Source: https://blog.ericgoldman.org/archives/2019/01/an-analysis-of-title-i-and-title-iii-of-the-music-modernization-act-part-1-of-2-guest-blog-post.htm
Timestamp: 2019-04-21 14:39:21+00:00

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On October 11, 2018, President Trump signed into law H.R. 1551, the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, which became Public Law 115-264, 132 Stat. 3676. It contains three titles pertaining to copyright law. Title I is the Musical Works Modernization Act, or MWM Act, which revises the Section 115 compulsory license for musical works and establishes a new “mechanical licensing collective” to administer it. Title II is the Classics Protection and Access Act (or CPA Act, formerly known as the “Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act,” or CLASSICS Act), which brings pre-1972 sound recordings mostly (but not completely) into the federal copyright system. Title III is the Allocation for Music Producers Act (or AMP Act), which amends the compulsory license for digital public performance rights for sound recordings to allocate a small portion of the proceeds to producers, mixers, and sound engineers.
This two-part blog post series will summarize the provisions of Title I, the Musical Works Modernization Act (or MWM Act) and Title III, the Allocation for Music Producers Act (or AMP Act). The provisions of Title II, the CPA Act, were summarized in a previous blog post.
Musical works were first added to the Copyright Act in 1831. At the time, sound recording technology did not exist, and there was no public performance right, so the only way that a musical work copyright owner could make money was by reproducing and distributing copies (in the form of sheet music) of the copyrighted work. In 1897, the Copyright Act was amended to add an exclusive right of public performance in musical works. As is the case today, however, there was no exclusive right to control private performances of musical works.
The early 20th Century saw the introduction of the pianola, a player piano that used a roll of perforated paper to operate the keys of a piano keyboard. As a consequence, a legal question arose whether the copyright in a musical work also gave the copyright owner the exclusive right to reproduce and distributed perforated rolls of paper that would reproduce the musical work when used in conjunction with a player piano. In White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1 (1908), the U.S. Supreme Court held that a “copy” of a musical work was “a written or printed record of it in intelligible notation.” 209 U.S. at 17. In other words, a copy must be “in a form which others can see and read.” Id. By contrast, “[t]hese perforated rolls are parts of a machine which, when duly applied and properly operated in connection with the mechanism to which they are adapted, produce musical tones in harmonious combination. But we cannot think that they are copies within the meaning of the copyright act.” 209 U.S. at 18.
The following year, in the 1909 Copyright Act, Congress reversed the result of the White-Smith case, extending to “compositions published and copyrighted after July 1, 1909” the exclusive right to reproduce the musical work “in any system of notation or any form of record in which the thought of an author may be recorded and from which it may be read or reproduced,” including “controlling the parts of instruments serving to reproduce mechanically the musical work.” 1909 Act §1(e). However, “as a condition of extending the copyright control to such mechanical reproductions,” the Act created a compulsory license. Once the copyright owner had exercised the right to make any such “mechanical reproductions,” anyone else could make mechanical reproductions without permission, “upon the payment to the copyright proprietor of a royalty of two cents on each such part manufactured.” Id.
Another unintended consequence of the compulsory license was that the “mechanical reproductions” themselves were not eligible for copyright, despite the provision granting copyright to “all the writings of an author.” 1909 Act §4. Sound recordings would not be added to the federal Copyright Act until February 15, 1972. (Title II of the MMA, the Classics Protection and Access Act, creates new federal protection for pre-1972 sound recordings to correct this longstanding discrepancy.) In addition, as a result of White-Smith, the “mechanical reproductions” were not considered to be “copies” of the musical work. 17 U.S.C. §303(b). The legacy of White-Smith persists today in the otherwise inexplicable statutory distinction between “copies” and “phonorecords.” “Phonorecords” are defined as material objects in which only sounds are fixed; while “copies” are defined as material objects in which any other kind of work is fixed. 17 U.S.C. §101.
It is important to note that the compulsory license gives the licensee the right to make and distribute phonorecords of a new sound recording of a copyrighted musical work. The licensee cannot distribute phonorecords of an existing sound recording without also getting permission from the sound recording copyright owner. Moreover, in practice most producers of covers use a “voluntary” license provided by the Harry Fox Agency. The royalty payable for a Harry Fox license is the same (or lower) than the statutory royalty, but the terms and conditions for reporting and paying royalties are somewhat more convenient to administer than those set forth in the statute.
