MediaNet Trying to Cut Off Black Box Payments

You can’t say these people aren’t cagey. Remember that one of the big selling points for the Music Modernization Act was that in return for the under-reported reach back safe harbor, songwriters would get paid on “black box” income by each digital music service dating back to the inception of each service. This is what the Copyright Office wants, too, unsurprisingly since that was the deal.

The reach back safe harbor was used as a scare tactic to keep songwriters from filing infringement lawsuits against these services and the MMA’s promoters went right along with it.

But–now that the bill is about to come due, guess who wants to change the deal? Services are beginning to threaten to decline the reach back safe harbor (and with it the blanket license, presumably) if they have to treat songwriters fairly on the black box. Instead of the MMA free ride that was handed to them on a silver platter, they now want to leverage the scare tactic and run out the clock on the statute of limitations that they will no doubt say had been running. That way they’d create their own safe harbor and never pay the black box but still try to use the blanket license.

So everyone should sue all of these loathsome people today and toll that statute. If enough of these services want to play hardball, there’s a real question of why bother having the blanket license at all.

Here’s an excerpt from MediaNet’s “ex parte” letter posted today:

We understand that the Office is contemplating that the cumulative report will provide data on unmatched usage back to the launch of the service. MediaNet, however, launched its service nearly 20 years ago. In light of that, and the change in vendors, we are requesting the Office adopt a narrow exception in the cumulative reporting regulations. We think such a regulation would be consistent with the overall statutory scheme. Notably, the statute references reporting pursuant to the “applicable regulations,” when discussing the information that must be provided to the MLC. That is a reference to the pre-existing reporting regulations. Significantly, those regulations provided that documentation related to royalties and usage for a particular period of time needed to be preserved only for a period of five years.

To be clear, MediaNet is not asking the Office adopt a regulation that allows a digital music provider to exclude all data from periods of time more than five years prior to license availability date (though such a rule would be consistent with the statute). Instead it is seeking a narrower provision that will provides all available data to the MLC. This would be in the form of a new paragraph in 37 C.F.R. § 210.20(c)(4) of the proposed rule:

(iii) The digital music provider shall be excused from providing the information set forth in paragraphs (i) and (ii) where the usage is from a period of time more than five years prior to license availability date, and the digital music provider certifies the following: that the information was solely held by a vendor with whom the digital music provider no longer has a business relationship, the digital music provider has requested that information from such vendor, and the vendor has informed the digital music provider that it cannot or will not provide that information.

Absent this narrow exception, MediaNet may decline to take advantage of the limitation on liability, which may deprive copyright owners of additional accrued royalties.

SoundExchange Comment on The MLC’s Public Database

[One of the problems that The MLC will encounter is matching songs to transaction data from the “safe harbor services” using the blanket licenses and enjoying the reach back safe harbor giveaway in the Music Modernization Act. There are different ways to do this, but it appears that The MLC wants to gather sound recording metadata (like the ISRC unique identifiers) and then map the songs to the sound recordings based on sound recording information from the services. This is hardly an authoritative basis to determine sound recordings, but that appears to be what The MLC intends to do. SoundExchange is the authoritative source for this information and they’ve been assembling that data for many, many years. This except from SoundExchange’s comment to the Copyright Office sheds light on the issues. Again, you’ll rarely find any of the issues in these Copyright Office comments discussed in the trade press unless someone like The MLC issues a press release. It’s also worth noting that The MLC has merely stated that The MLC “agrees that the data in the public MLC musical
works database is not owned by the MLC or its vendor.” First, “data” is not the same as a “database”. We want to find out if there is any difference between disclaiming ownership of individual data and claiming ownership of the database as a whole. But second, there’s no proof yet that The MLC’s current “data quality initiative” does not simply update the database of The MLC’s vendor, HFA.]

Read the entire SoundExchange comment here.

SoundExchange appreciates the inclusion in Section 210.31(h) of the Office’s proposed regulations the requirement that MLC Database include a “conspicuous” disclaimer that states that the database is not an authoritative source for sound recording information. It appears that the
MLC has decided to populate the MLC Database with sound recording identifying information sourced from usage data provided by digital music providers (rather than authoritative sources such as rights owners). SoundExchange believes this decision will result in the MLC Database being chock-full of redundant records variously misidentifying a large number of sound recordings.

