My law firm currently represents multiple songwriters and publishers in copyright litigation against Spotify that, in total, involve approximately 2,500 musical compositions.
The allegations are that Spotify built a multi-billion dollar business with no assets other than the songs available on its digital platform, but without building the infrastructure needed to ensure that songs appearing on Spotify were properly licensed or that appropriate royalties were paid.
Plaintiffs assert that Spotify has publicly admitted that it is required, as an interactive streaming service, to obtain mechanical licenses to reproduce and distribute the compositions on its service. Additionally, they knew that it was committing copyright infringement of literally hundreds of thousands of musical compositions by not doing so.
The plaintiffs assert that Spotify made the conscious decision, in the effort to be first to market and to have as many compositions on its service as possible, to commit infringement now — and ask questions later. They further assert that Spotify continued infringing even after put on notice of the lack of licenses for specific compositions, and/or Spotify’s failure to comply with compulsory licensing requirements, as well as the subsequent termination of any licenses that had been in effect.
The plaintiffs are seeking damages and profits of Spotify attributable to the infringement, or, in the alternative, statutory damages for willful infringement of $150,000 per composition at issue. Statutory damages against willful infringers of up to $150,000 per infringed work is in place to punish infringers for making the deliberate decision to infringe, and, in my view, is particularly appropriate in cases like the case against Spotify.
These are not the first cases filed against Spotify, or the first instance of these allegations being made against it. But those prior matters and settlements have been woefully inadequate.
The National Music Publishers’ Association (NMPA) previously raised these issues with Spotify. The problem is that the NMPA’s membership, by market share, mostly consists of major publishing companies. Those are in turn owned by the major record labels, and the major record labels own approximately 18 percent of Spotify.
Thus, the NMPA really has no incentive to punish Spotify for its willful infringement. Spotify is gearing up for a Wall Street direct listing, and the major record labels stand to receive a windfall from that event.
The NMPA settled with Spotify for a negligible amount when considering the number of compositions of its members. More importantly, the settlement with the NMPA did nothing to resolve the outstanding issues regarding failure to license or pay royalties going forward.
A class action was also filed against Spotify and recently settled. It too was woefully inadequate.
As alleged in the complaints filed on behalf of our clients, given the number of compositions involved in the class action and after deducting for attorneys’ fees, the average payout per infringed composition is approximately $4.00. In addition, the terms of the settlement force class members to license their works to Spotify moving forward whether they wish to do so or not.
The members cannot terminate the license even if Spotify breaches it. Which means that Spotify will have a license in perpetuity and cannot be sued for infringement no matter its conduct.
There were numerous objections to the class action settlement, including that the terms made it tremendously difficult to opt out. Publishers were deemed to have opted in if they did not opt out. A hearing was held on the objections in late 2017. As of the date of this article, the Court has not yet ruled on whether it will approve the settlement.
Finally, at the end of 2017, a Bill was introduced in the House, titled the Music Modernization Act, at the urging of the NMPA.
If passed by Congress, this bill would essentially eliminate the ability to hold Spotify liable for statutory damages for copyright infringement for any lawsuits filed after January 1, 2018. Its stated intention is to make the rate-setting system more market based. And one of its effects would be that the court review system for monitoring rates will be significantly changed.
There are numerous problems, however, with this Bill.
First, it is well established that a copyright infringement cause of action is a property right that vests at the time of the infringement — whether a lawsuit has been filed or not. Limiting damages retroactively if a lawsuit has not yet been filed may very well be unconstitutional. It also seems patently unfair to basically retroactively absolve Spotify of infringement damages, and willful infringement at that, just because a victim has not yet filed a lawsuit.
Second, the new legislation being introduced is a solution in search of a problem. The Music Modernization Act is being lobbied for and pushed to funnel power and money into the hands of a small constituency of dominating music entities (i.e. Sony, Warner, Universal, NMPA, etc.). In taking a moment to dissect the legislation being proposed, it exposes the goals of the lobbying group working on behalf of its limited constituency:
A. The legislation requires that all compositions be registered with the ‘Mechanical Licensing Collective’ in order to be eligible to collect and earn mechanicals royalties.
This requirement is basically a mechanism to steal from the uninformed. In addition, this new Musical Works Database of information would be outdated within a micro-second of coming into existence as there are between 125,000 to 200,000 new recordings being distributed into the US market every month by self-published songwriters (i.e., they control all of their own rights worldwide). Note that this sector of “do it yourself” musicians and songwriters have the fastest growing market share by revenue, while the major music publishers’ market share declines.
B. This requirement preys on ignorance and makes little sense until one considers the second part of the legislation.
Digital Service Providers (DSPs) would be protected from infringement and statutory damages for any compositions not registered with the Musical Works Database.
As there is already a requirement to register with the US Copyright Office in order to be eligible to earn and collect mechanical royalties for compulsory licenses, and/or pursue statutory damages, it represents a needlessly massive concession with no purpose beyond trying to entice the DSPs to sign on.
C. The Mechanical Licensing Collective would create the Musical Works Database and a board of directors would oversee it.
The saying “we must study the past to learn from it and not repeat the same mistakes,” applies here. The major music publishers created and supported the NMPA, a trade organization representing the interests of its constituency. The NMPA, with the major music publishers, also created the Harry Fox Agency (HFA), which, amongst other things, consolidates composition data primarily from NMPA members, issues mechanical licenses, assures the members were being paid all their earned mechanical royalties and, from time to time, creates and enters into settlements on behalf of its members.
Spotify, which used HFA, failed miserably in identifying and licensing musical compositions appearing on the Spotify site. Now, after selling HFA, the NMPA wants to do the exact same thing again by creating a collective that is responsible for consolidating composition data, issuing mechanical licenses and being responsible for the payment of mechanicals.
D. The Board members of the new organization will in all practicality be controlled by the NMPA.
The entity being created will be stocked with the NMPA and its members. They would be tasked with making decisions not just for themselves but all the other music publishers in the world that are not members of their organization.
