Fordham IP: copyright and music

7B. Music Industry Issues including Collecting Societies

Moderator: Anderson J. Duff, Wolf, Greenfield & Sacks, P.C., Boston 

Judith Finell, Judith Finell MusicServices Inc.

A musicologist; called in on various music-related matters for movies, music, etc.  Studio may not know that someone else’s music is embedded in a cue for three seconds—composer may not know that using another’s music to create a new final product implicates legal concerns; may consider that s/he has created a new, original work.

Madonna: Holiday; Mary J. Blige: Not Today.  (The melody sounds similar between the “holiday/celebrate” line and part of the Blige vocals.)  This doesn’t involve sampling.  Sampling allows artists with no access to the master/expensive studios to extract sounds.  Biz Markie case came down very hard on sampling.

David O. Carson, General Counsel, United States Copyright Office, Protection of Pre-1972 Sound Recordings 

US regime is unique; up until 1978, unpublished works were protected by state common law, and phonograph records were not considered published for technical reasons.  Feb. 15, 1972: dividing line for sound recording protection.  State treatment varies by state; we thought in 1976 we’d fix that by moving unpublished works into the federal statutory scheme.  But they didn’t do that for sound recordings.  We need a uniform rule for protection and use of sound recordings; there’s no reason for the time divide. 

Implementation: initial owner of federal copyright should be the person/s who owned it under state law the moment before the legislation federalizing protection goes into effect.  This was the #1 objection from the recording industry—you’d throw everything into chaos because we won’t know who owns the rights.  That was a non-issue on Jan. 1, 1978, when unpublished works were brought into the federal system—no one had trouble with ownership; but anyway, it’s easily fixable. If you own it today, you’ll own it tomorrow.

All the rights as well as all the limitations of federal copyright law should apply—that’s not the case right now.  The digital public performance right: is there such a thing in state common law?  State unfair competition?  It’s never come up, but the case law doesn’t hint that there is such a right. Copyright owners could get more from the federal system, including §114 statutory license.  Some people do voluntarily/ignorantly pay statutory royalties for pre-1972 sound recordings, but others don’t.  Another contested question: whether fair use applies to state systems.  Some library associations have decided that they’ll take their chances with fair use.  But the Copyright Office has no power to clarify that state law includes fair use; there’s only one case so finding, and though he thinks that’s correctly decided he can’t say what the next case.  Also, many states use unfair competition instead of state common-law copyright and he’d be surprised if that had a fair use defense (I’d be surprised if it didn’t!).  But in any event, it makes no sense to treat works differently in this way based on time of creation.

Termination: 203 should be amended to allow authors of pre-1972 sound recordings to terminate grants of transfers or licenses of copyright that are made on or after the date federal protection commences.  However, termination of prefederalization grants under state law presents serious issues with respect to retroactivity and takings, so the office doesn’t recommend termination rights for grants made prior to federalization of protection.  (Um, wasn’t this issue resolved differently when adding a time period for the newly federalized unpublished works right?  The idea is you get something from federalization that compensates for what you give up and so there’s not a taking.  But I understand why they left it alone.)

Term: should be what you would have gotten if it had been federalized in 1978 like everything else. 95 years/120 years from fixation if shorter. In no case past Feb. 15, 2067, and for a pre-1923 work you can get 25 years if you’re exploiting it; if you don’t start exploiting it and file notice you’re doing so during a 3-6 year transition period, then it should go into the public domain.  Libraries are holding on to many of these works and many of them are orphans; doesn’t make sense to continue protection if they’ve been unused this long.

Howard P. Knopf, Macera & Jarzyna LLP, Ottawa, Music Industries and Copyright Tribunals

Big money involved.  BMI/ASCAP are closing in on $1 billion/year.  Germany and France’s organizations are each over that.  UK, $675 million.  SOCAN (Canada) $275 million/year, well over normal benchmark of 10% of American figures. 

Common law countries: Canada set up a special tribunal for performing rights in 1935.  But tariffs are often significantly retroactive, by several years, and people are sometimes quite surprised by the bill for 4-5 years in the past.  5 cases pending in the Supreme Court coming from the Copyright Board, 4 involving music.  Can SOCAN get paid for a performance and a communication right?  New legislation will provide for a making available right.  Fair dealing: 30-second previews as research.  Neighboring rights: do performances in movies/TV require payment? 

USA has Copyright Royalty Board—3 full time judges and staff of three; far smaller than Canada’s.  Many people think the CRB isn’t working very well.  First controversial ruling on internet royalties put many radio stations out of business; now settlements going on plus subsequent legislation.  US rate court mechanism—historic concern with antitrust issues; SDNY has jurisdiction over ASCAP and BMI’s rates.  ASCAP and BMI revenues suggest things are going okay, though some people can take advantage of the system by applying for a license when they don’t qualify and achieve immunity for several years.

UK tribunal: less than one-time person supporting it.  Deal with small and large matters—one matter had legal fees in the millions. 

Australia has a system like Canada’s old system—part-time.  New Zealand also has a tribunal, recent decision on performances and comparison to other tribunes and why they weren’t relevant.