Nonetheless, SoundExchange also recognizes that the MLC needs to launch its business on a tight timetable, and that the Office has sought to mitigate the issue through other provisions such as the requirement to provide data provenance. However, the MLC’s decision makes it critically important the MLC’s disclaimer concerning sound recording information be clear and prominent, and perhaps linked to a more detailed explanation of the issue, because this design decision carries a significant risk of confusing the public, which needs to understand what the MLC Database is and what it is not….

[I]t is critical that the MLC Database be easily accessible to all other
industry participants, so others can build on the MLC Database to create value-added resources for the industry. For example, while the MLC’s reluctance to include and organize its data around authoritative sound recording information may make sense given practical constraints, it represents a missed opportunity to develop a resource with authoritative linkages between sound recordings and musical works that would be of significantly greater value for participants in the ecosystem. Fortunately, the statutory requirement that the MLC make its data available to others provides an opportunity for third parties to fill that void. This kind of function depends on API access to the MLC Database.

@CISACnews and BIEM’s Copyright Office Comments on the MLC

[Songwriters outside the United States should pay close attention to the disconnect between their CMOs and the MLC. It’s becoming increasingly apparent that The MLC is very US-centric and at that very Anglo-American centric in its myopia. We haven’t done a point by point comparison, but we have posted CISAC and BIEM’s comments in the past and we can’t help noticing that their current comment has a few references to prior comments that seem to have been largely ignored. They are very polite about it (maybe too polite about it) but the consequences of ignoring the CMOs is that any ex-US songwriter whose songs are exploited in the US and who relies on their CMO to collect their US earnings may find their streaming mechanicals reduced to zero after 1/1/21 if the HFA database that The MLC is using is not properly mapped.

The MLC’s continued disregard for CMOs is puzzling unless you think perhaps that The MLC doesn’t think CMOs will continue to play a role in the international copyright system. Whatever The MLC’s long-term goals, it is clear that the Music Modernization Act was drafted from an entirely US-centric point of view and that the concerns of our international partners were never taken into account while at the same time forcing them to accept the MMA’s terms. Another example of the haphazard approach that is rapidly becoming the hallmark of the MMA.]

Read the entire comment here.

The International Confederation of Societies of Authors and Composers (“CISAC”) and the International Organisation representing Mechanical Rights Societies (“BIEM”) would like to thank the U.S. Copyright Office (“the Office”) for the opportunity to provide comments on the Proposed Rulemaking on the Public Musical Works Database (“Database”) and Transparency of the Mechanical Licensing Collective (“MLC”). This submission follows our previous comments to the Office, in particular on the Notifications of Inquiry from September 2019 and April 2020 (SG19-1116; SG19-1284; SG20-0614).

As already explained in previous submissions, CISAC and BIEM are international organisations representing Collective Management Organisations (“CMOs”) worldwide that are entrusted with the management of creators’ rights and, as such, have a direct interest in the Regulations governing the functioning of the Database and the transparency of MLC’s operations. CISAC and BIEM would like to thank the Office for highlighting the existence and particularity of entities such as CMOs that are not referred to in the MMA (page 58175 of the Proposed Rulemaking1) and should be treated equally.

CISAC and BIEM are grateful that some of their comments were taken into account by the Office in the Proposed Rulemaking, but would like to reiterate their concerns on certain provisions which, if not adequately addressed, may affect the administration of rights of foreign rightsholders in the US, as follows…

A/ Copyright ownership information and shares

As part of the list of mandatory information for matched works, the Office lists “the copyright owner of the musical work (or share thereof), and the ownership percentage of that owner” (for unmatched works, it is the same as long as the owner has been identified but not located).

For the sake of clarity, we reiterate the need to have CMOs clearly recognized as “copyright owners” under the provisions of the Proposed Rulemaking. Indeed, as already explained in several of our previous submissions, outside the U.S., the “copyright ownership” of the work is attributed to the CMOs managing the mechanical rights of the so-called BIEM repertoire. This would mean that the “copyright owner” share as defined in the Proposed Rulemaking should refer specifically to the share controlled by the CMO as administrator of the work, as opposed to the actual composer/songwriter share.

