The Copyright Royalty Board Gets It Right: New Increased Inflation-Adjusted Royalty Rates for Webcasting–MusicTechPolicy

[This post first appeared on the MusicTechPolicy blog]

by Chris Castle

The Copyright Royalty Board has announced its decision on webcasting rates under §114 for 2021-25 and it’s good news for non-featured artists, featured artists and sound recording copyright owners. The rates are set for 2021, paid retroactively to January 1. 

ServiceNew Rate Per Performance 2021Old Rate Per Performance 2020Increase
Commercial Nonsubscription$0.0021$0.0018+17%
Commercial Subscription$0.0026$0.0024+8%
Noncommercial Webcaster (Non-educational)$1000 per station or channel up to 159,140 Aggregate Tuning Hours/month Overage at $0.0021 per performance$500 per station or channel up to 159,140 Aggregate Tuning Hours/month. Overage at $0.0018 per performancePer-station: +100%
Overage: +17%

After 2022, these rates are adjusted by the Consumer Price Index (CPI-U for the geeks). 

The Copyright Royalty Judges shall adjust the royalty fees each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index for All Urban Consumers (U.S. City Average, all items) (CPI-U) published by the Secretary of Labor before December 1 of the preceding year.

So it is clear that the CRB can come up with reasonable rates when they’re asked. It’s also a great example of the power of strong bargaining groups including SoundExchange, the unions, indie and major record companies, and a broad cross-section of music users.

Rates for noncommercial educational webcasters, satellite radio, audio for business establishments and some others — are decided in a different process. Their 2021 rates for these service are on the SoundExchange website.

The @IvorsAcademy Joins the No Frozen Mechanicals Campaign

The Ivors Academy joins the campaign against frozen mechanical royalties for songwriters by the Copyright Royalty Board in the US. Ivors is the UK’s independent professional association for music creators and is a community of diverse, talented songwriters and composers across all styles. Their talent creates the music that the world loves. The organization was formerly known as the British Academy of Songwriters, Composers and Authors, and is home to the Ivors Awards named after Ivor Novello. Ivors Academy are leading advocates for songwriters across Europe and are leading the #BrokenRecord and #PaySongwriters campaigns that have resulted in an inquiry into music streaming by the UK Parliament. Follow them at @IvorsAcademy.

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group 
Blake Morgan 
David Lowery 
ATX Musicians 
Ivors Academy 

Who Are These Law Clerks, Anyway?

[This post first appeared on Artist Rights Watch]

By Chris Castle

If you’re not a lawyer, you may not be that familiar with law clerks. The title sounds very…well, clerical. But make no mistake, they are very powerful people who are largely unknown to clients but who are in the room with their judges, often every step of the way. As Wikipedia tells us:

law clerk or a judicial clerk is an individual—generally an attorney—who provides direct assistance and counsel to a judge in making legal determinations and in writing opinions by researching issues before the court. Judicial clerks often play significant roles in the formation of case law through their influence upon judges’ decisions.

Yet, we know virtually nothing about them from the outside. If your case is heard, wouldn’t you want to know about everyone who was influencing the outcome of your case?

There are ethical rules that cover judicial clerks, such as Maintaining the Public Trust: Ethics For Federal Judicial Law Clerks issued by the Judicial Conference Committee on Codes of Conduct which admonishes clerks that the rules apply to them, too:

During your clerkship, you will provide valuable assistance as your judge resolves disputes that are of great importance to the parties, and often to the public. The parties and the public accept judges’ rulings because they trust the system to be fair and impartial. Maintaining this trust is crucial to the continued success of our courts. That’s why, although you have many responsibilities that demand your attention, you must never lose sight of your ethical obligations.

While that all sounds good, how would anyone ever know exactly what the story is with the clerks who are writing opinions with their judge or justice that directly affect the outcome of your case. As the ethical rules clearly state:

Although many of your obligations are the same as those of other federal judicial employees, certain restrictions are more stringent because of your special position in relation to the judge. Some obligations continue after your service to the court concludes.

But again–how would you ever know? If you go to the bible of the revolving door, Open Secrets, you’ll notice someone is missing…the entire judicial branch of our government.

Let’s take the easy one: Conflicts of interest. When does a law clerk have a conflict of interest? The rulebook tells us:

Canon 3F(1) of the Code of Conduct advises judicial employees, including law clerks, to avoid conflicts of interest. Conflicts arise when you—or your spouse or other close relative—might be so personally or financially affected by a matter that a reasonable person would question your impartiality. 

Note the disjunct: “personally or financially affected.” Either can give rise to a conflict or a question as to the clerk’s impartiality.

Conflicts come in several flavors, but two biggies are actual conflicts and potential conflicts, very routine inquiries in any conflict check. The ethical rules for clerks give examples of each: For example, an actual conflict is “The firm where you plan to work after your clerkship serves as counsel in a matter before your judge”. “Firm” in this case presumably applies to the situation where a company where the clerk plans to work appears before the judge.

A potential conflict includes “An attorney you met and talked with at a social function appears to argue a motion before your judge.” It’s not a far reach to think that the example would include a former professor, amicus, or author of an amicus brief filed or to be filed in a case before your judge.

But the point is, how would the litigants ever know any of these situations were an issue. Who keeps track of who knows whom among the clerks cloistered away in the ivory tower?