E. The major music publishers could choose NOT to use this new entity for licensing and collecting, but still participate and take a piece of the “black box” money (i.e. other entities money), while songwriters lose control of their creative work.
Under this new proposed legislation, unclaimed money goes into a black box. It then gets disbursed to publishers based on market share after a period of time if not claimed. This clearly benefits the major music publishers, and penalizes the smaller songwriters/publishers and the uninformed.
There is one underlying principle being pushed, which is the basis for the introduction of this new legislation: intellectual property should be as easy to use and license as possible for technology companies to achieve their business goals. And they should be able to do so with limited-to-no infringement damages.
In other words, technology companies are lobbying Congress to create laws to turn the creative community into workers whose own musical creations are not in fact their own. These works can be taken and used however these technology companies deem appropriate with no recourse. The artist no longer has control of his/her work. They are instead exploited labor reduced to second-class citizens with less constitutional protection, freedom and choice than others within our society.
Finally, there is little need for this legislation.
The existing licensing rules and regulations work. The infringement, non-compliance and lack of payments to music publishers and songwriters is occurring due to the (DSPs) willfully choosing to ignore them.
As a first example, the DSPs claim that the required information for compositions is not obtainable and does not exist. This is simply a false statement. If you ask a publisher, such as Sony/ATV, or self-published songwriter, such as Bob Gaudio, what songs they publish and/or wrote, and what percentage they control of each song, they are not only able to tell you, but they can also provide an electronic computer output with all the information (e.g., songwriter, publisher, composition name, percentage controlled etc.). In this example, the true problem is not that the composition data does not exist, but that the DSPs never asked for it. And they built no systems to take and use it.
The DSPs also claim that for some sound recordings they do not know who wrote the composition, making it therefore impossible to obtain a license and be compliant with regulations. However, this too is a false statement. The U.S. Government set up a mechanism for this exact situation. This mechanism allows the DSP to obtain a license to and make payments for the composition — even when they are not able to identify the songwriters and publishers.
It will be interesting to see how this legislation develops and whether it passes. But the Music Modernization Act is not about fairness.
It seems to be a direct response, at least in part, to the willful infringement by Spotify. It’s an attempt to insulate Spotify (and the major record labels who own it), from infringement liability, while once again enriching the major music publishers.
Richard Busch is the head of the entertainment and intellectual property section of King & Ballow.
Thanks Richard. Keep fighting the good fight.
Thanks for all the explanations and infos !
[Please note that this commentary was originally intended to be posted on the DMN article “The Huffington Post Rips Down an Article Sharply Criticizing Spotify ⎯ Here’s the Original,” but hey, when “opportunity knocks”:
[PART I of III]
A very “confusing,” but interesting commentary to say the least; I say that as it was stated that Spotify’s product “is music.” Whether that was the intent or inadvertent, nevertheless, it “hit the nail right on the head.” That proverbial “nail,” is, of course, exactly what is “Spotify’s product”⎯from whence did the music come?
Firstly, I do not think that the music industry per se will seriously argue that a vast majority of the product is not licensed to Spotify by either one of the (1) performance rights organizations, (2) the music publishers, or (3) the record labels themselves, but even so, there is certainly greater product availability than that which has been licensed to Spotify by either of the three aforementioned groups. For example, Spotify has commissioned product of its own, the topic of which has been the subject of many an article, and I am absolutely certain that it will also come as no surprise to anyone in further stating that there is also other product available through Spotify, the use of which, has not been licensed to Spotify by any of the above, or otherwise.
Further in that regard, for example, and, if my memory serves me, I believe that at one time in order to upload “product” to Facebook (2014-2015), the “up-loader” was first required to grant Facebook a license for the performance and worldwide distribution of that product (that pursuant to said license, Facebook could license said product to third-parties) and that Facebook and Spotify were then sharing-partners for the performance and distribution of that product, but, it is well-known for example (as there are have been many news reports on the subject) that some of that product had been “freebooted” from sources such as SoundCloud and YouTube, which, in many instances, is actually the product of its independent users which has neither been published nor copyrighted. Please, please correct me if I am mistaken in this regard (or, if correct, whether or not that situation has since changed) in that I am neither a Facebook nor a Spotify subscriber.
Some may be quick to note that the U.S. Copyright Office has recently authorized partial licensing; please be patient, as that matter shall become clear in due course.
There has been much discussion of late as to the forthcoming Spotify IPO and $19 billion plus valuation so the issue of “product” is important, I mean, this is not a paltry $3.2 billion deal such as the Beats to Apple acquisition, it is potentially $19 billion or more! What is the value of a streaming service without “product,” right? That said, perhaps the Beats to Apple acquisition will offer some guidance. Exactly what was so valuable to Apple that it would so readily shell out $3.2 billion? Was it the headphones? Was it the speakers? Was it the streaming service per se? I actually believe it was neither.
Rather, it was the blanket licensing, but from whom? Was it the blanket licenses acquired from the record labels? Was it the blanket licenses acquired from the music publishers? Or was it the blanket licenses acquired from a combination of both the record labels and the music publishers? I am quite sure it was not because of any licensing obtained from a PRO (in that, for example, UMG realized $400 plus million from that acquisition). Kind of like a shell game, is it not?
Enter 17 U.S.C. § 106(6).
[T]he owner of a copyright under this title has exclusive rights to do and to authorize any of the following:
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
The Constitution of the United States of America considerations notwithstanding such as Article I, Sec. 8, cl. 8 and the Fourteenth Amendment ; see also, for example, Selden v. Baker, 101 U.S. 99 (1880), and the Merger Doctrine.