This clarification also has direct consequences with respect to the determination of sensitive and confidential information which cannot be made publicly accessible through the Database, as further argued in CISAC and BIEM’s comments to the Proposed Rulemaking on Treatment of Confidential Information (see SG20-0562).

If, however, it is considered indispensable for the DMPs and the MLC to have creators’ information and percentage shares for identification and distribution purposes, such data should not be disclosed to third-party entities or made publicly accessible in the Database for the reasons stated in our previous submission. In particular, in the 28 May 2020 comments to the Proposed Rulemaking on Treatment of Confidential Information submitted to the Office,2 CISAC and BIEM explained that there seemed to be no business need to include the creator percentage shares in the musical works, as this information was not required to license or distribute musical works, and constitutes particularly sensitive and confidential financial and business information for creators and their representatives.

Personal identifiable information

CISAC and BIEM fully agrees with the Office with regards to the withdrawal of the date of birth from the list of mandatory public information to be included in the Database. However, CISAC and BIEM continue to be very much concerned with the general compliance of MLC’s operations, including the Database, with data protection laws. As for now, the Proposed Rulemakings are silent on this, although this is a key issue for CMOs worldwide and probably also for other rightsholders.

CISAC and BIEM thus respectfully suggest that the Regulations include clear language on the MLC’s full compliance with data protection laws, and in particular with the European General Data Protection Regulation, as the MLC will process personal data of EU creators. This means that the Database shall be construed in compliance with the GDPR requirements from the building-up of the system (i.e. privacy by design) until the processing operations, providing the requisite security guarantees.

Point of contact for inquiries and Complaints

CISAC and BIEM welcome the inclusion of the need for the MLC to provide a point of contact for inquiries or Complaints. However, as requested in our submission SG20-0614, the Proposed Rulemaking should go further and also make mandatory the publication of the rules that will be applied by the MLC’s dispute resolution committee. This will help to streamline and give more transparency to the dispute resolution process, which will benefit both copyright owners and DMPs.

Future of Music Coalition Warns Against Vendor Lock-in in Copyright Office Comments

[The Future of Music Coalition joins the chorus of concern about shenanigans at The MLC, Inc. with special access and treatment of its vendors regarding the “public” database. As others have pointed out, there’s a real question as to whether The MLC, Inc. is actually building its own database or is just building up the data muscle of its vendor the Harry Fox Agency (formerly owned by MLC promoter and nonvoting board member NMPA. The MLC is prohibited by law from licensing other than the narrow window of streaming mechanicals, but HFA is not.]

[I]t’s important that MLC’s chosen vendors not be able to leverage their
status with the MLC to advantage themselves in other business activities not covered under the MMA. If a vendor was able to leverage its status with MLC to the detriment of competitors in other kinds of licensing activity (even informally), that wouldn’t serve competition, consumers, or creators. Additionally, the Office needs to ensure that provisions about database vendors being replaceable are meaningful.

We see no reason to expect that the MLC’s chosen vendors aren’t up to the task, but songwriters and composers need assurance that if a vendor ends up having problems and a change is necessary, that change will really be possible.

The Office can require the MLC to disclose what it is doing to prevent any vendor from being too operationally enmeshed with the MLC that it either enjoys an unfair advantage through that relationship, or that it would be practically impossible for another vendor to step in.

Read the entire post here.

Songwriters Guild and Society of Composers & Lyricists Copyright Office Comments on Database Ownership and Songwriter Credit in Public Database

[The Songwriters Guild of America and the Society of Composers & Lyricists filed a joint comment with the Copyright Office on proposed rules implementing the public database that The MLC, Inc. is charged with stewarding. They raise a host of issues, but also focus on the ownership issue raised by the Alliance of Recorded Music and the songwriter credit issue raised by Kerry Muzzey.]

