Source: http://www.techlawjournal.com/alert/2015/02/17.asp
Timestamp: 2018-05-28 01:18:18
Document Index: 648031741

Matched Legal Cases: ['§ 114', '§ 115', '§ 112', '§ 114', '§ 109', '§ 106', '§ 117']

TLJ Daily E-Mail Alert No. 2,711, February 17, 2015.
Tuesday, February 17, 2015, Alert No. 2,711.
Copyright Office Releases Report on Music Licensing
2/5. The Copyright Office (CO) released a report [245 pages in PDF] titled "Copyright and the Music Marketplace".
Introduction. This report states that "There is a widespread perception that our licensing system is broken. Songwriters and recording artists are concerned that they cannot make a living under the existing structure, which raises serious and systemic concerns for the future. Music publishers and performance rights organizations are frustrated that so much of their licensing activity is subject to government control, so they are constrained in the marketplace. Record labels and digital services complain that the licensing process is burdensome and inefficient, making it difficult to innovate."
However, "While there is general consensus that the system needs attention, there is less agreement as to what should be done."
The report offers numerous proposals. It contains recommendations that could be implemented by the Congress. Although, it does to contain draft legislative language. It further recommends that the Copyright Office be given rulemaking authority. It states that the statute should merely set out the "essential elements", rather than "highly detailed statutory prescription".
The CO recommends expanding of the powers of both the CO and Copyright Royalty Board (CRB), and a diminishment of the roles of the Department of Justice (DOJ) and federal courts.
The CO's recommendations, if enacted into law, would likely have numerous effects, including increasing compensation for songwriters, increasing costs for music streaming services (which could increase prices for consumers), and increasing costs for terrestrial broadcasters (which are not allowed to charge consumers).
The report recommends extending the public performance right in sound recordings to terrestrial radio, fully federalizing pre-1972 sound recordings, and adopting a uniform market-based ratesetting standard for all government rates.
The report recommends that establishing rates for the public performance of musical works be shifted from the federal courts to the CRB. It recommends that music publishers be allowed to withdraw specific categories of licensing rights from their authorizations to the Performance Rights Organizations (PROs) -- that is, the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Inc. (BMI), and Society of European Stage Authors and Composers (SESAC). The report also recommends allowing bundled licensing of mechanical and performance rights.
The report also proposes incentivizing market players to create a public database, that would, among other things, make usage and payment data available to rightsholders.
This report describes the current regulatory regime, and addresses the economic incentives and interests of the various participants in the music market place. The CO is acting as an arbitrator among the various organized interests with conflicting objectives regarding how the legal regime for music licensing should be structured. The CO addresses how money is to be made by the music industry, and how industry wide profits might be allocated among various participants.
This report gives scant attention to consumer welfare. And, in so doing, it leaves untouched consumer and societal interests in the creation of new great music. This report does not address how the music licensing regime may affect the quality, compositional creativity, lyric expression, or artistic or literary merit of works being written, performed and recorded. A recording of Felix Mendelssohn's Violin Concerto in E Minor, like Billy Ray Cyrus's recording of "Achy Breaky Heart", is merely a "sound recording". Anything and everything is just "content".
Recommendations. The first proposal is to "Regulate musical works and sound recordings in a consistent manner."
The report states that "at least in the digital realm, sound recordings and the underlying musical works should stand on more equal footing. The Copyright Office's approach would offer a free market alternative to musical work owners, in the form of an opt-out right to withdraw specific categories of rights from government oversight in key areas where sound recording owners enjoy such benefits -- namely, interactive streaming uses and downloads."
The report recommends extending the public performance right in sound recordings to terrestrial radio broadcasts. "Apart from being inequitable to rightsholders -- including by curtailing the reciprocal flow of royalties into the United States -- the exemption of terrestrial radio from royalty obligations harms competing satellite and internet radio providers who must pay for the use of sound recordings. Assuming Congress adopts a terrestrial performance right, it would seem only logical that terrestrial uses should be included under the section 112 and 114 licenses that govern internet and satellite radio."
The CO has long recommended extending the public performance right in sound recordings to terrestrial radio. And, bills have been introduced in the Congress to accomplish this. However, this remains a controversial issue, and no bill has been enacted. Broadcasters vehemently oppose this proposal.
Dennis Wharton of the National Association of Broadcasters (NAB) stated in a release that "As it has for decades, the Copyright Office proposes music licensing recommendations looking only through the lens of copyright owners. What cannot be denied is that the U.S. music industry is the envy of the world, aided by a legal framework that enables 244 million listeners to enjoy free and local radio every week. We're pleased that Congress recognizes the unparalleled promotional value of broadcast radio, and has rejected a punitive new fee on local stations."