Let’s take a concrete example from the Above the Law Supreme Court Watch blog which handicaps U.S. Supreme Court clerk hires:

Joshua Revesz (Yale 2017/Garland) will be clerking for Justice Kagan in OT 2020. If his distinctive surname rings a bell, perhaps you’ve heard of his famous father: Professor Richard “Ricky” Revesz, former Dean of NYU Law School, and a former Supreme Court clerk (OT 1984/Marshall).

Readers of ARW may also recognize the name from a different place: The deep and abiding controversy over the American Law Institute’s failing Restatement of Copyright project. Professor Revesz joined the ALI in 2014 right after the noted Lowery insulter, Spotify lawyer, Lessig mentee and all round anti-copyright advocate Christopher Jon Sprigman joined the NYU faculty in 2013, presumably under then-Dean Richard Revesz.

Somehow–we don’t know exactly how–of all the lawyers in all the world, how ALI Director Revesz chose Professor Sprigman to run the Restatement of Copyright project, an undertaking that by all reports is devoted to weakening copyright and expanding loopholes for Big Tech. How do we know this? Because Sprigman pitched Revesz on the idea very soon after Revesz took over at ALI.

And the rest is history with everyone from authors to the Congress criticizing the very idea of a Restatement of Copyright; indeed, Professor Peter Menell of the UC Berkeley law school and Professor Shyamkrishna Balganesh of Columbia law school wrote an extensive critique that “explains why perfunctory extension of the common law Restatement model to copyright law produces incoherent, misleading and seemingly biased results that risks undermining the legitimacy of the eventual product.”  (“The Curious Case of the Restatement of Copyright“).  In other words–it’s bad.

It will come as no surprise that I would go further–I think that is exactly the purpose of the Restatement (and Professor Samuelson’s Copyright Principles Project it descends from).

Hold on, you say–what does this have to do with Clerk Revesz and his judge, Supreme Court Justice Elena Kagan, the former Dean of Harvard Law School (whose remarks at the 10 year anniversary celebration of the Berkman Center are illuminating (home to both Lessig and poker aficionado and alleged counsel to copyright infringer Mr. Tennenbaum, Charles Nesson)).  Maybe nothing.

But isn’t it the kind of thing you might want to know about someone who was in close contact with someone who was deciding the outcome of your case?  Or was in close contact with other clerks who were deciding the outcome of your case?  How would you ever know what contacts the clerks had with anyone who might be influencing their case or who had donated money to an institution that benefited the family member of someone who had influence over your case?  Either directly, over cocktail party conversation or the dinner table?  I am not implying any skulduggery here, it could all have been very innocent or appear so as conflicts often do.  

Did it happen?  We don’t know, because when we go to Open Secrets there’s no judicial branch disclosure.  Now certainly judges have to file public financial disclosures.  (That’s how we knew about Judge Ware’s employment by Santa Clara Law School when he presided over the Google Buzz cy pres and ordered $500,000 be given to that university–“now-retired federal district judge James Ware rewrote the settlement to direct $500,000 to Santa Clara Law School, where he taught. The money went to fund a center for ethics.”)

While their judges are obligated to public financial disclosures, clerks do not have such obligations to litigants, much less to the public.  Disposition of conflicts disclosed by clerks seem to be handled in chambers without consulting the litigants.

Given the number of clerks in chambers across the country, the possibility for conflicts are significant.  When a lawyer has a conflict of interest that is waivable, she must give the client the option to waive the conflict with informed consent.  But if the conflict is not waivable or the client refuses to waive, the lawyer must decline the representation.  

Is there a corollary for law clerks?  There definitely are rules and there definitely are processes.  But are the litigants ever asked if they consent to a conflicted clerk working on their case?

I’ve never heard of it.  Maybe there should be such a process.

Guest Post: Good News for Music Tech Startups: DLC Changes Fee Structure for Using Blanket Compulsory License

by Chris Castle

(This post first appeared on the Music Tech Solutions blog)

Title I of the Music Modernization Act established a blanket mechanical royalty license, the mechanical licensing collective to create the musical works database and collect royalties, the Digital Licensee Coordinator (which represents the music users under the blanket license) and a system where the services pay for the millions evidently required to operate the MLC and create the musical works database (which may happen eventually but which currently is the Harry Fox Agency accessed via API).

Title I also established another first (to my knowledge):  The United States became the first country in the world to charge music users a fee for availing themselves of a compulsory license.  The way that works is that all users of the blanket license have to bear a share of the costs of operating the MLC and eventually establishing the musical works database (and whatever else is in the MLC’s budget like legal fees, executive pension contributions, bonuses, etc.).  This is called the “administrative assessment” and is established by the Copyright Royalty Judges through a hearing that only the DLC and the MLC were (and probably are) allowed to attend, yet sets the rates for music users not present.

The initial administrative assessment is divided into two parts: The startup costs for developing the HFA API and the operating costs of the MLC.  The startup costs for the API, vendor payments, etc., were assessed to be $33,500,000; that’s a pricey API.  The first year MLC operating costs were assessed to be $28,500,000.  Because it’s always groundhog day when it comes to music publishing proceedings before the Copyright Royalty Judges, the method of allocating these costs are a mind-numbing calculation that will require lawyers to interpret.  With all respect, the poor CRJs must wonder how anything ever actually happens in the music business based on the distorted view that parades before them.  You do have to ask yourself is this really the best we can do?  Imagine that the industry elected to solve its startup problems by single combat with one songwriter and one entrepreneur staying in a room until they made a deal.  Do you think that the best they could come up with is the system of compulsory licensing as it exists in the US?  Maybe.  Or maybe they’d come up with something simpler and less costly to administer in the absence of experts , lobbyists and lawyers.

