The Music Modernization Act

One Giant Leap for Music Copyright Laws

In 2018, the Copyright Act finally entered the digital era. Musicians and other industry professionals have long called for amending the Copyright Act to address and incorporate new technology and industry trends into antiquated copyright laws. Congress finally responded to their requests with the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (MMA).

The MMA combines three previously introduced bills: the Classics Protection and Access Act (Classics Act); the Musical Works Modernization Act (MWMA); and the Allocation for Music Producers Act (AMP Act).1
The MMA accomplishes three goals. First, it extends certain federal copyright protections to sound recordings made prior to 1972.2 Second, it updates the way digital music providers obtain mechanical licenses.3 Third, it codifies a process for record producers and engineers to receive a portion of royalties for the sound recordings they helped to create.4

Classics:
Pre-1972 Recordings

The Classics Act provides certain federal copyright protections for sound recordings made prior to 1972. To understand the Classics Act, it is important to understand the distinction between a copyright for a musical work and a copyright for a sound recording. In the context of music, there are two copyrights embedded within a recording of a song: a copyright for the composition (i.e., the melody and lyrics), referred to as the “musical work,” and a copyright for the actual sound recording.5 Take for example, Whitney Houston’s recording of “I Will Always Love You.” Dolly Parton wrote “I Will Always Love You,” and her publishing company owns the copyright to that composition; however, the record label that released Whitney Houston’s version of “I Will Always Love You” owns the copyright to Ms. Houston’s recording of the song.6

Prior to 1972, sound recordings were not eligible for federal copyright protection; therefore, federal law did not protect recording artists.7 This lack of federal protection for sound recordings led recording artists to seek protection through an inconsistent patchwork of state laws that provided state-level copyright protection for sound recordings.8

Congress extended certain copyright protections to sound recordings in 1971 with the Sound Recording Act of 1971.9 The amendment was not retroactive; therefore, pre-1972 sound recordings still lacked copyright protection.10

Furthermore, the Sound Recording Act did not grant public performance rights to owners of sound recordings; in other words, the owner of a sound recording was not compensated when the recording was played publicly, such as in a retail store or restaurant.11 The lack of complete protection for sound recordings was partially rectified in the 1990s, when Congress passed laws granting public performance rights to sound recordings that were transmitted via digital audio.12

The lack of protection for pre-1972 sound recordings negatively affected older recording artists. Legacy artists like Darlene Love, Mary Wilson of the Supremes, Dionne Warwick, and Smokey Robinson all attended committee hearings in support of the Classics Act. In Mr. Robinson’s testimony before the Senate Judiciary Committee, he highlighted the disparity between the treatment of his hits recorded pre-1972 and those recorded post-1972.13 “Some great parts of my own career happened before 1972,” testified Mr. Robinson.14 “The Miracles … recorded [Motown’s] first million-selling hit, ‘Shop Around,’ in 1960, ‘Second the Emotion’ in 1967, and ‘Tears of a Clown’ in 1970. … So, as the law stands, SiriusXM pays me when they play my solo hits ‘Cruisin’’ or ‘Being with You’ from 1979 and 1981 — but under the federal law, they don’t have to pay me or my brothers in the Miracles when they play any of our records.”15

Against the backdrop of inconsistent treatment of pre-1972 sound recordings, the Classics Act now preempts state law claims and provides federal protections for pre-1972 sound recordings “on essentially the same terms” as post-1972 sound recordings.16 The Classics Act also provides statutory remedies for copyright infringement of pre-1972 sound recordings, including attorneys’ fees.17 Now, artists like Smokey Robinson will enjoy federal copyright protection for both their pre-1972 recordings and their post-1972 recordings.

Musical Works Modernization Act:
Licensing

Title I of the MMA streamlines the licensing process for digital music providers. “If a third party wants to use a copyrighted work in a particular way, he or she must ordinarily seek permission from the copyright holder; in the music industry, such permission is often referred to as ‘licensing.’”18 In the context of the music industry, a “mechanical license” permits audio reproductions of musical compositions; for example, an artist who wants to release a cover song must obtain a mechanical license from the composition’s copyright holder.19 These licenses are referred to as “compulsory” licenses because they don’t require permission from the copyright holder; as long as the composition has already been distributed to the public, the person wishing to obtain a mechanical license can do so after paying a royalty at a rate established by the government.20

Under the pre-MWMA statute, licensees could obtain mechanical licenses on a song-by-song basis by serving a Notice of Intent (NOI) on the copyright holder — or the Copyright Office, if the copyright holder could not be located — within 30 days of making or before distributing the recording.21 Under the MWMA, the Copyright Office will continue to accept NOIs for recordings on physical media, like CDs and vinyl records, but will not accept NOIs for digital phonorecords of a musical work; licenses for those types of works will now be handled through the newly established Mechanical Licensing Collective Inc. (MLC), a nonprofit designated by the Register of Copyrights to administer the new blanket licensing system.22