In contrast, Michael Huppe, head of the SoundExchange, stated in a release that "the most egregious injustice in our music licensing system" is "that artists and labels are not compensated for the use of their work by the $17 billion AM/FM radio industry."
Similarly, Cary Sherman, head of the Recording Industry Association of America (RIAA), stated in a release that the CO "recognized that it is time to fix the system to ensure that all creators are paid fair market value for their work, regardless of the platform on which their work is used. For example, a performance right for FM and AM radio is long overdue. The fact that a multi-billion dollar broadcasting industry that derives its value from music gets a special interest carve-out from paying artists and labels continues to be indefensible."
The report also recommends fully federalizing pre-1972 sound recordings.
Sherman added that "artists and labels behind iconic recordings made before 1972 deserve to be compensated by digital radio outlets like Pandora and Sirius."
The report also recommends adopting a "uniform market-based ratesetting standard for all government rates".
The report finds that "Regulation of music publishers and songwriters is particularly pervasive: the two most significant areas of their market (mechanical and performance licensing) are subject to mandatory licensing and ratesetting. Antitrust concerns have been the traditional rationale for government intervention. To be sure, where particular actors engage in anticompetitive conduct in violation of antitrust laws, that conduct should be addressed. But compulsory licensing does more than that -- it removes choice and control from all copyright owners that seek to protect and maximize the value of their assets." (Parentheses in original.)
Thus, "certain aspects of the compulsory licensing processes can and should be relaxed."
The report proposes that "the function of establishing rates for the public performance of musical works -- currently the province of federal district courts under the consent decrees -- be migrated" to the CRB. The DOJ's Antitrust Division's ASCAP and BMI consent decrees are also under review by the DOJ.
The report also recommends that the prohibition contained in 17 U.S.C. § 114(i) "that currently prevents ratesetting tribunals from considering sound recording performance royalties be eliminated".
The report recommends that "music publishers should be able to withdraw specific categories of licensing rights from their authorizations" to the Performance Rights Organizations (PROs) -- ASCAP, BMI, and SESAC.
It adds that "performance rights should be limited to digital rights equivalent to those that the record labels are free to negotiate outside of sections 112 and 114 -- essentially, interactive streaming rights for digital services. Publishers that chose to opt out would be required to provide a list of their withdrawn works and other pertinent information to a central source, such as the general music rights organization (``GMRO´´) discussed below. In addition, the Office believes that songwriters affiliated with that publisher should retain the option of receiving their writer’s share of royalties directly through their chosen licensing collective."
The report also recommends allowing "bundled licensing of mechanical and performance rights. Industry participants support increased bundling of rights -- i.e., reproduction, distribution, and performance rights -- in unified licenses to facilitate greater licensing efficiency."
The report also contains numerous recommendations regarding mechanical licensing and 17 U.S.C. § 115. For example, it recommends permitting "collective licensing of mechanical rights but with an opt-out right for interactive streaming and download uses", establishing "blanket licensing for digital uses under section 115", and giving publishers an audit right under Section 115.
The report finds that the statutory license regime under 17 U.S.C. § 112 and 17 U.S.C. § 114, which permits qualifying digital services to engage in noninteractive streaming activities at a CRB-determined rate, "seems to be working reasonably well".
However, it offers recommendations: "Consider ratesetting distinction between custom and noncustom radio", "Allow fine-tuning of technical aspects of the license through the exercise of regulatory authority", "Consider permitting SoundExchange to process record producer payments", and "Allow SoundExchange to terminate noncompliant licensees".
The report also recommends creating "a unified statutory licensing scheme for public broadcasters".
The report finds that "accurate, comprehensive, and accessible data, and increased transparency, are essential to a better functioning music licensing system". It states that "it is essential to make reliable usage and payment information available to rightsholders".
It recommends establishing "incentives through the statutory licensing scheme for existing market players to create an authoritative public database".
The report also suggests that music publishers be allowed "to opt out of the statutory licensing system and pursue direct negotiations". Also, "In the case of direct deals for rights covered by an MRO or SoundExchange, the Office recommends allowing songwriters and artists to elect to receive their shares of royalties from the licensee through their chosen licensing entity."
Matt Schruers of the Computer and Communications Industry Association (CCIA) stated in a release that "While it is commendable that the Copyright Office acknowledges that transparency in the music marketplace is essential to ending inefficiency and abuse, many of its recommendations would put at risk the licensing structure and platforms that play music legally and compensate music creators."