My feeling is that the entire administrative assessment process is fraught with conflicts of interest, a view I made known in an op-ed and to the Senate Judiciary Committee staff at their request when the MMA was being drafted.  The staff actually agreed, but said their hands were tied because of “the parties”–which of course means “the lobbyists” because the MMA looked like what they call a “Two Lexus” lobbying contract.  Not for songwriters, of course.

Yet, the DLC appears to have reconsidered some of this tom foolery and should be praised for doing so.  The good news is that the market’s gravitational pull has caused the allocation of the assessment on startups to come back to earth in a much more realistic methodology.  Markets are funny that way, even markets for compulsory licenses.  While still out of step with the rest of the world, at least the US precedent appears much less likely to have the counterproductive effects that were obvious before MMA was signed into law due to the statute’s anticompetitive lock in.  And the DLC should be commended for having the courage and the energy to make the fairness-making changes.  That’s a wow moment.

Hats off to the DLC for getting out ahead of the issue.  I recommend reading the DLC filing supporting the revisions (technically a joint filing with MLC but it reads like it came from DLC with MLC signing off).  It’s clearly written and I think the narrative will be understandable and informative to a layperson (once you get past the bizarre structure of the entire thing).  The DLC tells us the reasons for revisiting the allocation:

Since the Judges adopted the initial administrative assessment regulations, the Parties [i.e., the DLC and MLC since no one else was allowed to participate even if they had a stake in the outcome] have gained a better understanding of the overall usage of sound recordings within the digital audio service industry, as well as the relative usage of various categories of services. This information has led the Parties to conclude that the allocation methodology could have significant impacts on smaller Licensees, and that the allocation methodology should be modified to better accommodate these Licensees, and that such is reasonable and appropriate. This is particularly the case as these Licensees transition to the new mechanical licensing system set forth in the Music Modernization Act (“MMA”) and navigate new reporting requirements, and further as the country continues to generally struggle through the economic and health effects of the ongoing COVID-19 pandemic. While the cost, reporting requirements, and impacts of the pandemic are experienced by all Licensees, the Parties believe that it is reasonable and appropriate to modify the administrative assessment to better address the situations of smaller Licensees.

The “old” allocation resulted in this payment structure for services buying into the blanket license (setting aside download stores for the moment):

Old Assessment Alloction

It was that $60,000 plus an indeterminate share of operating costs that was the killer.  The new allocation is more precise applicable to other than download stores:

New Assessment Alloction

This makes a lot more sense and one can believe that some startups actually were asked what they think. Remember, David Lowery sent an open letter to the CRJs in 2019 raising this exact point reacting to the bizarre initial administrative assessment hearings:

The Judges should take into account that no startup has been present or able to negotiate the many burdens placed on them by this settlement. In particular, they have not been able to be heard by the Judges on the scope of these financial burdens that their competitors—some of the richest multinational corporations in history—have unilaterally decided to place on them with no push back.

This isn’t to say that any would be brave enough to come forward and challenge their betters if given a chance. But they should at least be given a chance.

There are some twists and turns to the new rule which was adopted by the CRJs as a final rule on January 8, 2021, and any startup should obviously get smart about the rules. But–these latest amendments have established two really great things: First, the DLC is paying attention. That is very good for the reasons David raises. The other is that the DLC is apparently actually talking to someone other than Google and Spotify and coming up with reasonable compromises. This is very, very good. Let’s hope it continues.

We’ll be watching.

Guest Post: Streaming and the Embarrassment of COVID Riches

By Chris Castle (first appeared on MusicTechPolicy)

We’re starting to see a narrative emerging from the digital music services in reaction to artists chafing under the misery of streaming royalties.  Streamers want lawmakers to focus attention on the allocation of current period revenue that they pay to creators and deflect attention from the company’s stock market valuation (or private company valuation).  That’s a grand deflection and misdirection away from the true value of artists, songwriters and their recorded music to streaming companies like Spotify.  But they can’t escape the embarrassment of riches by discounting the value of stock price through deflecting attention to loss-making revenues that companies like Spotify keep artificially low through a kind of Malthusian reverse pricing power to drive growth.  It may be rational for investors, but it’s not sustainable for the creators of the company’s sole or primary product.

We saw this with Pandora–lawmakers were told how much of Pandora’s monthly revenue the company paid out in royalties as though revenue was the primary metric.  The deflection worked until lawmakers started realizing that Tim Westergren was booking $1 million a month in stock sales.  Then it rang pretty hollow.  But the commoditizers are at it again.

No matter how much Big Tech tries to commoditize music, this is not about selling widgets at a deep discount–it’s about people’s lives.

“Get Big Fast”

Let’s be clear–companies like Spotify don’t get into business to eke out a profit.  They get into business to get their snouts into the trough of IPO stock as fast as possible and share that wealth with as few people as possible.  (And get out of corporate governance before the chickens come home to roost.)  So looking at revenue allocation without the accretive boost of stock market valuation is simply a grand deflection.  Abracadabra!

