to negotiate mechanical licenses with publishers, but they must send publishers written notices of their intention to obtain compulsory licenses. The plaintiffs claim that Spotify did not provide proper notices to them and continued to stream their songs without mechanical licenses.

When a stream occurs, it utilizes two of the exclusive rights granted to a copyright owner of a song, the reproduction right and the communication right. In the music publishing business, those are known as “mechanical rights” and “performing rights.” Performance rights are licensed in the U.S. by performing rights organizations, like ASCAP, BMI and SESAC, which each represent different catalogs of songs. Mechanical rights in the U.S. are licensed primarily through The Harry Fox Agency, which acts as a licensing agent for music publishers, but mechanical rights in many songs must be obtained from individual publishers or songwriters, who can be challenging to locate and communicate with.

This is not the first time Spotify has been admonished for failing to implement adequate procedures to notify song proprietors of Spotify’s intention to add their songs to its playlist. In 2016, Spotify reached a $30 million settlement with the National Music Publishers’ Association (NMPA) for unpaid mechanical royalties and Spotify recently settled a class action suit by a group of songwriters led by David Lowery for $43.3 million. The largest members of the NMPA are the major music publishing companies, whose parent companies own a combined 18% of Spotify, according to the recent lawsuits. The lawsuits claim the three major U.S. record companies stand to make $700 million each if Spotify pursues a public offering (which is anticipated this year), thus fostering speculation those companies settled the lawsuits to protect that windfall.

In those prior lawsuits, Spotify emphasized the difficulty of identifying and contacting each song publisher and the company agreed in the settlements to “work collaboratively to improve the gathering and collecting of information about composition owners to help ensure those owners are paid their royalties in the future.” The complaints in the recent lawsuits claim that Spotify has “built no infrastructure capable of collecting compositional information and failed to ask for such information.”

In most countries outside the U.S., mechanical rights are licensed via a centralized collective licensing organization, which represents all the song owners in the particular country. Even if music publishers license their songs directly to a streaming service, the mechanical rights “society” in their country usually handles the administration associated with collecting and paying out the royalties due. In the U.S., there is no industry-wide or national organization to assist with processing mechanical licensing and collecting mechanical royalties

Although the U.S. music industry has acknowledged that a global music rights database is necessary, no one has yet made it a reality. Everyone seems to agree that songwriters and music publishers should be paid properly when their songs are streamed, and some argue it is the responsibility of the well-financed streaming firms to design a system to identify songs and make appropriate payments. Others argue the music publishing establishment should create a industry-wide system for identification and payment.

If the U.S. were to adopt the nationwide collective licensing model utilized in almost all other countries and create a centralized mechanical licensing entity, the recent lawsuits against Spotify would never have been necessary. Unfortunately, that is not likely to occur due to the entrenched and vested business interests involved, and the reluctance to collaborate and share databases of song information, which many consider to be proprietary.

The Jukebox musical is alive and well and living on Broadway. From the songs of Gloria Estefan to Carole King, from Frankie Valli to Abba, we are amidst a 20-year old trend to present pop music’s biggest hits on the live theatrical stage. Indeed, blockbusters like Jersey Boys, Mamma Mia and Rock of Ages have encouraged music rights holders to exploit their catalogues in what has proven for some to be a very lucrative market, and the 2018-2019 Broadway season continues to welcome jukebox properties to the Great White Way.

Woman singing with microphone
Copyright: arturkurjan / 123RF Stock Photo

The licensing of a non-dramatic musical composition (for example, a pop song) for use within a dramatico-musical stage play (aka a musical) is often misunderstood by creatives and rights holders alike. To debunk some commonly held misconceptions, here is my 60-second elevator summary:

  1. A grand right is a right that subsists in the entire dramatico-musical play as a single work – not the music in and of itself. As such, a “grand right” combines the elements of the music, lyrics and book of a dramatico-musical or operatic work into a single right. A grand right is usually owned and controlled by the theatrical producers and/or composers who create the dramatico-musical or opera. When your child’s middle-school performs Annie for the ninth year in a row, that performance is the exercise of a grand performance right.
  2. If you are looking to incorporate existing, non-dramatic compositions into a dramatic work, for example, in the creation of a jukebox musical, you will need to obtain a dramatic performance license. Whereas performance rights societies such as ASCAP are able to grant licenses for non-dramatic performances of non-dramatic compositions (e.g., to allow your gym to play Rihanna), only the copyright owner of the non-dramatic composition can grant a dramatic performance license – customarily, the music publisher.
  3. Always keep in mind, dramatic performance licenses do not include a grant of life rights and/or underlying rights to the story of the writers or performers of the non-dramatic compositions. If you intend on acquiring a dramatic performance license to tell the story of your favorite band, you will also need to obtain some kind of life rights and/or underlying rights agreement.

Understanding these distinctions can save creatives and producers time and expense in the long run, particularly in this evolving and competitive ancillary rights market.

Charlie Nelson Keever writes:

The Supreme Court ruled this morning that a federal law that prohibits the government from registering trademarks that “disparage” others violates the First Amendment.

Members of an Asian-American rock band filed a lawsuit after the U.S. Patent and Trademark Office (PTO) kept the band from registering its name, The Slants, a reference to the derisive slur sometimes wielded against Asian-Americans. The PTO said the name was likely to denigrate a significant number of Asian-Americans in violation of the Lanham Act, which prohibits any trademark that could “disparage … or bring … into contempt[t] or disrepute” any “persons, living or dead.”

Rock star cartoon
Copyright: kennykiernanillustration / 123RF Stock Photo

The band’s founder, Simon Tam, said the point of the band’s name is just the opposite. “[Growing up] the notion of having slanted eyes was always considered a negative thing… Kids would pull their eyes back in a slant-eyed gesture to make fun of us. … I wanted to change it to something that was powerful, something that was considered beautiful or a point of pride instead.”