Ownership of the Musical Works Database

As to the issue of “ownership” of the Musical Works Database, SGA and SCL were gratified by the USCO’s clear statement quoting the MMA that:
[w]hile the mechanical licensing collective must ‘establish and maintain a database containing information relating to musical works,’ the statute and legislative history emphasize that the database is meant to benefit the music industry overall and is not ‘owned’ by the collective itself. Under the statute, if the Copyright Office designates a new entity to be the mechanical licensing collective, the Office must ‘adopt regulations to govern the transfer of licenses, funds, records, data, and administrative responsibilities from the existing mechanical licensing collective to the public, either for free or at marginal cost, pursuant to the MMA.’

Nevertheless, we feel compelled to repeat once again the admonitions voiced by attorney Christian Castle in his recent submission to the USCO concerning practical issues, problems and anomalies that have arisen even prior to the commencement date of MLC public operations concerning the construction of the Musical Works Database:

I believe that The MLC is encouraging songwriters to correct their song data in the HFA database and that no data from HFA has been transferred to The MLC as yet, and may never be. If The MLC is having data corrected and filled out in the HFA database, then the rules applicable to vendor access to the database may not apply because the Congress’s musical works database is not actually being created at The MLC, it’s being created at HFA. Time will tell if I am correct about this, but it does seem that if I am correct, then The MLC and HFA are working together to exploit an imagined loophole in Title I that violates Congressional intent and certainly the spirit of MMA. Respectfully, the Office should find out what is going on.3

SGA and SCL believe that these are important questions of fact that require answers to ensure that data ownership issues are as clearly defined as possible in advance of any conflicts that may arise. Clarifying that (i) all data and corrections made through HFA will be mirrored in the Musical Works Database in real time, and (ii) that being compelled to provide data to HFA under color of authority from Title I does not constitute a license to HFA for any other purpose, will be important steps forward.

As we have also previously stated, the contractual role and authority of HFA (or any other vendor) should be subject to transparent scrutiny by all interested parties, includingthe music creators whose works are the subject of all information that resides in the database. That includes examination of the contractual rights of the vendor in regard to the data flowing through its own systems and/or those of the MLC, the ancillary vendor use rights (if any) of such data during both the pendency and post-expiration/termination periods of such contract(s), and the clarity of rights ownership of data by the MLC and successor iterations of the MLC (including as regards the Musical Works Database). We respectfully call on the USCO to address more robustly these important issues of transparency and data ownership, and ignore unsupported assertions that transparency and scrutiny of vendor relationships will invite inefficiencies as opposed to clarity and competition.

Songwriter and Composer Names in the Public Musical Works Database

As the USCO is aware and has recognized, SGA and SCL have been consistently outspoken concerning the fact that out of all pertinent identifiers for musical compositions, the names of the music creators of a work are among the only constant and unique data points. In all but the rarest of circumstances, such information is never subject to change, and therefore one of the most important and reliable elements necessary for accurate identification and matching of works.

Moreover, the extension of proper credit to human creators as part of this crucially important Musical Works Database –rather than simply limiting identifiers to the names of corporate assignees of rights which are frequently subject to change and termination– is both appropriate and essential to the fulfillment of the ideals and underpinnings of the MMA set forth in Article I, Section 8 of the US Constitution. As that section makes clear, copyright protections are first and foremost meant to serve the interests of the creators and the public, not the corporate entities that serve in an instrumental but secondary role as rights administrators.

We have therefore remained completely at a loss to understand why this crucial category of information was omitted from the MMA as a specifically required identifier (and why the music publishing community for some reason failed to support our efforts to correct that oversight), and are especially thankful that the USCO has put forth a proposed rule

that requires the MLC to include songwriter and composer information in the database. SGA and SCL continue to remain disquieted, however, with the additional qualifier added by the USCO concerning the standard to be applied by the MLC in seeking music creator data: “to the extent reasonably available to the collective.” Such a limited standard serves to diminish the requisite and explicit value of songwriter/composer identifying information.

We respectfully believe that music creator information should be more clearly defined as a mandatory data point required to be pursued for inclusion in the database by the MLC with vigor, and suggest once again that the rulemaking more specifically reflect the imperative nature of this duty. A more appropriate standard would be, in our view: “to the extent available to the collective through its best efforts to secure such data.” The avoidance of creating loopholes that may permit music publishers to omit music creator information from the data they voluntarily provide to the MLC is essential, and the independent community of songwriters and composers continues to seek the assistance of the USCO in this regard.