That deflection is particularly galling when the executives dip into current revenues to reward themselves like drunken sailors.  This is the profit fallacy—I would go so far as to say that in Silicon Valley, “profit motive” is very 1980 and long ago was replaced by the motive of  “get big fast.”  These companies seek to capture public stock market valuation, and share price valuation implies a belief in top line earnings and market share growth–not current period profit or–God forbid–dividends to shareholders.  And “get big fast” is working for Spotify.

share of streaming services

There is also controversy about a perceived “allocation” of music royalties payable by the streaming services particularly between record companies and recording artists or PROs and songwriters (especially the PROs and authors’ societies that Silicon Valley would dearly like to replace).  The allocation theory again focuses on revenue instead of the total value transfer. It goes something like this: Streaming services pay 69¢ of each dollar for royalties. When the artists or songwriters complain, it’s not because the saintly streaming services don’t pay enough, it’s because the greedy record companies or PROs take too much of that 69¢.

There is a lot that is not said with that fallacious allocation statement. I think a focus on revenue “allocation” is the wrong way to look at the royalty issue from a policy perspective.  The “allocation” focus presupposes there is an aggregate payment for music that is somehow misallocated.  

Pie-ism a la Mode

This allocation or “pie” fallacy is a very familiar argument in the U.S. It often comes from broadcasters fighting equitable remuneration for recording artists on terrestrial radio by attempting to limit their total payment for both sound recordings and songs to the amount that broadcasters historically have paid for songs only.  Instead of acknowledging the value of sound recordings, the platforms confound song performance royalties with “music”.  They say, “We pay $X for music, we don’t care how you allocate it between songs and recordings.”  This is like comparing apples to oranges and producing a pomegranate.

I call this thinking the fallacy of the pie, a derivative of the fallacy of composition.  It makes creative sectors fight each other in a kind of digital decimation.  

There is nothing particularly sophisticated about this strategy.  But the policy challenge for industrial strategists is to how to grow the pie, not to cut smaller pieces for everyone.  Growing the pie is particularly relevant when the platform seeks to monetize its valuation in the public financial markets. At that point, focusing solely on the allocation of revenue to the exclusion of the total valuation transfer is simply a kind of cruel joke.

Here’s the sad reality broken down to current per-stream rates that are entirely based on service revenue:

etude-ecoute-en-continu-streaming-montants-spotify-apple-music-google

This is front of mind as we see reports of Believe Digital (owner of the independent pre-pay distributor Tunecore) contemplating a €2 billion IPO drafting behind the reported COVID-fueled success of streaming and the Spotify public offering.  Government may play a role in requiring a share of riches transferred from the public financial markets to be shared by those artists and songwriters who gave the issuer its valuation, particularly when the issuer did not invest in the creative community.  

Get COVID Profitable Fast

If profit were really the target, one could make Spotify more profitable almost overnight by moving their U.S. headquarters to Syracuse, Cedar Rapids or even Austin rather than multiple floors of the World Trade Center in Manhattan.  One could cut executive compensation, one could do many things to reduce their Selling, General and Administrative costs.  But profit is not the issue for them.  Valuation is the issue and valuation is driven by bets on future growth.   In Spotify’s case, growth is often measured as subscriber growth and subscriber growth implies competing on price because Spotify offers more or less the same product as its competitors in a triumph of the commoditizer.  Which in turn implies keeping retail prices down (and Monthly Service Revenue) in a race to the bottom on subscription price and to the top on share price.  You may find that analyzing the economics of who wins in streaming is similar to who wins a gas war among price cutting petrol stations.

COVID has nearly destroyed the live music business that sustained the artists who previously tolerated their mils per stream Spotify royalties.  Far from being harmed by COVID, COVID has been rocket fuel for Spotify which adds to the unfairness of the “big pool” revenue share royalty system.  As the COVID Misery Index demonstrates, Spotify’s growth in valuation has outpaced its fellow oligopolists:

COVID Misery Index 1-8-21

Given the urgency of the COVID crisis, it is important to understand the difference between the creator community and other workers affected by COVID.  For example, restaurants are not failing while some other entity succeeds in extracting value from their customers.  As the COVID Misery Index demonstrates, Spotify’s stock price has more than doubled since the onset of COVID.

Again, Spotify’s success is largely predicated on keeping both royalties and prices low and bargaining for special royalty treatment.  I don’t object to the company’s pricing decisions so much as the complete failure of Spotify to share its success with independent artists who make up a significant amount of its offering but who are doomed to scrap at the decimal point in search of a positive integer.

Instead of launching billion-dollar stock buy-back programs to juice their share price, it would be a simple thing for Spotify to credit the royalty accounts of independent artists and songwriters with a cash infusion not connected to the revenue share deflection.  They have a direct billing relationship with thousands of artists and songwriters and they could simply deposit some thousands in these accounts which overnight would help balance the inequities and also provide an alternative to government support payments.  We have experienced government payments to creators in Austin, and one of the biggest problems was the mechanics of getting the money from the government’s account into the creator’s account. 

Spotify could just do it today as a thank you for doubling the value of their company while artists and songwriters suffered. Or perhaps Daniel Ek could just pay it out of his own pocket since he loves creators so damn much.