Instead of obtaining mechanical licenses on a song-by-song basis, the MWMA gives the authority for the MLC to issue blanket mechanical licenses to digital music providers.23 A “blanket license” means that digital music providers will be able to obtain one license from the MLC and, in exchange, use all compositions subject to compulsory licensing.24 Digital music providers that obtain blanket licenses will be required to report and pay royalties to the MLC each month.25 The MLC will also be responsible for establishing a public database identifying the copyright owners of compositions, and to pay royalties to these owners.26 Unclaimed royalties will be distributed on a pro rata basis.27

As a result of the new blanket licensing system, digital music providers will get the benefit of reduced transaction costs, and songwriters will (hopefully) receive more “fair and timely payment” when their compositions are used on digital services.28 The MWMA also benefits digital music providers because it limits their liability for copyright infringement. Under the MWMA, after a digital music provider obtains a blanket mechanical license from the MLC, they will be immune from lawsuits alleging unauthorized reproduction or distribution.29 This will likely end the recent spate of lawsuits against digital music providers, such as the 2017 class action suit against Spotify.30 The suit, which was settled for $43.4 million, was a result of two class action lawsuits against Spotify for distributing copyrighted music without proper mechanical licenses.31

The MWMA also made various changes to the operation of the courts responsible for establishing royalty rates for certain types of music licenses. The Copyright Royalty Board (CRB) is a board composed of three copyright royalty judges “who determine rates and terms for copyright statutory licenses.”32 The CRB sets royalty rates for mechanical licenses, as well as public performances of sound recordings via satellite radio and certain subscription music services.33 Previously, the CRB used a four-factor statutory standard to determine the appropriate royalty rates.34 Under the MWMA, the CRB will instead apply a willing buyer/willing seller rate based on open market rates.35

Additionally, the two largest performing rights organizations, ASCAP and BMI, are subject to a 1940s consent decree; under that decree, if a licensee cannot agree with either ASCAP or BMI on a public performance fee, they can ask the “rate court” — one of two judges in the Southern District of New York — to determine a reasonable fee.36 Before the MWMA, ASCAP and BMI were assigned to the same judge on an ongoing basis.37 Under the MWMA, random judges from the Southern District of New York will be assigned to preside over rate court petitions.38

AMP Act: Music Producer Rights

Title III of the MMA is the Allocation of Music Producers Act, which codifies the process by which producers and engineers can receive royalties for songs they helped to create.39 Under the AMP Act, recording artists who agree to allocate a percentage of their royalties to a producer can send a “Letter of Direction” to SoundExchange, a nonprofit collective rights management organization designated by Congress to collect and distribute digital performance royalties for sound recordings.40 SoundExchange will then distribute the designated percentage of royalties to the producer. For sound recordings fixed prior to Nov. 1, 1995, SoundExchange will allocate 2 percent of royalties to be distributed to producers involved in the creation of a song, even if no one sent a letter of direction. For the producer to qualify for this exception, the following requirements must be met:

  1. The producer has made reasonable attempts to contact and request a letter of direction from the featured recording artist without affirmation or denial;41
  2. SoundExchange has attempted to contact the recording artists and notify them of the producer’s request;42 and
  3. SoundExchange has not received an objection by the recording artist within 10 business days of the first distribution of royalties to the producer.43

Critics

Though the MMA has gained major support from most musicians and the performing rights organizations, it does not fix all the problems in the music industry. Skeptics of the MMA are mostly concerned about the complexity of the MLC legislation. SESAC publicly announced its opposition to the bill’s creation of the MLC and even offered a proposed compromise.44 SESAC proposed that the MLC only be responsible for building and managing a comprehensive song and recording database. SESAC owns Henry Fox Agency, which collects and distributes mechanical licensing fees on behalf of music publishers. Though they received backlash from songwriters because of their financial interest in opposing the MLC, SESAC insisted that they are “wholeheartedly in support of the MMA’s goals.”45

One major issue lies in one of the primary functions of the MLC. The MLC creates a safe harbor for digital streaming services that bars lawsuits against them after Jan. 1, 2018.46 This eliminates the songwriter’s right to sue infringers for statutory damages, attorney’s fees, or to seek an injunction.47 The part of this provision that is the most concerning is that it bans suits that could have occurred prior to the MMA being signed into law.48 “[C]ourts have long held that an infringement claim is a property right that vests at the time of the infringement — whether a lawsuit has been filed or not.”49 So the fact that this bill is retroactive “may very well be unconstitutional.”50 It also puts songwriters in a vulnerable place against the large, digital streaming giants. Critics attest that this safe harbor provision explains why Spotify is a major supporter of the MMA.

Conclusion

Though not a perfect law, the MMA represents significant improvements to antiquated copyright laws. It will help musicians get paid in the digital era we now live in, afford legacy artists the federal protection previously denied to them, and codify the process for producers and sound engineers to receive royalties.