Moving forward, as it was previously noted, for example, that UMG realized a $400 million plus profit from the Beats acquisition by Apple, let us therefore identify what the product of a record label actually is. Presumably, the record labels acquired an equity stake in Spotify in exchange for their “blessing,” much as they did from Beats in order for Spotify to obtain its blanket licensing from the record labels (here now not delving into the equitable matter of how the record labels had gained a substantial equity stake in Beats or even Spotify for that matter in lieu of demanding fair-market royalty rates and the sharing of the profits realized by the record labels from the sale of that equity stake, i.e., “other monies,” with their recording artists, et al.). As for identifying what the product of a record label actually is, the fairly recent decision rendered in Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 62 F.Supp.3d 325 (S.D.N.Y. 2014), and citations therein, are instructive (in relevant part; citations and footnotes omitted, for the most part. Italics in original; boldface mine):
Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 62 F.Supp.3d 325 (S.D.N.Y. 2014):
Since 1831, federal law has protected copyrights in musical compositions.
The creator of a musical composition has long had a right of exclusive public performance of that musical piece.
Thus, when radio stations publically perform ⎯ that is, broadcast ⎯ copyrighted musical compositions, they pay royalties to the holder of the copyright of the song ⎯ generally the composer or his heirs ⎯ for the privilege of doing so.
Those royalties are typically collected and distributed by professional clearinghouses, such as the American Society of Composers, Authors and Publishers (“ASCAP”).
A copyright in a musical composition is not [the] same as a copyright in a sound recording of a performance of that composition. And this lawsuit [is] not about musical compositions.
As far as the Court is aware, Sirius pays royalties to the holder of the copyright for the right to perform the Turtle’s musical compositions.
This suit is about copyright in sound recordings, which is a different animal. A sound recording is a medium in or on which a particular performance of a musical composition (song) is fixed for posterity and for playback. In essence, a copyright in a sound recording is a copyright in the performance ⎯ not in the work being performed.
Congress only made sound recordings eligible for federal statutory copyright protection in 1971. Furthermore, that protection was limited in two important ways.
First, Congress did not originally provide sound recording copyright holders with exclusive right to publically perform their works [that is to say, “a particular performance of a musical composition (song)”]. Thus, the owners of copyrights in sound recordings, unlike copyright holders in musical compositions [i.e., songs] were not entitled to compensation under federal law when radio stations broadcast their recordings between 1972 and 1995. In 1995, Congress added a limited public performance right for sound recordings, giving holders of sound recording copyrights the “exclusive right  … to perform the copyrighted work publicly by means of a digital audio transmission. Federal copyright law still provides no exclusive right to public performance of sound recordings by any other means.
The second important limitation of the 1971 Act was that it operated prospectively. Recordings “fixed” (recorded) prior to February 15, 1972 were not, and still are not, eligible for federal copyright protection. The Turtles recordings were all fixed before February 15, 1972. Therefore, none is eligible for federal copyright protection.
Instead of adopting a federal copyright scheme for pre-1972 sound recordings, Congress left the issue to the states. For works protected by federal law, Congress broadly pre-empted any “equivalent right in any such work under the common law or statutes of any State.”
III. Flo and Eddie Holds the Valid Common Law Copyright in the Turtle’s Sound Recordings.
As explained above, federal law provides copyright protection for sound recordings fixed on or after February 15, 1972. As to those sound recordings, Congress broadly preempted equivalent state-law protections. Federal law does not, however, provide copyright protection for sound recordings fixed before February 15, 1972. Furthermore, Congress expressly declined to preempt whatever common law copyright protection was provided to those recordings by state law until February 15, 2067.
IV. Flo and Eddie’s Common Law Copyright Provides Exclusive Rights to Reproduce and Publicly Perform Turtles Recordings
Flo and Eddie alleges that Sirius has infringed its common law copyright by (1) reproducing (making copies of) the master recordings, and (2) performing those recordings (or the illicit copies of them) publicly.
New York unquestionably provides holders of common law copyrights in sound recordings with an exclusive right to reproduce those recordings. Sirius does not challenge that proposition, although it argues that its reproductions of Turtles sound recordings constitute fair use. That issue will be discussed below.
Whether New York provides holders of common law copyrights in sound recordings with an exclusive right to publicly perform those recordings presents a much thornier question ⎯ one of first impression, and one that has profound economic consequences for the recording industry and both the analog and digital broadcast industries. My first task is to predict how I believe the New York Court of Appeals would rule on this question, which no appellate court in New York has yet confronted.
I conclude that the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant to copyright in such a recording.
“In general, the rights under common law copyright … are at least co-extensive with the rights commanded under the Copyright Act.” But when New York first recognized common law copyrights in sound recordings ⎯ over 50 years ago ⎯ Congress had not yet authorized any federal copyright protection for sound recordings.
Thus, the protections New York common law offers holders of copyrights in sound recordings cannot be determined by reference to comparable federal protection. Instead, I must look to the background principles and history of New York copyright common law. (“[W]hen examining copyright law, a page of history is worth a volume of logic.” (internal citations and quotation marks omitted)).
The common law typically “protects against unauthorized reproduction of copies or phonorecords, unauthorized distribution by publishing or vending, and unauthorized performances.”
Of course, the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century. So does certain testimony cited by Sirius from record industry executives, artists and others, who argued vociferously before Congress that it was unfair for them to operate in an environment in which they were paid nothing when their sound recordings were publicly performed.
That they were paid no royalties was a matter of statutory exemption under federal law; that they demanded no royalties under the common law when their product as ineligible for federal copyright protection is, in many ways, inexplicable.
[PART II of III]
But acquiescence by participants in the recording industry in a status quo where recording artists and producers were not paid royalties while songwriters were does not show that they lacked an enforceable right under the common law ⎯ only that they failed to act on it. The United States Copyright Office, in its most recent commentary on this subject, concluded, “While, as a factual matter, a state may not have affirmatively acknowledged a public performance right in pre-1972 recordings as of the Office’s 2011 report, the language in the report should not be read to suggest that a state could not properly interpret its law to recognize such a right.”
The United States Supreme Court admonished recently against reading too much into a lack of precedent for a point, stating (in another context), “It should be unsurprising that such a significant matter has been so long judicially unresolved.” The Supreme Court, for example, failed to grapple with many fundamental constitutional questions for the first 150 years of the Constitution’s existence.