Whether it’s driven by the embarrassment of riches or a guilty conscience, the commoditizer’s grand deflection is back. Don’t let them fool you twice.

Guest Post: What is the Intention of Justice? Notice and Stay Down is the Government’s Responsibility

By Chris Castle

ARTHUR

Let’s get back to justice…what is justice? What is the intention of justice? The intention of justice is to see that the guilty people are proven guilty and that the innocent are freed. Simple isn’t it? Only it’s not that simple.

From …And Justice for All, written by Valerie Curtin and Barry Levinson.

Law out of balance is no law at all.  I suggest that the DMCA is just this imbalance and the unbalanced DMCA has created other imbalances that in turn transferred wealth from the many to the few.  One of the biggest dangers to our society currently and in the future is erosion of the third estate (or the “musician’s middle class”) into the concentration of wealth in fewer and fewer hands.  This erosion is accompanied by its inevitable trend toward authoritarianism enforced by the mandarin class of Silicon Valley.  Not to mention the policy laundering operations funded by transferred wealth like the Chan Zuckerberg Initiative (that’s the Chan Zuckerberg who asked Xi Jinping to name her then-unborn child).  

Serfing in the Apocalypse 

This kind of neo-feudal concentration of wealth is most obvious in the tech oligarchy, especially in companies like Facebook, Google and Spotify with their dual class supervoting stock that concentrates the corporate decision making and wealth not in the shareholders but in the hands of Mark Zuckerberg, Sergey Brin, Larry Page, Eric Schmidt, Daniel Ek and Martin Lorentzen.  And then there’s Amazon with the world’s richest man, Jeff Bezos—the future space mogul.  (Bezos’ Blue Origin and Google’s adventures in biometrics and AI in China are examples of the second order knock-on effects of the Internet oligarchy become defense contractors.) 

I also suggest that one of the driving forces that has accelerated this concentration of wealth and power over the last twenty years has been the 1998 Digital Millennium Copyright Act.  Unless substantially reversed, the DMCA will continue to accelerate the wealth transfer from creators to oligarchs.  It must also be said that state actors or near state actors like TikTok either profit from, promote or protect massive online piracy based in DMCA-type alibis.  This topic is another conversation, but anyone who has dealt with the huge pirate sites has felt the cold hand of truly bad guys with top cover.  In addition to the tech oligarchs, Russian oligarchs think the DMCA idea is really pretty groovy.

The DMCA Alibi

You’ve probably heard the expression “notice and takedown” applied to copyright online.  It was the DMCA that created the “notice and takedown” alibi regime for piracy and near-piracy.   These notices have come to be called “DMCA notices” and the Congressional plan that implemented that call and response has unambiguously failed.  You may have also heard the expression “value gap.”   The “value gap” is shorthand for illicit profits made from exploiting the DMCA loophole which itself is a prima facie case of law out of balance.  The “value gap” is the predictable consequence of “notice and takedown.”

Google alone has received nearly five billion DMCA notices just in the current reporting period.  That’s 5,000,000,000.  I’m still waiting to see the conga line of Members of Congress and Senators who say that was exactly what they intended (and many who were involved in drafting the DMCA are still serving).  I’m also waiting to hear lawmakers acknowledge that when something happens 5,000,000,000 times, it’s a feature not a bug just like the Ford Pinto’s exploding gas tank.  No one ever asked them until Senator Thom Tillis began a series of hearings before the Senate Judiciary Committee’s Subcommittee on Intellectual Property earlier this year.

If we’re lucky, in coming days Senator Tillis will be introducing a legislative overhaul of this gaping wound reflecting the many hearings he’s chaired this year to investigate the DMCA imbalance that created one of the biggest wealth transfers in history.  That wealth transfer is not only caused by the perpetual state of piracy or near piracy created by the DMCA, it is also caused by the cost of enforcing copyright that has fallen on all creators in all copyright categories.  Not to mention the sheer scale of the burden imposed by lawmakers on creators.  Hopefully Senator Tillis’s investigation will bear fruit and will right the imbalance.

And as we have exhaustively endured for over 20 years, law out of balance is no law at all.   In the music business, performers—like all creators—have been effectively powerless to stop this latest great imbalance in justice created by the copyright infringement safe harbor disaster and piracy force multiplier.  That value gap has hollowed out the performer community (as well as record companies) after 20 years of wealth transfer to the Big Tech oligarchs from commoditizing the recordings that performers created.  And Big Tech have used their DMCA-driven profits to hire even more lobbyists around the world to create even more loopholes in the human rights of artists in the endless maelstrom of Malthusian decline.  That decline manifests itself in the ennui of learned helplessness of creators around the world as companies like Google seek to impose Google’s version of notice and takedown around the world.

Notice and Staydown

But—there is a new term in our lexicon that hopefully will appear in new legislation from Senator Thom Tillis: Notice and stay down. What does it mean?  It’s a mid point between a pure negligence standard and the intent of the DMCA to provide a responsible alternative dispute resolution system.  Instead of the endless whack a mole iterations of catch me if you can posting and reposting of infringing works, online service providers would be required to actually do the right thing and keep the infringing work off of their service.  It’s really just a properly enforced repeat infringer policy.  It’s hard to believe that adults persist in this whack a mole but they do.  There’s big money in those moles that don’t actually stay whacked.