He added that "Policies that would unfairly discriminate against digital technologies and further consolidate market power among a few dominant rightsholder corporations will injure innovation, artists, and listeners alike."
Lee Knife, head of the Digital Media Association, stated in a release that "The Copyright Office missed a significant opportunity to truly advance copyright, music licensing and the music marketplace with its just released report. The suggestions proposed would continue to fragment the already-complex licensing structure and put at risk those platforms that deliver music legally and compensate music creators."
Framework for the Licensing of Musical Works. Next, the report proposes "an updated framework for the licensing of musical works" that would be based upon music rights organizations (MROs), and one GMRO, a nonprofit entity designated, and regulated, by the government.
An MRO would have the "ability to administer, and bundle, performance and mechanical rights on behalf of the publishers and songwriters it represented. It would also collect and distribute the royalties due under such licenses." Current PROs, including ASCAP and BMI, could qualify as an MRO. To the extent they chose to opt out of the blanket statutory system, publishers and songwriters would license their public performance and mechanical rights through MROs.
The report states that "Each MRO would enjoy an antitrust exemption to negotiate performance and mechanical licenses collectively on behalf of its members -- as would licensee groups negotiating with the MROs -- with the CRB available to establish a rate in case of a dispute. But MROs could not coordinate with one another and would be subject to at least routine antitrust oversight."
In addition, "Each MRO would be required to supply a complete list of the publishers, works, percentage shares and rights it represented, as well as the MRO’s licensing contact information, to the GMRO, and would be obligated to keep that information current. "
Also, "MROs would also be responsible for notifying the GMRO of any members that had exercised opt-out rights by providing the relevant opt‐out information, including where a direct license might be sought, so potential licensees would know where to go for license authority."
The "general music rights organization" or GMRO "would be responsible for maintaining a publicly accessible database of musical works represented by each MRO, which would incorporate data supplied by the MROs and other authoritative sources. The GMRO would actively gather missing data, reconcile conflicting data, and correct flawed data, and would also provide a process to handle competing ownership claims."
The report states that the GMRO "would also incorporate sound recording data -- presumably from SoundExchange -- into the public database, and be responsible for developing additional data that matched sound recordings with musical works to facilitate more efficient licensing."
The GMRO "would also serve as the default licensing and collection agent for musical works (or shares of works) that licensees were unable to associate with an MRO or opt-out publisher. Services with usage-based payment obligations would transmit records of use for unmatched works, along with associated payments and an administrative fee, to the GMRO."
The report states that the GMRO "would then attempt to identify the MRO or individual copyright owners and, if successful, pay the royalties out. If unsuccessful, the GMRO would add the usage record to a public unclaimed royalties list and hold the funds for some period of time -- e.g., three years -- to see if a claimant came forward. As is the case with SoundExchange, after that period, the GMRO could use any remaining unclaimed funds to help offset the costs of its operations."
The GMRO would be funded by "copyright owners and users", mostly from "fees charged to users of the section 112, 114 and 115 licenses."
More Reaction to the Report. The National Music Publishers’ Association (NMPA) stated in a release that "We applaud the recognition that music creators should be fairly compensated. However, while there is much to like in this report, we hope that Congress rejects any further regulation of songwriters. It is critical that songwriters are given the freedom of other intellectual property owners -- to sell their creations in a free market. Until they can do so, they will continue to be treated unfairly by the very industry they fuel."
Paul Williams, head of the ASCAP, stated in a release that "the current music licensing system needs reform and fast. The report emphasizes how the current system undervalues musical works -- something many of our members experience daily. The many proposed updates -- particularly recommendations intended to make the system more equitable for songwriters -- underscore yet again the inefficiency of the current system for music fans and creators alike. As outlined in the report, the current marketplace is strained by the 70-year old consent decree regime and is not appropriately responsive to the free market, particularly in our new digital world."
Michael Huppe, head of the SoundExchange, stated in a release that "all creators should receive fair pay, on all platforms and technologies, whenever their music is used." Also, the CO report "reaffirms that all users of music should play by the same rules and compensate creators at fair market rates. The current system of disjointed rate standards is tantamount to picking winners and losers based upon the accident of their technology, rather than the merit of their business model."
Lee Knife, head of the Digital Media Association, stated in a release that "Many of the specific recommendations throughout the report unfairly discriminate against digital technologies while supporting the further consolidation of market power among the handful of major corporations and their affiliated associations which dominate music licensing. If implemented, these proposals will likely lead to artists and songwriters experiencing reductions in royalty payments and risk listeners having reduced access to the music they love."