So it is not surprising that sound recordings, like choreographic works, received little attention from courts before they became eligible for statutory copyright. It is likely that the issue was just not on anyone’s radar screen until Congress granted a public performance right in more recent sound recordings.
An arguably stronger argument can be made that years of judicial silence implies exactly the opposite of what Sirius contends ⎯ not that common law copyright in sound recordings carries no right of public performance, but rather that common law copyright in sound recordings comes with the entire bundle of rights that the holders of copyright in other works enjoy. No New York case recognizing a common law copyright in sound recordings has so much as suggested that right was in some way circumscribed, or that the bundle of rights appurtenant to that copyright was less than the bundle of rights accorded to plays and musical compositions. The expansive nature of New York’s common law protection for artistic works that do not enjoy federal statutory copyright protection was announced over 50 years ago, in Metropolitan Opera Association v. Wagner-Nichols Recorder Corp., supra ⎯ a case protecting property rights in sound recordings. There, the court said, “The law has … protected the creative element in intellectual productions ⎯ that is, the form or sequence of expression, the new combination of colors, sounds or words presented by production … against appropriation by others.”
Modern federal law supports the notion that an express carve-out is required in order to circumscribe the bundle of rights appurtenant to copyright. When Congress amended the Copyright Act in 1971 to protect copyrights in sound recordings, it announced quite explicitly that sound recordings would not carry any right to public performance. The relevant section of Title 17 limits copyright in sound recordings to the rights, “To reproduce and distribute to the public by sale or other transfer of ownership, or by rental, lease, or lending, reproductions of the copyrighted work if it be a sound recording.” Sound Recordings Act, Pub.L. No. 92-140, 85 Stat. 391, 391 (1971). The 1971 Act further provided that “the exclusive right of the owner of a copyright in a sound recording to reproduce it is limited to the right to duplicate the sound recording in a tangible form,” and that “this right does not extend to … reproductions made by transmitting organizations exclusively for their own use.” Id.
This express carve-out for public performance strongly suggests that, absent such an explicit limitations, holder of sound recording copyrights would have enjoyed the entire bundle of rights traditionally granted to copyright holders⎯including the right to public performance, which has been part of the bundle of rights enjoyed by holders of federal copyrights in performable works since 1897 or earlier. Put otherwise, if public performance rights were not part of the normal bundle of rights in a copyright, Congress would not have needed to carve out an exception specifically for sound recordings. 
 The history of Congressional grants of public performance rights is convoluted. The 1831 Act, which first granted copyright protection to authors of musical compositions, did not provide a public performance right. [*] See Act of Feb. 3, 1831, ch. 16, § 1, 4 Stat. 436. When Congress added copyright protection for “dramatic composition[s]” in 1856, it expressly included a “sole right to … perform, or represent” the composition, without providing any comparable right for copyrights in other works. Act of Aug. 18, 1856, ch. 169, 11 Stat. 138, 139. That state of affairs continued through the general copyright law revisions of 1870 in which Congress expressly provided a “public perform[ance]” right for dramatic compositions but not for musical compositions. Act of July 8, 1870, ch. 230, § 86, 16 Stat. 198, 212. Finally, in 1897 [roughly 17 years after the pronouncement of Selden v. Baker, supra], Congress added a public performance right specifically for musical compositions [despite the absence of a patent, among other things]. Act of Jan. 6, 1897, ch. 4, 29 Stat. 481, 481-82. When Congress revised the copyright law in 1909, it continued to provide the holders of copyrights in dramatic compositions and musical compositions [despite the absence of a patent, among other things] with the exclusive right to “perform [their works] publicly.” Act of Mar. 3, 1909, ch. 320, § 1, 35 Stat. 1075, 1075. Other types of works, however, did not enjoy that same privilege [unless, of course, they had been patented].
By the time Congress enacted copyright protection for sound recordings, public performance rights were firmly entrenched for musical compositions and dramatic compositions: the two kinds of works to which public performance rights could sensibly be provided. It was thus an accepted part of the background law that public performance rights would, absent a deliberate effort to exclude them, extend to sound recordings. That principle applies with even more force to common law copyright, which generally includes fewer limitations on exclusive rights than does federal statutory law. See Shyamkrishna Balganesh, The Pragmatic Incrementalism of Common Law Intellectual Property, 63 V and L.Rev. 1543, 1563 (2010).
There, in answer to a certified question from the Second Circuit, the New York Court of Appeals held that, “New York provides common-law copyright protection to sound recordings not covered by the federal Copyright Act, regardless of the public domain status in the country of origin.”
New York is hardly unique in this regard. Each time that Congress is asked to extend the term of copyright protections (a request not infrequently made), someone observes that allowing the children and grandchildren of creative people long dead to collect royalties does nothing to encourage creativity, and so cuts against both the traditional argument in favour of copyright and undermines the historic belief that, at some point, a Government-created monopoly on intellectual property should yield to an expanded public use. Congress has rejected that perfectly sensible argument time and time again. I see no reason to conclude that either statutory or common law copyright any longer focuses on fostering future creativity, as opposed to rewarding past creativity.
Sirius also claims that recognizing performance rights in pre-1972 sound recordings would unjustly punish good faith investors who provided capital for Sirius.
Investors always assume the risk that whatever economic model they are working off will turn out not to be correct, so investor expectations are rarely “settled” enough to provide a justification for declining to apply the correct rule.