How in the world did we arrive at the status quo?  A page of history is worth a volume of logic to fully understand this leading edge of the Great Reset.  

The Great Copyright Reset

In the late 1990s, the large ISPs had a legitimate concern about this Internet thing. If ISPs (like Verizon or AT&T) are providing ways for the many to connect with each other over the Internet, they were inevitably empowering essentially anonymous users to send digitized property to each other by means of that same technology.  That property might take the form of an email file attachment (or link to a file) that contained a copy of a sound recording, movie or an image.  ISPs wanted to be protected from responsibility for things like copyright infringement they had nothing to do with.  (This knowledge predicate is where the games begin.)

The ISPs needed a zone in which they could operate, a zone that came to be called the “safe harbor.” The deal essentially was that if you didn’t know or have a reason to know there was bad behavior going on with your users, or didn’t have knowledge waiving like a red flag, then the government would provide a little latitude to reasonable people acting reasonably.

This safe harbor idea was a great privilege conferred upon online service providers and balanced the democratizing nature of the Internet with the need to enforce the law against bad actors.  Lawmakers were caught up with the idea of bringing people together.  What they didn’t realize sufficiently was some of those people previously only met on Death Row.

Artists’ rights to protect themselves were not entirely extinguished by this new safe harbor for big companies but were severely burdened. Record labels and film studios had to devote substantial resources to whack a mole that could have been spent on their core businesses–making records and movies.  If a copyright owner thought there was infringement going on that didn’t qualify for the safe harbor, then the intention was that individual artists shouldn’t have to file a lawsuit, they could just send a simple notice to the service provider. If it turned out that there was a bona fide dispute over the particular use of the work, then the parties could go to court and hash it out if necessary. The notice part of “notice and takedown” was perceived as an inexpensive remedy that would be available to artists who did not want to take on a lawsuit as well as ISPs with litigation budgets.  The Congress did not factor in the charlatans who would come later like Google and Facebook, neither of which existed in 1998.

This is documented in the legislative history from 1998, i.e., both before Google and and Facebook and before the Electronic Frontier Foundation discovered Morpheus or Mrs. Lenz:

This ‘‘notice and takedown’’ procedure is a formalization and refinement of a cooperative process that has been employed to deal efficiently with network-based copyright infringement.

Section 512 does not require use of the notice and take-down procedure. A service provider wishing to benefit from the limitation on liability under subsection (c) must ‘‘take down’’ or disable access to infringing material residing on its system or network of which it has actual knowledge or that meets the ‘‘red flag’’ test, even if the copyright owner or its agent does not notify it of a claimed infringement. 

Sounds very civilized, don’t it? Sounds like something that could be considered to be just. How could something that sounded so right go so wrong so fast?  Notice and takedown has become notice and shakedown after the charlatans arrived.

The Inevitable Notice and Shakedown

The one thing that nobody thought was that it was the intention of Congress that there would be ad networks, multinational corporations and international piracy rings whose business model is in large part built on exploiting the “notice and takedown” loophole in that safe harbor.  

These organizations ignored the DMCA’s knowledge predicate and repeat infringer requirements and adopted what is essentially a “catch me if you can” version that allows them to infringe until they get caught by the copyright owner and then continue to infringe if they are not sued–the exact opposite of what the DMCA intended.  What once was a reasonable exception was almost immediately tainted as a massive loophole that the government has done little to nothing to correct much less enforce.

The “safe harbor” is no longer a loophole, it has graduated to a full blown design defect as indiscriminately harmful as any exploding gas tank.  So now when artists ask that some common sense be applied to this grotesque distortion of the law-supposedly passed in part for the benefit of artists-some would tell artists that it’s not up to government to tell them what the law means. As Kafka-esque as that sounds.

Will You Believe Me or Your Lying Eyes?

Isn’t it obvious that having to send a notice for the same work on the same service hundreds of thousands of times an absurd burden? In other words — is the government actually defending whack a mole with a straight face? Did the government actually intend that 5,000,000,000 take down notices in a year are a new normal?  If they did, evidence of that intent is not in the statute or the legislative history.  Would Congress offer protection to an exploding gas tank after they already knew it was a threat because it was designed that way?

Whack a mole is not automatic-it requires human intervention. As we saw in BMG’s precedent setting and victorious lawsuit against the ISP Cox Communications over Cox’s grotesque failure to enforce its repeat infringer policy, a person has to decide to repost the infringing file even while knowing the file is or is very likely an infringement. Whack a mole actually defies the entire purpose of the safe harbor-whack a mole is not a little latitude for reasonable people acting reasonably.

Whack a mole is a design defect.  Is it just that Congress should protect any design defect?

Let’s get back to justice. Not only does the status quo require creators to tell lawmakers (including courts) what their law means, the U.S. Government has utterly failed artists with the fundamental justification for the Sovereign common to our jurisprudence and political theory. 

Crucially, it must be acknowledged that the government has failed to protect artists.  The government has failed to enforce the laws, essentially overseeing and giving legitimacy to one of the largest wealth transfers of all time from the hands of the many into the overflowing pockets of the few.  All based on an extreme interpretation by Google and its ilk of the government’s laws.  Direct challenges to these interpretations involve costly and protracted litigation — with the inescapable whack a mole continuing all the while.