As under existing law, “A person may obtain a compulsory license only if the primary purpose in making phonorecords of the musical work is to distribute them to the public for private use, including by means of digital phonorecord delivery.” [17 U.S.C. §115(a)(1)(A)] Nondramatic musical works eligible for a compulsory license fall into one of two categories: (i) those for which “phonorecords of such musical work have previously been distributed to the public in the United States under the authority of the copyright owner of the work, including by means of digital phonorecord delivery” (as under existing law), and (ii) those “for which clause (i) does not apply.” [17 U.S.C. §115(a)(1)(A)] Works in the second category are eligible only “in the case of a digital music provider seeking to make and distribute digital phonorecord deliveries of a sound recording embodying a musical work under a compulsory license for which clause (i) does not apply.” (This clause is terribly written, because grammatically it is unclear whether the qualifier “for which clause (i) does not apply” modifies the nouns “digital music provider,” “digital phono­record deliveries,” “sound recording,” “musical work,” or “compulsory license.” In context, the best reading is that it modifies “musical work,” since section 115 is a limitation on the exclusive rights for musical works.) The second category has three additional conditions in two clauses: that (I) “the first fixation of such sound recording was made under the authority of the musical work copyright owner, [//] and the sound recording copyright owner has the authority of the musical work copyright owner to make and distribute digital phonorecord deliveries embodying such work to the public in the United States”; and (II) “the sound recording copyright owner [or an authorized distributor] … has authorized the digital music provider to make and distribute digital phonorecord deliveries of the sound recording to the public in the United States.” [17 U.S.C. §115(a)(1)(A)(ii)] In other words, even if phonorecords of a musical work have not been distributed to the public in the United States, a musical work is still eligible to have a compulsory license for digital phonorecord deliveries if the musical work copyright owner authorized a sound recording copyright owner to make digital phonorecord deliveries of the sound recording to the public in the United States, and the digital music provider has obtained the permission of the sound recording copyright owner or its agent.
Under the current language of section 115(a)(1), a compulsory license is available to “any other person” after a sound recording embodying a musical work has been distributed to the public in the United States under the authority of the musical work copyright owner. The new language is intended to eliminate any ambiguity under existing law as to whether a digital music provider may obtain a compulsory license when the digital music provider is the first person to distribute digital phonorecord deliveries of such musical work. The new language makes clear that a digital music provider may obtain a compulsory license in those instances in which the digital music provider is the first person to make and distribute digital phonorecord deliveries of a sound recording embodying a musical work.
(i) “the license authority provided under the blanket license shall exclude any musical works … subject to the voluntary license or individual download license.” This clause contains a significant ambiguity that may lead to litigation. Does it mean that if a digital music provider has a voluntary license or individual download authority for one or more musical works, the blanket license for that particular music provider excludes those musical works? Or does it mean that if a digital music provider has a voluntary license or individual download authority for one or more musical works, the blanket license for ALL digital music providers excludes those musical works? In context, the better-reasoned answer is the former; but one can expect that eventually, the copyright owner of a hit musical work who obtains a higher voluntary rate will sue to try to collect the higher rate from all digital musical providers.
(iii) “The rates and terms of any voluntary license shall be subject to the second sentence of clause (i) and clause (ii) of subsection (c)(2)(A) and paragraph (9)(C).” Subsection (c)(2)(A) provides (as under current law) that for certain specified licenses, the royalty rates fixed by the Copyright Royalty Board apply in lieu of voluntary negotiated rates. Subsection (d)(9)(C) says that “[a] voluntary license for a covered activity in effect on the license availability date [January 1, 2021] will remain in effect unless and until” it expires, or the parties agree to amend or terminate it.
The Music Licensing Collective is authorized to perform the following thirteen functions: (I) offer and administer blanket licenses; (II) collect and distribute royalties; (III) identify and locate the copyright owners of musical works; (IV) maintain the musical works database (see below); (V) administer a process for claiming ownership of musical work copyrights, and for distributing unclaimed royalties for such works; (VI) collect administrative assessments from digital music providers and significant nonblanket licensees; (VII) invest in resources and arrange for services to support its activities; (VIII) enforce rights and obligations, including filing proofs of claims in bankruptcy; (IX) initiate and participate in proceedings before the Copyright Royalty Board regarding the “administrative assessment” (see below); (X) initiate and participate in proceedings before the Copyright Office; (XI) gather and provide documentation for use in proceedings before the Copyright Royalty Board; (XII) maintain records and respond to audits; and (XIII) any other activities that are “necessary or appropriate” to fulfill its responsibilities. [17 U.S.C. §115(d)(3)(C)(i)] The Collective may only issue and administer “blanket licenses for reproduction or distribution rights in musical works for covered activities” that comply with subsection 115(d)(1). [17 U.S.C. §115(d)(3)(C)(ii)] For a reasonable fee, the Collective may also administer voluntary licenses or individual download licenses “for reproduction or distribution rights in musical works for covered activities” granted by copyright owners. [17 U.S.C. §115(d)(3)(C)(iii)] Except for proceedings before the Copyright Office and the Copyright Royalty Board, the Collective is prohibited from engaging in any other government lobbying activities (although the entities that the Board members represent, of course, are not prohibited).

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