By Gianna Korpita

What is Copyright?

Article I, Section 8, Clause 8, of the United States Constitution grants Congress the power “[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”[1] Congress’ power to enact copyright law falls under this clause. The Copyright Act of 1976 is the current primary basis of copyright law in the United States. This 1976 Act allows artists the exclusive right to make and sell copies of their works, the right to create derivative works, and the right to perform or display their works publicly. These exclusive rights are subject to a time limit and generally expire 70 years after the author’s death.

Section 115 of the act discusses compulsory licenses for making and distributing phonorecords. It also discusses artists’ compensation. There has been some contention over Section 115 and how it can adapt to better benefit those who have a stake in the music industry when it comes to digital media services.

How Do Digital Downloads and Streaming Fit In?

For years, the Recording Academy has supported comprehensive music licensing reform under the U.S. Copyright Act. Music industry stakeholders and music creators have also championed reform for music licensing, as well. In today’s technological world, streaming services and digital downloads are becoming more prevalent than physical copies on CDs and Vinyl. Music is now a digital business, with 80% of total revenues deriving from digital music services. With services such as Spotify, Apple Music, and Tidal, there is unclarity in the law regarding how people can license and get paid for their works. There have been instances where digital media services use artists’ works, but the artists are not accurately compensated.

Recently, this has been somewhat resolved with the Orrin G. Hatch–Bob Goodlatte Music Modernization Act. The Act was unanimously passed in both the House and Senate and was officially signed into law by the President on October 11, 2018. This Act revamps Section 115 of the U.S. Copyright Act. The Act improves how music licensing is obtained and how royalties are paid in consideration of streaming media services.

Some Highlights of Revamped Section 115:

Title 1: Music Modernization Act

• The Act replaces the existing song-by-song compulsory licensing structure for making and distributing musical works with a blanket licensing system. This blanket licensing system allows digital music providers to make and distribute digital phonorecord deliveries including permanent downloads, limited downloads, and interactive streams.
• The Act establishes a “mechanical licensing collective” (MLC) to administer the blanket licenses and a “digital licensee coordinator” (DLC) to manage the activities of the licensees.
• The MLC will receive notices and reports from digital music providers, collect and distribute royalties, and identify musical works and their owners for payment.
• The MLC will establish and maintain a publicly accessible database containing information relating to and the identity and location of the copyright owners which will collectively be paid for by the streaming services.
• The current system for filing notices of intention to obtain a compulsory license will remain in place for non-digital uses, but will not be required for a digital phonorecord delivery of a musical work, such as in the form of a permanent download, limited download, or interactive stream.
• The new rate standard applied by the Copyright Royalty Judges will be a market-based willing buyer and willing seller standard, replacing the policy-based rate-setting standard.
• Rate hearings between performance rights organizations (BMI/ASCAP) and licensees rotate among all U.S. Southern District Court of New York Judges, instead of being assigned to the same two judges, Judge Denise Cote for ASCAP and Judge Louis Stanton for BMI.

Title II: Classics Act

• Sound recordings made prior to February 15, 1972 were not covered under federal copyright law, leaving them up to the individual states to pass laws for recording protection. The Act established that sound recordings before 1972 are covered by federal copyright until February 15, 2067.
• Recordings prior to 1923 will enter the public domain three years from the passage on January 1, 2022.

Title III: Allocation for Music Producers Act

• SoundExchange is a non-profit organization established by Congress to distribute royalties on sound recordings. It will distribute royalties to a producer, mixer, or sound engineer who was part of the creative process in developing the musical compositions.

What Does This Mean for the Music Industry?

In today’s technologically advancing world, with digital and streaming media services at the forefront, it is important that Copyright legislation has changed. Overall, this new Act has improved how those in the music industry do business and how they are compensated for their musical works. The result of the Act is a music market consisting of fair competition and fair pay. The enactment of this law helps music creators and digital services to work together collaboratively. Songwriters and artists can now be paid by streaming services with a single mechanical licensing database overseen by music publishers and songwriters, they can receive royalties on songs recorded before 1972, and those involved in the creative process can be paid for their creative input as well. All of this will ensure that those in the music industry are fairly compensated and do not run into any issues with streaming services. Streaming services are here to stay, and it is important that the legislation has changed to keep up with the developing technological landscape.

[1] [1] U.S. Const. art. I, § 8, cl. 8

Student Bio: Gianna Korpita is currently a 3L student at Suffolk University Law School and is the 2018-2019 Editor-in-Chief of the Journal of High Technology Law. She holds a Bachelor of Science in Business Management and Administration from Boston University. She is originally from Hackettstown, NJ and has previously worked in both banking and telecommunications prior to attending law school.

Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.