MONIQUE BROWN is a May 2019 graduate of the University of Tennessee College of Law and will take the bar exam in February 2020. She is currently pursuing a career in entertainment and intellectual property law.  She wrote this article during her final semester of law school, while participating in UT College of Law’s Semester in Residence program.  Through this program, Brown worked for the Volunteer Lawyers & Professionals for the Arts (VLPA), a program of the Arts & Business Council of Greater Nashville.  The VLPA provides free legal service to artists and arts nonprofits. Brown wrote this article with assistance from Jesse Ford Harbison, director of Legal Services for the Arts & Business Council of Greater Nashville.

NOTES
1. S. Rep. No. 115-339, at 2 (2018).
2. Orrin G. Hatch–Bob Goodlatte Music Modernization Act, Pub. L. 115-264, 132 Stat. 3676 (2018).
3. Id.
4. Id.
5. Id. at 18.
6. Tuneen E. Chisolmn, “Whose Song Is That? Searching for Equity and Inspiration for Music Vocalists Under the Copyright Act,” 19 Yale J. L. & Tech. 274, 281 n.16 (2017).
7. Office of the Gen. Counsel of the U.S. Copyright Office, supra note 10, at 53.
8. Id.
9. Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391 (1971); Office of the Gen. Counsel of the U.S. Copyright Office, supra note 10, at 17.
10. Office of the Gen. Counsel of the U.S. Copyright Office, supra note 10, at 17.
11. Shourin Sen, “Denial of Performance Right in Sound Recordings: A Policy that Facilitates Our Democratic Civil Society?” 21 Harvard J. L. & Tech. 233, 237 (2007).
12. Office of the Gen. Counsel of the U.S. Copyright Office, supra note 10, at 43-44.
13. Protecting and Promoting Music Creation for the 21st Century: Hearing Before the U.S. Senate Committee on the Judiciary, 115th Cong. (2018) (statement of Smokey Robinson).
14. Id.
15. Id.
16. Kevin J. Hickey, Cong. Research Serv., LSB10181, The Music Modernization Act: Extending Copyright Protection to Pre-1972 Sound Recordings 1 (2018).
17. Orrin G. Hatch–Bob Goodlatte Music Modernization Act, Pub. L. 115-264, 132 Stat. 3676 (2018).
18. Brian Yeh, Cong. Research Serv., RL33631, Copyright Licensing in Music Distribution, Reproduction, and Public Performance 2 (2015).
19. Dana A. Scherer, Cong. Research Serv.,  R43984, Money for Something: Music Licensing in the 21st Century 8-9 (2018).
20. Id.
21. Id. at 10.
22. Musical Works Modernization Act (changes to section 115), U.S. Copyright Office, https://www.copyright.gov/music-modernization/faq.html (last visited June 27, 2019).
23. Id.
24. Id.
25. 17 U.S.C. § 115(d)(4)(A)(i).
26. 17 U.S.C. § 115(d)(3)(E)(i).
27. 17 U.S.C. § 115(d)(3)(G)(ii).
28. U.S. Copyright Office, Designation of Music Licensing Collective and Digital License Coordinator, 84 Fed. Reg. 32,274 (July 8, 2019).
29. 17 U.S.C. § 115(d)(1)(D).
30. “Spotify settles $43 Million Class Action Copyright Lawsuit,” Forbes (June 1, 2017), https://www.forbes.com/sites/
legalentertainment/2017/06/01/spotify-
settles-43-million-class-action-copyrightlawsuit/#6f4fe8f01e3f.
31. Id.
32. Copyright Royalty Board,
www.crb.gov (last visited March 28, 2019).
33. Todd Larson, et al., Music Licensing Overhaul Signed into Law, 30 IP & Tech. L.J. 12, 3 (2018).
34. Id.
35. Id.
36. Office of the Gen. Counsel of the U.S. Copyright Office, supra note 10,  at 3542.
37. Larsen, supra note 42, at 3.
38. Id.
39. S. Rep. No. 115-339, at 19-21 (2018).
40. Orrin G. Hatch–Bob Goodlatte Music Modernization Act, Pub. L. 115-264, 132 Stat. 3676 (2018).
41. Id.
42. Id.
43. Id.
44. Nate Rau, Music Modernization Act: “Eleventh-Hour Proposal Could Torpedo Landmark Bill, Backers Warn,” The Tennessessean (July 23, 2018), https://www.tennessean.com/story/money/2018/07/23/nashville-group-says-
sesacproposal-endangers-music-
modernization-act/819721002.
45. Jessica Nicholson, “SESAC Aims to Clarify MMA Position Following Criticism from Songwriter Community, “ MusicRow (July 27, 2018), https://musicrow.com/2018/07/sesac-aims-to-
clarify-mma-position-following-criticismfrom-songwriter-community/.
46. Maria Schneider, “Despite What You Hear, There Are Serious Questions About the MMA,” MusicAnswers, www.musicanswers.org/despite-what-you-hear-there-are-serious-questions-a... (last visited Dec 29, 2018).
47. Id.
48. Id.
49. Richard Busch, “Music Modernization Act is Certainly Not for Everyone,” The Tennessean (Feb. 17, 2018), http://www.tennesseean.com/story/opinion/2018/02/17/music-
modernization-act-certainly-not-faireveryone/338787002.
50. Id.

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