However, I question whether the investors would be truly surprised if Sirius were to have to pay royalties in order to perform pre-1972 sound recordings. Sirius, which broadcasts exclusively in non-analog form, must pay royalties under federal law in order to broadcast post-1972 sound recordings. All Flo and Eddie seeks here is the right to receive royalties under state law for the digital broadcasting of its pre-1972 recordings⎯hardly a shocking development in the world of digital broadcasting. [See, Hollywood Reporter: Sony Reaches Settlement Over Streaming Royalties to ‘American Idol’ Stars]
In 1995, Congress added a limited right for sound recording copyright holders to publicly perform their works “by means of a digital audio transmission.” 17 U.S.C. § 106. [i.e., § 106(6)] In creating that limited right, Congress carefully balanced the interests of all affected parties. As Senator Hatch explained, the bill establishing a public performance right was “forward looking.” It largely leaves in place mature businesses that have grown up under the old copyright regime [i.e., analog broadcasting]. It seeks to ensure that creators of sound recordings will have the rights they have been denied until now as the digital age dawns. 141 Cong. Rec. 22,775, 22,779 (1995). By establishing a “new digital performance right [that] applies to digital audio transmission … [but] not  to traditional broadcasts and most other free transmissions” Congress “attempted to balance the competing interests of the various copyright owners as well as users.” Id.; see H.R.Rep. No. 104-274, at 13-15 (1995); S.Rep. No. 104-128. At 13-17 (1995), 1995 U.S.C.C.A.N. 356, 366; see generally Kimberly L. Craft, The Webcasting Music Revolution is Ready to Begin, As soon As We Figure Out the Copyright Law: The Story of the Music Industry at War with Itself, 24 Hastings Comm. & Ent. L.J. 1, 9-13 (2001) (discussing the legislative history of the 1995 Act).
Sirius suggests no reason why New York⎯a state traditionally protective of performers and performance rights⎯would treat sound recordings differently.
Arista Records, LLC v. Launch Media Inc., 578 F.3d 148 (2nd Cir. 2009):
When Congress created sound recording copyright, it explicitly characterized it as “narrow.” There is no general right of performance in the sound recording copyright. There is only a limited right of performance of digital audio transmission with several exceptions to the copyright, including the one at issue in this case.
[PART III of III]
Bonneville Intern, Corp. v. Peters, 347 F.3d 485 (3rd Cir. 2003):
This case deals with copyright protection for sound recordings. The creator of a musical composition has long had a right of exclusive public performance of that [particular] musical piece. 17 U.S.C. § 106(4). Therefore, every time you hear the ubiquitous refrain from “Happy Birthday” in a public performance, a subsidiary of AOL/Time-Warner cashes a royalty check. [Obviously out-dated as we all know what ultimately transpired with “Happy Birthday,” but still relevant for present purposes.] However, the owner of a copyright in a sound recording of a musical composition has long had very little copyright protection. Until 1971 there was no copyright protection at all. With the Sound Recording Amendment of 1971, Pub.L. No. 92-140, 85 Stat. 391, a limited copyright in the reproduction of sound recordings was established in an effort to combat recording piracy. However, there was still no right to public performance of that sound recording. Therefore, while playing a compact disc recording of “Happy Birthday” in a concert hall for the paying public would still enrich AOL/Time-Warner, the person or company that owned the copyright on the CD recording of the music would earn no remuneration beyond the proceeds of the original sale of the recording. This dichotomy of copyright protection has a significant impact in the radio industry. While radio stations routinely pay copyright royalties to songwriters and composers (through associations like the American Society of Composers, Authors, and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”)) for the privilege of broadcasting recorded performances of popular music, they do not pay the recording industry royalties for that same privilege. Perhaps surprisingly, this state of affairs, until about ten years ago, produced relatively high levels of contentment for all parties. The recording industry and broadcasters existed in a sort of symbiotic relationship wherein the recording industry recognized radio airplay was free advertising that lured consumers to retail stores where they could purchase recordings. And in return, the broadcasters paid no fees, licensing or otherwise, to the recording industry for the performance of those recordings. The recording industry had repeatedly sought, however, additional copyright protection in the form of a performance copyright. Until 1995, those efforts were rejected by Congress.
The 1990’s brought significant technological change. The advance of digital recording technology and the prospect of digital transmission capabilities created the possibility that consumers would soon have access to services whereby they could pay for high quality digital audio transmissions (subscription services) or even pay for specific songs to be played on demand (interactive services). The recording industry was concerned that the traditional balance that had existed with the broadcasters would be disturbed and that new, alternative paths for consumers to purchase recorded music (in ways that cut out the recording industry’s products) would erode sales of recorded music. Congress responded to these concerns with the Digital Performance Right in Sound Recordings Act of 1995, Pub.L. No. 104-39, 109 Stat. 336 (“DPRA”). The DPRA added to the list of protectable rights a digital audio transmission performance right.
[T]he owner of a copyright under this title has exclusive rights to do and to authorize any of the following:
* * * * * *
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
A consideration of the legislative history of the DPRA and the DMCA also reinforces our conclusions. Starting with the DPRA, it is apparent that the public performance right of § 106(6) was originally intended to be limited in scope. See 1995 Senate Report, at 19 (App. At A718)(“[U]nder [§ 114(d)(1)(A)], any transmission to members of the public that is neither a subscription transmission … nor part of an interactive service is exempt from the new digital performance right.”) This new right was expressly limited in knowing opposition to policies preferred by the Copyright Office at the time:
Notwithstanding the views of the Copyright Office … that it is appropriate to create a comprehensive performance right for sound recordings, the Committee has sought to address the concerns of record producers and performers regarding effects that new digital technology and distribution systems might have on their core business without upsetting the longstanding business and contractual relationships among record
producers and performers, music composers and publishers and broadcasters that have served all of these industries well for decades. Accordingly, the Committee has chosen to create a carefully crafted and narrow performance right, applicable only to certain digital transmissions of sound recordings.