In respect to the foregoing, we desire to make clear that SGA and SCL also continue to support the rights of those music creators who may wish not to be publicly associated with certain musical works. That is and must continue to be right of any songwriter or composer. We therefore support the proposed rule put forth by the USCO that grants the MLC discretion to allow music creators the option of having songwriter/composer information listed anonymously or pseudonymously. We would, however, prefer that such a regulation be extended into a mandatory direction to the MLC to accept such direction from a music creator.

Read the whole comment here.

Copyright Office Comments by Composer @KerryMuzzey: Include Songwriter Credits in MLC Database

[Kerry Muzzey is an independent classical and film composer and artist rights advocate. In his comment to the Copyright Office on the MLC regulations he asks why songwriter names are not required to be included in the public database currently being stewarded by The MLC, Inc. Including songwriter names in the database seems like a fundamental building block of identifying a song–assuming that’s what you want to do. It would be like SoundExchange reporting not including an artist name in the transaction data. It makes no sense. Yet, it’s an issue as we will see.]

My name is Kerry Muzzey. I am an independent classical and film composer, and am self-published. It is crucial that the MLC database be searchable and completely public-facing, not only by song title but by writer’s name and publishing entity name or by ISWC or BMI/ASCAP IPI/CAE. Independent artists and music publishers must have the ability to search the “black box” of royalty collection, not only for unpaid royalties, but for accrued royalties that appear under a misspelling of an individual’s name, publishing entity, or in the event that a similar song title has resulted in the misattribution of the writer/publisher credit to another writer/publisher or artist. This transparency is essential not only for accurate accounting of royalties for an individual, but also for any works that are co-written, have multiple publishers, and/or whose performance rights are represented by multiple PROs. Any composer, songwriter or music publisher should have the ability to “disambiguate” their works from any other similar- or matching-title works or similar or identical writer names, by a simple error submission/correction process (after completing any necessary verification of identity). 

Read the entire comment here.

Copyright Office Comments of the Alliance for Recorded Music: Confirm the public owns the public database

[We’re continuing to post selections from the comments filed at the Copyright Office about implementation of the Music Modernization Act. There are a host of new regulations on the operation of the Mechanical Licensing Collective. It’s important to read up on these comments as they cover topics that simply are not covered by the mainstream music press. It’s the kind of thing that if you don’t make the effort to find out what is being said, the Copyright Office will make the new rules without you. Nothing sinister, it’s just how it works. You’ll wake up one day and find out your mechanical royalties haven’t been paid or the statutory mechanical royalty rate has been frozen for 14 years. A day like today.

There are a number of organizations and individuals–other than the usual suspects and conflicted parties–who are taking the time to comment extensively on the proposed new rules and you should know who they are and why they are concerned. We will select a few excerpts and link to the full filings so you can decide for yourselves. Because we believe that artists and songwriters should be told the truth.

The first issue is who owns the public’s musical works database. This is a vital question that has become strangely nuanced. We start with a great comment from the Alliance for Recorded Music represented here by Richard James Burgess of A2IM and Susan Chertkoff of RIAA.]

The Alliance for Recorded Music asks the Copyright Office to confirm who owns the public database in the temporary stewardship of the MLC, among other things in the full comment.

The Alliance for Recorded Music (“ARM”) is pleased to provide these Comments in response to the Notice of Proposed Rulemaking (“NPRM”) published by the Copyright Office (the “Office”) on September 17, 2020 regarding the public musical works database and transparency of the Mechanical Licensing Collective (“MLC”). See 85 Fed. Reg. 58170.

ARM is a nonprofit coalition that represents the recorded music industry in the United States, including the major record companies and more than 700 independently owned U.S. music labels. RIAA and A2IM are both members of ARM. The companies that ARM represents collectively create, manufacture, and/or distribute nearly all of the sound recordings commercially produced and distributed in the United States. As the creators, distributors, and copyright owners of most of the commercially valuable sound recordings available through the digital music providers (“DMPs”) intending to use the new blanket mechanical license, as payors of mechanical royalties and as potential users of the MLC’s musical work database, ARM’s members have a vested interest in the regulations that govern the MLC and its public database.

Database Ownership.