It would not be unreasonable for artists to think that the whole thing smacks of crony capitalism, particularly when one of the biggest beneficiaries of the loophole is a major lobbying influence like Google. While some ISPs have at least tried to address the issue, the Googles of this world are noticeably absent.

So I would beg pardon here-I do not feel that it should be necessary for artists to tell the Congress what would be acceptable in the way of parameters for “notice and stay down”, at least not initially. I think artists have the undisputed right to ask-actually to demand-of the Congress, what was their intention?

Enter the Foxes

Don’t underestimate the knock-on effects of the DMCA wealth transfer that funds self-preservation for the DMCA beneficiaries.  Who can forget Google’s dominance of the Obama Administration?  It’s clear that like Google learned from Microsoft, Facebook has learned from Google (and both joined forces to try to defeat the European Copyright Directive, so expect more of the same foxes coming for the henhouse when Senator Tillis introduces his bill).  

We note the irony that the ethics czar for the Biden transition team is from Facebook, as is the director of legislative affairs a former Facebook lobbyist.  A former Facebook board member co-chairs the transition team and there is a sprinkling of other former Facebook board members in other roles.  Three transition team members are former Chan Zuckerberg Initiative employees.  And Google’s Eric “Uncle Sugar” Schmidt will have a leading role.  

Once they get into power, you can expect that DMCA reform will get exponentially harder, but the Tech Transparency Project will have even more work to do.

Senator Tillis Could Make Real Progress Toward Reversing the DMCA Cronyism

The safe harbor is the government’s law. They wrote it. They voted for it. They represented voters—including creators—when they did so. They presumably have some idea what it is supposed to mean. Many who voted for it are still in the Congress. The Congress needs to come clean on what they intended. Isn’t that the better place to start? Why should artists have to tell the Congress what the Congress’s intention was?

If it was the intention of the Congress (and President Clinton who signed the law) that the current state of whack a mole was the plan all along, then let them say that — and perhaps more importantly, point to where they told the electorate that was their intention at the time the DMCA was passed in the Congress and signed into law.  If it is not their intention, then it should be reversed with no daylight.

Google alone is on track to receive over five billion take down notices this year alone. If this was the Congressional intention, then let them say that. If their intention was there should be no upper limit on the number of takedown notices any one company could receive in a year, then let them say that. And explain themselves.

And let’s be clear-Google does not appear to view these billions of notices as a design defect, although that would be a perfectly reasonable conclusion. And neither do Facebook or Twitter. One has to believe that if a company the size of Google viewed billions of notices as a problem, they could fix that problem. They haven’t. In fact the number of notices grows exponentially every year. Perhaps they view billions of DMCA notices as a feature set.  Because along with the billions of notices comes a fortune for Google just like Facebook, Twitter and the rest.  Big Tech’s defenders would say of Pirate Bay and Megavideo, they’re just like Google.  Yes, that’s right.  Google is just like them and they are just like Google.  Serfing on the DMCA apocalypse.

What is the intention of justice? That the guilty are proven guilty. But if lawmakers won’t tell us what it means to be guilty much less prosecute the politically connected wrongdoers, then what justice is that?

Notice and stay down is a reasonable reaction to whack a mole, and one that is entirely consistent with the original intent of the DMCA notice and takedown regime that has gone so far wrong. Hopefully Senator Tillis will be leading the charge.

It might actually be that simple.  Notice and stay down.

As Arthur told the jury, “If he’s allowed to go free, then something really wrong is going on here.”

Guest post: Attention BrewBros: Internet Archive Announces Closing of National Emergency Library

By Chris Castle

The eponymous Mr. Kahle announced with the usual huge heaping rasher of sanctimonious twaddle straight from the mollycoddle mumbletank that the so-called “National Emergency Library” was closing early.  Not because Brewster Kahle did anything wrong, not because he got a Tillis-gram, no no no.  It’s because there are other resources for the “Internet bound.”

Internet bound.  You read that right.  Yet the crepuscular “National Emergency Library” is fading into the sunset according to an Internet Archive blog post.  Personally, I’ll believe it when I see it.

Today we are announcing the National Emergency Library will close on June 16th, rather than June 30th, returning to traditional controlled digital lending. We have learned that the vast majority of people use digitized books on the Internet Archive for a very short time. Even with the closure of the NEL, we will be able to serve most patrons through controlled digital lending, in part because of the good work of the non-profit HathiTrust Digital Library. HathiTrust’s new Emergency Temporary Access Service features a short-term access model that we plan to follow.

We moved up our schedule because, last Monday, four commercial publishers chose to sue Internet Archive during a global pandemic.

Yes, those heartless “commercial publishers”.  You see, the saintly Mr. Kahle is not motivated by money (having already enriched himself with his snout in the Silicon Valley cash tank).  Those commercial publishers were enforcing their rights.  And during a pandemic, no less.  Any self-reflection there?  Not a bit.  No thought that Mr. Kahle himself was taking advantage of a pandemic to engage in price gouging, which is just white-collar looting.  As someone who grew up with both hurricanes and earthquakes, I have zero sympathy for the dude.

But this is the usual running for the exits that these people all try to hide behind.  You sue them for bad behavior and they think that if they just stop doing the bad thing once they were caught and called out, you should welcome them back to humanity.

Not really.