The Supreme Court sided with The Slants.

“The disparagement clause violates the First Amendment’s Free Speech Clause,” Justice Samuel Alito wrote in his opinion for the court. “Contrary to the Government’s contention, trademarks are private, not government speech.” Alito noted that the government “still has an interest in preventing speech expressing ideas that offend,” but suggested the “disparagement clause” was overly broad.

This case could have a broad impact on how the First Amendment will be applied in other trademark cases. In 2014, the PTO canceled the Washington Redskins’ trademarks, finding the term “Redskins” disparages Native Americans under the same statutory clause that was quashed by the Supreme Court today. The team is calling today’s ruling a win. Redskins attorney Lisa Blatt said in a statement, “The Supreme Court vindicated the team’s position that the First Amendment blocks the government from denying or cancelling a trademark registration based on the government’s opinion.” The Redskins’ case has been on hold in the U.S. Court of Appeals for the 4th Circuit in Richmond, pending today’s decision.

Charlie Nelson Keever is a summer associate in the firm’s Los Angeles office.

Copyright: <a href='//www.123rf.com/profile_olegdudko'>olegdudko / 123RF Stock Photo</a>
43756518 – hotel.

The iconic American rock band The Eagles released its platinum album “Hotel California” in December of 1976.  It sold more than 32 million copies worldwide and its title track “Hotel California” achieved legendary status.  Over four decades later, it appears the “lovely place” on a “dark desert highway” might actually exist, but not how the band envisioned.

The Eagles launched a trademark infringement action last Monday against a small hotel in Todos Santos, Mexico with a familiar name – Hotel California.  Described on its website as a “sub-tropical oasis” just 45 minutes outside Cabo San Lucas, Hotel California was founded in 1948, when the Eagles were just toddlers.  The hotel was later named “Todos Santos Hotel” and underwent numerous transitions in ownership concluding with current owners John and Debbie Stewart, a Canadian couple who bought the establishment in 2001.  Thereafter, the hotel’s original name was restored allegedly to deceive guests into associating the property with The Eagles.

In its complaint, the band cites as evidence of infringement the hotel’s Eagles-themed lobby music and gift shop merchandise bearing the brand “Legendary.”  The Eagles also identify numerous customer reviews which indicate that guests routinely perceive an affiliation between the hotel and The Eagles.  The hotel appears to reinforce this perception by listing on its website a series of “coincidences” wedding the hotel to the world-famous song.  For instance, the website advertises that Hotel California sits near a “long desert highway,” neighbors a mission church with bells heard daily, hosts “ghosts and spirits” in the courtyard, and previously accommodated guests who smoked “colitas” (a slang term for joint) during the 1960s and 70s.

In response, The Eagles are flexing their talons.  The band seeks injunctive relief, actual damages, profits, and punitive damages against the hotel (and maybe a complimentary colita).

This week provided yet another reminder to entertainment law practitioners that there is still plenty of work to do even after your clients pass away.  On Wednesday, April 19th, 2017 the U.S. District Court in Minnesota issued a temporary restraining order blocking the digital release of a six-song EP entitled “Deliverance” by Prince, who passed away one year ago this week.

The EP was to be released by George Ian Boxill, through independent record label, Rogue Music Alliance, and contains all previously unreleased songs.  Boxill was a collaborator with Prince, and producer on the EP songs.  Prince’s estate alleges that Boxill violated the terms of a confidentiality agreement with the late singer, which conveyed all rights to the materials they created exclusively to Prince, and provided that Boxill would not use the recordings in any manner.

Boxill and most Prince fans would argue Prince would have wanted to share these unreleased recordings with his fans.  However, given the propensity of Prince to demand control and exclusivity over his work, brand, and persona while he was alive, it should not be a surprise that his estate continues to seek protection of those rights after his death.  This is notwithstanding likely financial benefits from the sale of this work. We are all aware of Prince’s so-called “vault” of recordings, but so long as his estate maintains his protectionist views over his body of work, we may never hear the fruits of his labor.  There is no obligation under copyright law that requires copyright holders to exploit their works, even if there is a high demand for it.

The temporary restraining order on the Deliverance EP expires on May 3, 2017, unless the District Court grants an extension.  Only time will tell if we can purchase an EP copy before it goes back into the “vault.”

Following up my colleague Lori Kozak’s blog post from almost one year ago, the Asian-American rock band known as “The Slants” had their day in the highest court of the land on January 18, 2017. The U.S. Supreme Court heard oral arguments from the band’s attorneys that the group’s name should not be barred from federal trademark registration on the basis that their name is offensive to people of Asian ethnicity.

While arguments over band names typically arise between band members, “The Slants” founder, Simon Tam is fighting Section 2(a) of the Lanham Act, which prohibits the registration of a trademark that may disparage persons, institutions, beliefs, or national symbols. Representing Tam, attorney John Connell argued that the band name contains both a commercial and expressive communication, and that Section 2(a) places an undue burden on the latter, which is outside the scope of Congress’ intent to reduce confusion in the marketplace.

On the other hand, Justice Department attorney Malcolm Stewart argued that by granting such trademarks federal protection, the government would in fact be distracting consumers from identifying goods and their sources, and this would actually hinder commerce.

Merchandising, live performances, and fan clubs for artists rely heavily on the strength of an artist’s branding. While the Court recognized that Congress is not preventing “The Slants” from using their name in commerce, the advantages of federal trademark protection have become a necessity for any successful musical act, whether on a major label or as an independent artist. Tam, along with the rest of us (including the Washington Redskins) will eagerly wait for the Court’s decision in this case, which is expected in June.