The NPRM makes clear that “the statute and legislative history emphasize that the database is meant to benefit the music industry overall and is not ‘owned’ by the collective itself.” 85 Fed. Reg. at 58172. It also notes that the MLC “agrees that the data in the public MLC musical works database is not owned by the MLC or its vendor.” Id. We agree with this view and were disappointed to find no corresponding clarification of this important concept in the proposed regulations. To avoid any future misunderstandings, and in the interest of consistency with the statute itself, we encourage the Office to make this point explicit in the regulations.

Read the full comment here

Guest Post: The Supreme Court Should See Through Google’s Industrial-Strength Fair Use Charade

[This post first appeared on Morning Consult. The US Supreme Court will hear oral argument in the Google v. Oracle case on October 7]

Google’s appeal to the U.S. Supreme Court of two Federal Circuit decisions in Oracle’s favor is turning into the most consequential copyright case of the court’s term — if not the decade. The appeal turns in part on whether the Supreme Court will uphold the Federal Circuit’s definition of fair use for creators and reject Google’s dubious assertion of “industrial strength” fair use.

I co-wrote an amicus brief on the fair use question on behalf of independent songwriters supporting Oracle in the appeal. Our conclusion was that the Supreme Court should affirm the Federal Circuit’s extensive analysis and hold for Oracle because Google masks its monopoly commercial interest in industrial-strength fair use that actually violates fair use principles.

The story begins 15 years ago. Google had a strategic problem. The company had focused on dominating the desktop search market. Google needed an industrial-strength booster for its business because smartphones, especially the iPhone, were relentlessly eating its corporate lunch. Google bought Android Inc. in 2005 to extend its dominance over search — some might say its monopoly — to these mobile platforms. It worked — Android’s market share has hovered around 85 percent for many years, with well over 2 billion Android devices.

But how Google acquired that industrial boost for Android is the core issue in the Oracle case. After acquiring Android, Google tried to make a license deal for Sun Microsystems’ Java operating system (later acquired by Oracle). Google didn’t like Sun’s deal. So Google simply took a verbatim chunk of the Java declaring code, and walled off Android from Java. That’s why Google got sued and that’s why the case is before the court. Google has been making excuses for that industrial-strength taking ever since.

Why would a public company engage in an overt taking of Oracle’s code? The same reason Willie Sutton robbed banks. Because that’s where the money is. There are untold riches in running the Internet of Other People’s Things.

Google chose to take rather than innovate. Google’s supporters released a study of the self-described “fair use industries” — an Orwellian oxymoron, but one that Google firmly embraces. Google’s taking is not transformative but it is industrial strength.

We have seen this movie before. It’s called the value gap. It’s called a YouTube class-action brought by an independent composer. It’s called Google Books. It’s called 4 billion takedown notices for copyright infringement. It’s called selling advertising on pirate sites like Megaupload (as alleged in the Megaupload indictment). It’s called business as usual for Google by distorting exceptions to the rights of authors for Google’s enormous commercial benefit. Google now positions itself to the Supreme Court as a champion of innovation, but creators standing with Oracle know that for Google, “innovation” has become an empty vessel that it fills with whatever shibboleth it can carelessly manipulate to excuse its latest outrage.

Let’s remember that the core public policy justification for the fair use defense is to advance the public interest. As the leading fair use commentator Judge Pierre Leval teaches, that’s why fair use analysis is devoted to determining “whether, and how powerfully, a finding of fair use would serve or disserve the objectives of the copyright.” You can support robust fair use without supporting Google’s position.

Google would have the court believe that its fair use defense absolves it from liability for the industrial-strength taking of Oracle’s copyright — because somehow the public interest was furthered by “promoting software innovation,” often called “permissionless innovation” (a phrase straight out of Orwell’s Newspeak). Google would have the court conflate Google’s vast commercial private interest with the public objectives of copyright. Because the internet.

How the Supreme Court rules on Google’s fair use issue will have wide-ranging implications across all works of authorship if for no other reason than Google will dine out for years to come on a ruling in its favor. Photographers, authors, illustrators, documentarians — all will be on the menu.