• Copyright Office Releases Report on Music Licensing
• Rep. Farenthold Re-Introduces Bill to Extend First Sale Doctrine to Computer Programs that Run Machines
9:30 AM - 12:30 PM. The Brookings Institution (BI) will host an event titled "The Future of Work in the Age of the Machine". See, notice. Location: National Press Club, 13th Floor, 529 14th St. NW.
12:00 NOON - 1:00 PM. The American Enterprise Institute (AEI) will host an event at which Federal Trade Commission (FTC) Commissioner Maureen Ohlhausen will speak. See, notice. Location: AEI, 12th floor, 1150 17th St., NW.
10:00 AM. The House Homeland Security Committee will hold a hearing titled "The Administration’s Cybersecurity Legislative Proposal on Information Sharing". The witnesses will be __. See, notice. Location: Room 311, Cannon Building.
Cybersecurity for a New America: Big Ideas and New Voices
Rep. Farenthold Re-Introduces Bill to Extend First Sale Doctrine to Computer Programs that Run Machines
2/11. Rep. Blake Farenthold (R-TX) and Rep. Jared Polis (D-CO) introduced HR 862 [LOC | WW], the "You Own Devices Act", a bill to revise the first sale doctrine.
This bill would create an unwaivable right to transfer a lawfully made copy of a computer program subject to copyright, when selling a machine, when the program "enables any part of a machine or other product to operate".
This bill is substantially identical HR 5586 [LOC | WW | PDF], which Rep. Farenthold introduced in the 113th Congress.
He introduced that bill on September 18, 2013. However, there were no cosponsors, and no action was taken.
The just introduced bill was referred to the House Judiciary Committee (HJC). Rep. Farenthold is a member. Rep. Polis is a former member of the HJC who now sits on the House Rules Committee (HRC).
This bill would add a new subsection to 17 U.S.C. § 109, which contains the first sale doctrine.
Section 109 provides in part that "the owner of a particular copy or phonorecord lawfully made under this title ... is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord".
HR 862 would provide that notwithstanding 17 U.S.C. § 106 (which enumerates the exclusive rights of copyright) and 17 U.S.C. § 117 (which limits the exclusive rights of computer in computer programs), "if a computer program enables any part of a machine or other product to operate, the owner of the machine or other product is entitled to transfer an authorized copy of the computer program, or the right to obtain such copy, when the owner sells, leases, or otherwise transfers the machine or other product to another person."
It adds that "The right to transfer provided under this subsection may not be waived by any agreement." But, the bill would not apply retroactively. It "shall apply to transfers of computer programs occurring on or after" the date of enactment.
The bill further provides that "Any right to receive modifications to the computer program described in paragraph (1) relating in whole or in part to security or error correction that applied to the owner of the machine or other product described in paragraph (1) shall apply to the person to whom the machine or product and the copy of the computer program are transferred."
The bill would render unenforceable certain provisions in end user license agreements (EULAs) regarding programs that operate a device when the end user sell that device.
However, the bill only affects a "computer program" that "enables any part of a machine or other product to operate". So, for example, while the first sale doctrine currently enables one who has purchased a music CD to sell that CD, this bill does not reach EULAs that restrict resale of digitally delivered music, because it does not operate a device or machine.
The bill does not affect unauthorized copies of computer programs.
The bill confers no rights to access and/or modify lawfully acquired computer programs.
The bill contains no modification to the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA).
The bill contains no reference to patents or the Patent Act.
Rep. Farenthold (at left) stated in a release that "As technology advances, more and more of the devices in your home, office, and garage contain essential software that make them run".
"While this gives us great improvements like air conditioners that can be switched on or off from your phone, household lamps that you can remotely control or program, and speakers that play music as you change rooms, it also opens the door to software licenses that erode how much you own these devices and how you can dispose of them. YODA ensures that these devices are yours and you can sell them when you wish."
Rep. Polis stated in this release that "For too long our antiquated copyright laws have been stifling innovation and blocking consumers from being able to access more efficient, effective, and affordable products and technology ... YODA will bring our copyright laws into the 21st century and recognize that people can own and transfer devices without being strangled by paperwork and empty legal threats."
Sherwin Siy (at right) of the Public Knowledge (PK) stated in a release that "We're glad to see Representatives Farenthold and Polis fighting for consumers in this space. In recent years, we've been seeing increased attempts by companies to leverage copyright restrictions in order to roll back the rights that consumers should have over their own goods. This bill represents a great beginning to ensuring that personal property ownership remains a fundamental right in the digital age."
Last year, the Electronic Frontier Foundation (EFF) praised HR 5586 in a release.