Id. At 13 (App. at A712)(emphasis added). See also 1995 House Report, at 13-14 (App. At A777). Congress had in mind the symbiotic relationship between the recording industry and broadcasters, and did not seek to change the existing relationship. See 1995 Senate Reporter, at 15 (App. at A714) (“It is the Committee’s intent to provide copyright holders of sound recordings with the ability to control the distribution of their product [i.e., “a particular performance of a musical composition”] by digital transmissions, without hampering the arrival of new technologies, and without imposing new and unreasonable burdens on radio and television broadcasters, which often promote, and appear to pose no threat to, the distribution of sound recordings.”) To that end, the DPRA, as enacted, contained a much broader exemption from the § 106(6) performance right than is presently the case. See note 5, supra. The legislation did “not affect the interests of broadcasters, as that industry was traditionally understood.” 141 Cong. Rec. 1292 (1995) (Sen. Hatch, introducing the bill that became the DPRA). “If the technological status quo could be maintained, it might well be that the current laws could be tolerated. But, we know that technological developments such as satellite and digital transmission of recordings make sound recordings vulnerable to exposure to a vast audience through the initial sale of only a potential handful of records.” Id. at 1293.
So what does it all mean? In short, in view of the current state of the congressional statute (again, assuming arguendo the constitutional validity of such, among other prudential considerations), if I understand it correctly, and I believe I do, it appears that “the owner of [the copyright in] a particular performance in a sound recording of a musical composition (song)” (in most cases that would be a record label – unfortunately ☹), is limited to licensing only that particular performance “by means of a digital audio transmission.” Put another way, and for greater certainty … wait for it⎯but only duplicate performances or, in other words, copies of that particular performance.
What about any and all of the other different particular performances in a sound recording, or otherwise, that do not in fact “duplicate” or “copy” a copyrighted musical composition (most of which were initially set to paper) you ask?
Digging a little deeper, in view of the current state of the congressional statute (again, assuming arguendo the constitutional validity of such, among other prudential considerations), if I understand it correctly, and I believe I do, it appears that the owner of the copyright in a musical composition (in most cases that would be a music publisher – unfortunately ☹), has the exclusive right to prepare and authorize the preparation of “derivative works based upon the copyrighted work,” that is to say, based upon that particular musical composition. But the music publisher (if there be a music publisher) does not hold a patent for that copyrighted musical composition; a music publisher (if there be a music publisher) simply holds a copyright for that particular musical composition.
So what exactly does a mechanical license under section 115 of the copyright act provide? A compulsory license under section 115 simply permits the licensee to make mechanical reproductions (that is to say, duplicates) or, put otherwise, mechanical copies of a copyrighted work, i.e., a particular musical composition, provided, of course, that a “notice of intention” is first sent to the holder of that copyright and payments for that particular musical composition are made upon mechanical reproduction of that particular musical composition. The question that begs to be asked and answered is: What if the musical composition is not duly registered and federally copyrighted?
Rather than investing in Spotify, perhaps a more sound investment may be to buy stock in Xerox, because in order to make a mechanical reproduction of a particular musical composition most of which were initially set to paper, marketed and sold as such, i.e., the initial medium, in the absence of a patent, paper photocopies would be necessary⎯yes or no?
For greater certainty, I am neither a U.S. Constitutional scholar nor am I a lawyer (though I do have a GED from the state of Maine; perhaps McDonald’s is hiring, that is, if I can find one that has not yet closed its doors since the increase in minimum wage, but I digress). Be that as it may, I am absolutely certain that with potentially $15 billion at stake in the Spotify IPO alone, that there will be a plethora of U.S. Constitutional scholars, lawyers and others thoroughly investigating this matter before investing in the same in the upcoming weeks or months.
As I am not an acquisition historian either, I am unsure at this juncture whether or not it was actually the UMG (the record label), for example, that granted the “blanket” licensing to Beats for those copyrighted “particular performance[s] in a sound recording of a musical composition (song)” that it held in exchange for an equity stake in Beats, among other things, or the UMPG (the music publisher), or otherwise a combination of the two. In any event, I am sure that the DMN readership, and others will know the answers to those questions. Maybe the recording artists and/or the songwriters are still entitled to some of the profits from that acquisition, who knows.
Two more quick points, the first being that Spotify has already alluded to all of the above in “Spotify: Don’t Compare Us to Napster,” wherein it is reported that, “Spotify argues that, inter alia, ‘streaming’ implicates neither reproduction nor distribution rights under copyright law;” and, furthermore, that “‘streaming’ ⎯ by its very definition ⎯ cannot infringe upon either the reproduction right under 17 U.S.C. § 106(1) or the distribution right under 17 U.S.C. § 106(3),” whilst “generously” conceding, inter alia, “that it must pay for a public performance of works.” That said, others might not be so “gratuitous,” who knows.
The second being the proposed Music Modernization Act wherein it is proposed that if “unclaimed accrued royalties” are not claimed within 3 years they will be forfeit.
What of due process, among other things? If an independent songwriter(s) and/or an independent recording artist(s), or even one individual thereof, for example, has neither published nor sold their material, yet it inexplicably appears on a streaming service such as Spotify without all of their, or their duly authorized agent(s) (if there is a duly authorized agent(s)), express license or consent, how then in three years time could the “unclaimed accrued royalties” be legally forfeited if the material had not been duly registered under the federal copyright act, and those profits generated throughout the years by Spotify divvyed up amongst the publishers and record labels?
If the material is not duly registered and copyrighted under the federal copyright act, and the material is somehow available through Spotify, could a DMCA notice even be sent to Spotify to have it removed? How would an individual even know unless they had a Spotify account; would they be required to first agree to the Spotify terms of service in order to search for such? What if the material had been “freebooted?” It makes no sense. These are but a few questions in this regard.
What if the material should not have been on Spotify in the first place for reasons such as it had neither been published nor sold by the independent songwriter(s) and/or independent recording artist(s), or even one individual thereof?
Furthermore, even with a copyright for certain material under the federal copyright act, “partial licensing” does not appear to work. Billboard reported in “Spotify Hit With $1.6B Copyright Lawsuit Over Tom Petty, Weezer, Neil Young Songs,” that even with the “partial [blanket] license” of a record label, that, “the plaintiffs in these new cases asserted that Spotify hadn’t complied with obligations under Section 115 of the U.S. Copyright Act, which provides a compulsory license to make a mechanical reproduction of a musical composition, but only if a ‘notice of intention’ is sent out and payments are made.”