EU: many people don’t think it’s working at all—breakdown on compulsory licensing.  ECJ Padawan decision—maybe nail in coffin of levy system—can’t levy on system used by businesses and not for copying.

Most important issue always has been and always will be antitrust.  Should lighten up on oversight and deregulate in order to lower prices, but keep antitrust people in the loop.

Maria Martin-Prat, Head of Unit – Copyright, DG Internal Market & Services, European Commission, Brussels

European licensing: authors (composers/lyricists) rely on collecting societies; performance is more streamlined.  Currently: fragmentation of the repertoire; Anglo-American mechanicals have been taken away from the societies.  Societies in the past use multi-repertoire licenses, but now they do multi-territory and single-repertoire.  Now you have to go member state by member state.  Just for the author’s rights, over 30 transactions.  Online uses are much more complicated.  Not all societies have access to data.  Lose/lose situation for users, rightholders, OSPs.

Dr. Mihály Ficsor, President, Hungarian Copyright Council (mediates between rightsholders and users, per Ficsor) (from the materials, he is very upset about the lies that were spread about ACTA, and thinks it was very wrong of people to “spontaneously” organize to protest it)

Concentration of licensing put small societies/countries in a situation where they couldn’t compete, undermining cultural diversity.  Users may say they don’t want to license Romanian songs, only Italian ones.  Thus, smaller countries should be enabled to take care of their own repertoires.  It’s one thing to possess rights and another to exercise them. 

Steven J. Metalitz, Mitchell Silberberg & Knupp LLP, Washington, D.C.

This is all a second-order problem.  Rights are well-established.  It does come down to protection v. exercise. People are paying, and then the question is how you manage that process. From authors’ perspective, the major concern is that in the fastest growing markets, money simply isn’t being paid, so questions of allocation are moot.  In China, there was no provision for 8 years after China joined TRIPS for music performances to be paid; collecting societies didn’t collect for theaters or hotels.  Collections are minuscule in China and India; courts in India say that the mechanical licenses subsumes a performance right for TV etc. 

Justice William J. Vancise, Chairman, Copyright Board of Canada

We now have 38 collecting societies, but only 6 deal with music, SOCAN the most important.  Some societies are very transparent about revenues and distribution (SOCAN).  Neighboring rights collective deals with equitable remuneration for performers and makers; umbrella organization which collected $20 million in 2008 and distributed $15 million.  Other collectives—mechanical rights, etc.  Overall, the system works pretty well.  The SCt has upheld our determinations in the past, but only a fool would predict what will happen in the pending cases.  A little like your health care debate in the US.  Competition Bureau also has oversight over the board. 

Q: CRB in US—judges do have to apply the test from Congress, to set marketplace royalty rates. These were litigated proceedings and neither side was happy with the outcome.  Not fair to attribute a widely held view that this is not a functional administrative tribunal.  Has gone through 3 iterations of copyright royalty distribution in the US (CARP, etc.).  Unhappy groups go to Congress and ask for a change, and then we get another administrative setup, but that’s a function of contested circumstances. 

Knopf: Aware of the different tests Congress said to use (willing buyer/willing seller), but the main problem is the fundamental paradox: you have to work backwards to figure out what the monopoly price should be where none would exist otherwise.  It’s inherently artificial.  Here, they set rates that were substantially in excess of the income received by many of these stations, and the stations then went out of business.

Ficsor: Percentage-based tariff systems are problematic. The cost of making available goes down constantly. Therefore in the service, the value of copyright is going up.  The percentage is not an expression of what the rights owners deserve.  (Jane Ginsburg might say that this argument applies equally to the “owner” on behalf of the “author,” and if she wouldn’t I’ll at least throw it out there.)

Martin-Prat: Authors want their local societies to control—hard to tell a Hungarian composer to rely on a French organization that might not speak Hungarian. Not a matter of cultural diversity, since the music is there.  The licenses are not being granted; some societies granted licenses 4-5 years ago but still haven’t paid artists; this is not good for cultural diversity.  Also, sometimes societies split ownership of the rights, and so you’d need rights from both—you end up confused about who owns the rights, sometimes with claims to 120% of the rights. 

Ficsor: SESAC should also be considered in the US.  Small societies should be allowed if the rights owners want it.  If they don’t want to learn English, they would like to leave their repertoire to a national society.

Q: SESAC exists because of an insult by ASCAP at an international meeting by a representative from a Polish society.  Made no sense economically. Users pay more.  3 organizations each spend money to survey performances and decide how to distribute the money.  Rates: there is no competitive market; these are monopoly pricing decisions. So the rate judge ended up going with what he thought the market could live with.

Justice Vancise: the comment is always that this is not a free market since the rate court is the shadow over it.  But our mandate is to fix an equitable/reasonable price, not a market price.

Q: but reasonable has no reference point. What’s reasonable?

Vancise: depends on whose ox is being gored.

Knopf: solution in the machine: paper by Glynn Lunney on American system calling for direct licensing. iTunes and Amazon are kind of examples of direct licensing.  Wave of future, solves a lot of antitrust problems (my note: generates others!).