Despite Google’s protestations that it is really just protecting innovation, what is good for Google is not synonymous with what is good for the public interest — any more than “what’s good for General Motors is good for America,” or more appropriately, “what’s good for General Bullmoose is good for the USA.”

Bob Goodlatte: Supreme Court Could Take Intellectual Property Protections Back 50 Years in Google v. Oracle

[Really important opinion post by former House Judiciary Chairman Bob Goodlatte on Google’s attack on copyright in the vitally important Oracle case before the U.S. Supreme Court on Oct 7. Nice to see the Chairman back in the fight!]

Once or twice a generation, the Supreme Court agrees to hear a case so monumental, so groundbreaking in its potential to change the law, that it shapes Americans’ rights for years to come. These occasions are nothing short of paradigm-shifting, and the upcoming Supreme Court case Google v. Oracle is one of them.

On October 7, the Justices will hear oral arguments in this case, which many lawyers have referred to as the copyright case of the century. It will mark the first time the High Court rules on the copyrightability of software since Congress passed the Copyright Act of 1976—the law that governs the country’s entire copyright system. As such, it will set a crucial precedent for the future of copyright law and the United States’ economy in the digital age by either protecting IP from systematic domestic and foreign copying or offering these cases legal protection.

Google v. Oracle was initially filed nearly a decade ago after Google inquired about licensing portions of Oracle’s popular computer platform, Java, but elected to copy it instead. It then used the replicated code to build software for its mobile operating system, Android.

Read the post on Newsweek.

Notes and Materials on TikTok from MusicBiz Conference

By Chris Castle

I was pleased to moderate a panel on TikTok’s situation for the Music Business Association with an all-star panel of experts on September 25. You can access our voluminous panel materials here including the panelists biographies.

The following is my opening statement followed by the panel outline with some page number cross references to the panel materials.

Opening Statement

TikTok has become a major marketing tool for artists in the music business.  It has also been accused of some pretty serious consumer issues as well as massive copyright infringement.  We care what happens to TikTok for many of the same reasons we cared about what happened to Napster—ideally we would bring TikTok into a professional business reality that is safe for fans and where artists and songwriters can be paid.  In other words, we come here to save TikTok, not to bury it.

It appears that a potential deal with TikTok could be unraveling.  See your materials at p. 92 for a summary of deal points.  It’s a bit cloudy to decipher the positions of the parties without pre and post money cap tables, but we try.  

What we know is that the Commerce Department has delayed the ban on downloading new versions of TikTok until midnight Sunday.  TikTok has asked a federal court to block the download ban, and DC District Court Judge Carl Nichols told the US Government yesterday that it has until 2:30 pm ET to show cause why they need the ban or the Court will hold a hearing Sunday morning.  TikTok’s official statement is a p. 91 in your materials. UPDATE: After the MusicBiz panel, Judge Nichols granted a preliminary injunction allowing TikTok to be downloaded and holding that TikTok’s operations fit in a loophole. Read the order here.

In China, the Chinese government recently changed its technology export controls to cover TikTok.  TikTok is required to obtain government approval of the deal by the Beijing Municipal Bureau of Commerce which it has not yet granted.  The Chinese Communist Party has “slammed the deal as ‘dirty and unfair’” and “modern piracy” according to the Wall Street Journal.   

So there’s that.

TikTok is the subject of a review by the Committee on Foreign Investment in the US (or “CFIUS”) which is a cabinet level group that reviews M&A activity from a national security perspective.  CFIUS was established by Congress in 1988 as an amendment to the Defense Production Act of 1950. (See p. 83 of the panel materials)

As a matter of process, CFIUS conducts a review of a covered transaction and makes a recommendation to the President about whether the transaction should be approved or unwound based on national security concerns, including data security.  

CFIUS review can be also be done before an acquisition, but Bytedance elected not to request a pre-acquisition review by CFIUS which created substantial investment risk for Bytedance shareholders as we have seen play out with TikTok.

CFIUS has required divestment of various acquisitions in the past decades, such as Aixtron, Ralls, Mamco, StayInTouch, Qualcomm, PatientsLikeMe, Grindr, and Moneygram.  