So then, what is a record labels’ product? Therefore, what is the scope of the product covered by a record labels’ licensing, “blanket” or otherwise? Is additional licensing required from a music publisher and, if so, what is the scope of that licensing, “blanket” or otherwise? If availing oneself of a compulsory licence to make mechanical reproductions under Section 115 of the Copyright Act, which musical compositions are actually covered by those compulsory licenses, and which musical compositions are not? If the “product” made available through Spotify, for example, is not duly registered and copyrighted under the U.S. Copyright Act, do these particular questions even matter? If not, what does?
If I were to invest $19B in Spotify, I would first want to know the answers to these very important questions and more, failing which, I suppose, I could simply choose either to invest in Spotify or go to Las Vegas as, in either case, it seems the outcome would pretty much be the same, hopefully, but at least if I choose to go to Las Vegas, I leave there with some fond memories – unless…
Apologies to Paul and the DMN readership for the length of these comments, but it was quite impossible to shorten them given the gravity of the issues and without the risk to making some real progress⎯I hope.
[*] See, e.g., Stowe v. Thomas, 23 Fed.Cas. 206 (E.D.Penn. 1853): The Honourable GRIER, Circuit Justice. … The claim of literary property, therefore, after publication, cannot be in the ideas, sentiments, or the creations of the imagination of the poet or novelist as dissevered from the language, idiom, style, or outward semblance and exhibition of them. His exclusive property in the creation of his mind, cannot be vested in the author as abstractions, but only in the concrete form which he has given them, and the language in which he has clothed them. When he has sold his book, the only property which he reserves to himself, or which the law gives to him, is the exclusive right to multiply the copies of that particular combination of characters which exhibits to the eyes of another the ideas intended to be conveyed. This is what the law terms copy, or copyright. Curt. Copyr. 9-11, et seq.
The Statute of 8 Anne, c. 19 (which so far as it describes the rights and property of an author, is but declaratory of the common law), is entitled, “An act for the encouragement of learning, by vesting the copies of printed books in the authors, &c.” It gives the author “the sole right of printing and reprinting such book or books,” and describes those who infringe the author’s rights, as persons “printing, reprinting, or importing such book or books” without the license of the author. Our acts of congress give substantially the same description both of the author’s rights and what is an infringement of them.
Now, although the legal definition of a “book” may be much more extensive than that given by lexicographers, and may include a sheet of music as well as a bound volume; yet, it necessarily conveys the idea, of thought or conceptions clothed in the language or in musical characters, written, printed or published. Its identity does not consist merely in the ideas, knowledge or information communicated, but in the same conceptions clothed in the same words, which make it the same composition. 2 Bl. Comm. 46. A “copy” of a book must, therefore, be a transcript of the language in which the conceptions of the author are clothed; of something printed and embodied in a tangible shape. The same conceptions clothed in another language cannot constitute the same composition, nor can it be called a transcript or “copy” of the same “book.” I have seen a literal translation of Burns’ poems into French prose; but to call it a copy of the original, would be as ridiculous as the translation itself.
The notion that a translation is a piracy of the original composition, is founded on the analogy assumed between copy-right and patents for inventions, and where the infringing machine is only a change of the form or proportions of the original, while it embodies the principle or essence of the invention. But as the author’s exclusive property in a literary composition or his copyright, consists only in a right to multiply copies of his book, and enjoy the profits therefrom, and not in an exclusive right to his conceptions and inventions, which may be termed the essence of his composition, the argument from the supposed analogy is fallacious. Hence, in questions of infringement of copyright, the inquiry is not, whether the defendant has used the thoughts, conceptions, information or discoveries promulgated by the original, but whether his composition may be considered a new work, requiring invention, learning and judgment, or only a mere transcript of the whole or parts of the original, with merely colourable variations. Hence, also, the many cases to be found in the reports, which decide that a bonâ fide abridgement of a book is not an infringement of a copyright.
To make a good translation of a work, often requires more learning, talent and judgment, than was required to write the original. Many can transfer from one language to another, but few can translate. To call the translations of an author’s ideas and conceptions into another language, a copy of his book, would be an abuse of terms, and arbitrary legislation.”
No apologies necessary, this is the kind of voluminous discussion we hope to spark!
” technology companies are lobbying Congress to create laws to turn the creative community into workers whose own musical creations are not in fact their own. These works can be taken and used however these technology companies deem appropriate with no recourse. The artist no longer has control of his/her work. They are instead exploited labor reduced to second-class citizens with less constitutional protection, freedom and choice than others within our society.”
Dick Busch must be getting his period soon.
Music’s worst enemy: Lawyers who’ve weaseled their way into running the music business.
GET TOGETHER WITH CHIEF LEGAL COUNSEL OF Liberty Media and sue GOOGLE, Apple/Shazam, Soundhound and 6 more OBSCUREmoney losing music and lyric ID ASSHOLESS for giving IP (intelectual property) of of over million musicians to over two billion FREELOADERS!
SiriusXM will become next day 10B music store without subscriptions!
YES, without the subs!
Novel idea: Litigation as a business model!
Sue your way to prosperity!
P.S. Didn’t we try this before? How’s it working out?
Ek’s style streaming is also not a business model.
Besides IPO fraud there is no long term money for Ek, labels or musicians!
60 Million NOI Lookup:
While it is clear that NMPA supports this legislation because it will be good for the publisher members and it will insulate services like Spotify form certain infringment suits, this article/editorial is – as virtually all of them on this site and elsewhere by “artist representatives” – rife with misinformation and half-truths, several of which are embarrassingly-rudimentary for Mr. Busch.
“The allegations are that Spotify built a multi-billion dollar business with no assets other than the songs available on its digital platform,…”
1) it is not a “multi-billion dollar business.” It has NEVER, EVER turned even one dime of profit. Investor valuations are NOT “revenues,” “earnings” or “profits.”
2) If all they needed were nothing but the songs – no programming, no application developed, no licenses with the labels, no marketing, etc., etc., etc., then why aren’t folks just flocking to the songwriters and publishers’ sites and getting all their music there, directly from them?
Could that just possibly be because Spotify apparently added SOMETHING???
Perhaps something which just happens to be PRECISELY what people want?
“The plaintiffs assert that Spotify made the conscious decision, in the effort to be first to market….”
You’re REALLY going to argue that Spotify is the FIRST on-demand streaming service in the U.S.?
“The plaintiffs are seeking damages and profits of Spotify attributable to the infringement,….”
Um…. “profits?” See point 1, above.
“Thus, the NMPA really has no incentive to punish Spotify for its willful infringement. ….The NMPA settled with Spotify for a negligible amount when considering the number of compositions of its members.”
Nope. The settlement included all the mechanicals due for previously-unlicensed uses AND a punitive amount, on top of that.
“More importantly, the settlement with the NMPA did nothing to resolve the outstanding issues regarding failure to license or pay royalties going forward.”
Also untrue. The settlement included an MOU to resolve the issues with NMPA and it’s members that agreed to the settlement, going forward.
“As alleged in the complaints filed on behalf of our clients, given the number of compositions involved in the class action and after deducting for attorneys’ fees, the average payout per infringed composition is approximately $4.00.”
Did you just say: “and after deducting for attorneys’ fees,”?????
What WERE those attorney’s fees?
“In addition, the terms of the settlement force class members to license their works to Spotify moving forward whether they wish to do so or not.”
Um, elect to participate in a class settlement = agreeing to its terms. That is certainly NOT being “forced” to do anything.
“There were numerous objections to the class action settlement, including that the terms made it tremendously difficult to opt out. Publishers were deemed to have opted in if they did not opt out. A hearing was held on the objections in late 2017. As of the date of this article, the Court has not yet ruled on whether it will approve the settlement.”
Well, are those attorney are earning all of those attorney’s fees, or not?
“[T]he new legislation being introduced is a solution in search of a problem. The Music Modernization Act is being lobbied for and pushed to funnel power and money into the hands of a small constituency of dominating music entities (i.e. Sony, Warner, Universal, NMPA, etc.).”
Spoken like an attorney who LOVES the fact that there is no comprehensive database of songwriter information available, since the absence of that information generates exactly THESE types of lawsuits, that line YOUR pockets.
“The legislation requires that all compositions be registered with the ‘Mechanical Licensing Collective’ in order to be eligible to collect and earn mechanicals royalties. This requirement is basically a mechanism to steal from the uninformed.”
How is asking songwriters, who ostensibly want to get paid for the use of their works, to sign up to get paid for the use of their works, “a mechanism to steal from the uninformed”?
“this new Musical Works Database of information would be outdated within a micro-second of coming into existence as there are between 125,000 to 200,000 new recordings being distributed into the US market every month by self-published songwriters (i.e., they control all of their own rights worldwide).”
That’s why there is a 3 year waiting period before the money is distributed, numbskull…
“As there is already a requirement to register with the US Copyright Office in order to be eligible to earn and collect mechanical royalties for compulsory licenses,….”
NOPE. that requirement is ONLY to pursue statutory damages. Not to collect mechanicals. The right to collect mechanical royalties attaches the moment the work is fixed in a tangible medium (and distributed publicly). No registration requirement is, or can be, imposed.
“Now, after selling HFA, the NMPA wants to do the exact same thing again by creating a collective that is responsible for consolidating composition data, issuing mechanical licenses and being responsible for the payment of mechanicals.”
“In other words, technology companies are lobbying Congress to create laws to turn the creative community into workers whose own musical creations are not in fact their own. These works can be taken and used however these technology companies deem appropriate with no recourse. The artist no longer has control of his/her work. They are instead exploited labor reduced to second-class citizens with less constitutional protection, freedom and choice than others within our society.”
Um, NOPE! Not even close. But thanks for the detour into breathless, entirely hyperbolic B.S., I guess.
“Finally, there is little need for this legislation.
The existing licensing rules and regulations work. The infringement, non-compliance and lack of payments to music publishers and songwriters is occurring due to the (DSPs) willfully choosing to ignore them.”
Um, can any of us figure out why Mr. Busch – an attorney who makes his living exploiting the gap between the lack of copyright registration requirements in the U.S. and the need for digital services to license works in the U.S. – might think there’s “no problem” in licensing musical works in the U.S.?
Bueller?, Bueller?, Bueller?
Here’s a hot tip: EVERYONE ELSE involved – from the Copyright Office to the record labels, to the Nashville Songwriters’ Association – has been clamoring for a registry, for years.
“If you ask a publisher, such as Sony/ATV, or self-published songwriter, such as Bob Gaudio, what songs they publish and/or wrote, and what percentage they control of each song, they are not only able to tell you, but they can also provide an electronic computer output with all the information (e.g., songwriter, publisher, composition name, percentage controlled etc.). In this example, the true problem is not that the composition data does not exist, but that the DSPs never asked for it. ”
So, Mr. Busch’s proposal is that EVERY digital music service ask EVERY SINGLE INDIVIDUAL in the U.S. (and indeed, in the world) “Hey, you: What songs have you published and/or wrote, and what percentage do you control of each song?”
“The U.S. Government set up a mechanism for this exact situation. This mechanism allows the DSP to obtain a license to and make payments for the composition — even when they are not able to identify the songwriters and publishers.”
I really can’t believe this guy calls himself a “copyright lawyer.” It is explicitly clear in the Copyright Act that anyone can obtain a license and NOT MAKE ANY PAYMENTS for the composition — when they are not able to identify the songwriters and publishers.
2nd year law students know this stuff…
I just received a NOTICE OF INTENT from Spotify that it would issue a “Compulsory License of my copyrighted song to a producer/performer for PhonoRecords production.
There was no mention of needing my authorization, or whether I would be entitled to compensation of any kind. What should I do?