CFIUS review of Bytedance is based on the company’s 2017 acquisition of Musical.ly.  CFIUS concluded that the acquisition “threatens to impair the national security of the United States” and recommended divestiture.  The CFIUS review began November 1, 2019, which resulted in two executive orders requiring the divestiture of Musical.ly or substantial mitigation to satisfy CFIUS requirements (extensively covered in Sec. 2 of the August 14 Executive Order.  (p. 76 of materials).  

There has been some negotiation of a potential sale of TikTok which is premised on two opposing views:  The US will not permit TikTok to operate in the US unless it is controlled by 

Americans, all data is hosted in the U.S. meeting CFIUS inspections, and US companies have access to all TikTok’s technology.  The position of the government of the Chinese Communist Party is essentially the opposite of the U.S. view.

If a resolution cannot be reached, the President has the power to stop Americans from engaging in transactions of any kind with TikTok under the International Emergency Economic Powers Act which would apply to employees, vendors, advertisers and users.  (Cited in 8/14 Executive Order and discussed at p. 65)

And even if TikTok can get past the CFIUS problems, it still has to deal with its failure to license substantial numbers of copyrights, and that implicates a foreign infringer’s ability to use various safe harbors to copyright.  The copyright infringement issues will extend outside of the U.S. and we will discuss implications for Canadian artists and potential class actions against TikTok.

It must also be noted that there is currently a class action against TikTok in Illinois for child endangerment and violations of child privacy protections through TikTok’s biometric data collection.  Of course, TikTok already paid the largest fine in FTC history for violations of Children’s Online Privacy Protection Act.  We won’t discuss this topic today, but relevant documents are included in your materials at p. 177.

There’s also the potential for a TikTok IPO to be blocked because China refuses to comply with US public company accounting standards based on national security concerns (which essentially means any government contract).  This makes it impossible to compare Chinese and all other public companies, and opens the door to financial fraud such as with Luckin Coffee.  The Senate has passed the “Holding Foreign Companies Accountable Act” and the bill is sponsored in the House by Rep. Brad Sherman.  (At p 105 in the materials).  It is doubtful that the Chinese government would allow TikTok to comply with that US law either.

Closer to home, commenters have asked whether TikTok should be permitted to operate without implementing infringement controls at least as strong as YouTube’s Content ID and a transparent repeat infringer policy.  But first, we will discuss the functionality of TikTok and how we got to this place.

Panel Topics

1.  TikTok Data Functionality:  Trent Teyema and Chris (10 mins) (p. 83)

–What about TikTok creates a national security problem for a CFIUS review?

—What is the connection between Bytedance, TikTok and the Chinese government?

—How does China’s National Intelligence Law create requirements of TikTok executives to disclose user data?

—What is involved in a CFIUS pre-clearance?

2.  The TikTok Executive Orders:  Rick Lane and Chris (10 mins) (p. 75) (TikTok statement p. 91)

—What is the legal authority for the EO?

—Does the Oracle and Walmart investment solve TikTok’s data security problem?

—Has TikTok already engaged in or promoted election interference?

—What safe harbors does TikTok benefit from under US law?  Section 230 and DMCA

3.  Copyright Infringement on TikTok: Chris and Gwen Seale (10 mins) (p. 130)

—What is the functionality that creates copyright infringement on TikTok?

—Is TikTok eligible for the new blanket mechanical?

—Is TikTok eligible for DMCA protection?

—How does TikTok’s DMCA takedown process work?  

—How extensive are TikTok’s licenses?

—Should TikTok be allowed to continue operations without implementing a system at least as effective as YouTube’s Content ID and CMS?

—How does TikTok’s infringement problem compare to Napster? To Spotify class action?

4.  Copyright Infringement Class Actions in the US and Canada: Chris and David Sterns (10 mins) (p. 138)

—Compare US copyright infringement class action in Lowery v. Spotify to TikTok

—Discuss Canada’s UGC exception, non-commercial and moral rights issues

—Compare US vs. Canadian class actions for copyright infringement

5. Discussion:

—Impact of allowing foreign companies using safe harbors like 230 and DMCA in US.  US/UK bilateral US/EU bilateral.

—Can a US TikTok IPO be blocked based on accounting standards, see Public Company Accounting Oversight Board, SOX, and Holding Foreign Companies Accountable Act