As the IA blog post takes note:

[T]his lawsuit is not just about the temporary National Emergency Library. The complaint attacks the concept of any library owning and lending digital books,   challenging the very idea of what a library is in the digital world. [Not really…just Mr. Kahle’s provocation.  And…cue violins…] This lawsuit stands in contrast to some academic publishers who initially expressed concerns about the NEL, but ultimately decided to work with us to provide access to people cut off from their physical schools and libraries. We hope that similar cooperation is possible here, and the publishers call off their costly assault.

Not bloody likely.  When did Noah build the Ark?  Before the rain, get it?  You take precautions before you are forced to by circumstances.

If you get down on your knees and beg to be sued, don’t be surprised if you are.  And when you are, at least have the courage to own up to the begging.  But wait…I thought that there was all that stuff about fair use was his superpower? What happened to that?

 

CISAC and BIEM Suggestions to US Copyright Office on MLC Oversight Regulations

We often overlook the international dimension to the Mechanical Licensing Collective created by Congress in the Music Modernization Act.  We’re not the only ones.

One of the most insightful comments in the Copyright Office’s public request for suggestions for regulations to govern the MLC came from CISAC and BIEM.

CISAC stands for Confédération Internationale des Sociétés d’Auteurs et Compositeurs.  Founded in 1928, CISAC has been working on the data exchanges and standard identifiers for songs and other non-recorded works since 1994.  CISAC created the much discussed abd widely adopted International Standard Work Code (“ISWC”) for songs.

BIEM stands for Bureau International des Sociétés Gérant les Droits d’Enregistrement et de Reproduction Mécanique.  Founded in 1929, BIEM represents mechanical collecting societies in some 58 countries.

You may not recognize those acronyms, so here is how the two organizations describe themselves in their comment:

The International Confederation of Societies of Authors and Composers (CISAC), and the International Organisation representing Mechanical Rights Societies (BIEM) are international organisations representing Collective Management Organisations (“CMOs”) worldwide1. CISAC and BIEM members are entrusted with the management of creators’ rights and, as such, have a direct interest in the regulations governing the new blanket licensing system for digital uses as well as the activities of the Mechanical Licensing Collective (MLC).

Another way to say it is that the MLC was to a large extent modeled on these mechanical rights societies with some important differences, starting with governance.  The president of CISAC is Jean-Michel Jarre, the composer.  That’s right, a composer is the president.  Just sayin’.  You may remember Jean-Michel from the #irespectmusic campaign when he was all-in early:

jean michael jarre IRM 1
Photo by Helienne Lindvall

Here’s an excerpt from the CISAC/BIEM filing that we though was important, but you should take a few minutes and read the entire thing.  It’s not very long and it includes vitally important concepts that were never mentioned in Title I of the Music Modernization Act.  The comment is spelled out very politely from people who actually know what they’re doing.  Let’s just say that independent songwriters are not the only ones who may end up in the dreaded black box.

Remember that MLC is accountable (no pun intended) for identifying and paying potentially on all songs ever written or that may ever be written that are exploited in the US under the new blanket compulsory license in Title I of MMA.  This doesn’t mean that all songs will be exploited all the time, but it does mean that MLC has chosen to be responsible for identifying every song and paying royalties to every songwriter as and when exploited–so to speak.  All with the authorization of the U.S. Congress.  Starting next January.

Good times.

Comments on Section B: Data Collection and Delivery Efforts

The correct identification of copyright owners shall be a key objective of the MLC. Regulations shall ensure the appropriate onward distribution of royalties to copyright owners, whether national or foreign, and therefore that non-US [Collective Management Organizations (“CMOs”)] are entitled to make registrations and thus, claim royalties with the MLC.

 Support the Non-Discriminatory Treatment of Foreign Rightholders

In compliance with article 5.1 of the Berne Convention guaranteeing non-discriminatory treatment between national and non-national creators, the Office should promulgate regulations that ensure rightholders of “US works”
and “non-US works” enjoy the same rights and are equally treated when their works are exploited in the US territory.

 Provide adequate means for CMOs to submit rightsholder information
Outside the US and in particular in Europe, it is common practice for creators to entrust the administration of both performing and mechanical rights to CMOs. As the history of mechanical rights collective management in Europe shows, CMOs are indispensable in the process of establishing the correct ownership of musical works (and shares of such works) on behalf of individual right holders. Oftentimes non-US CMOs are also responsible for the registration of works information licensed in the U.S. that are only sub-published, or not published at all, in the U.S. In this regard, it is essential that non-US CMOs are also entitled to make registrations and, thus, claim royalties with the MLC. Importantly, non-US CMOs (in particular BIEM Members) are normally able to contribute data in relation to work identification and to the registration of work information in the MLC’s Database with a high degree of reliability; in many cases their contributions would be necessary to supplement data submitted by DMPs.

Therefore, the role of non-US CMOs in the identification of works should be expressly foreseen by the regulations. Likewise, the role of CMOs should also be expressly foreseen by the Regulations with regards tothe proper use and implementation of data standards such as ISWC that will ultimately support the proper identification of rightsholders.

Whose Idea was the RSC Memo on Copyright? Don’t ask Derek Khanna

Derek Khanna has been on a media blitz lately following the White House’s endorsement of a “We the People” petition to “make cell phone unlocking legal”. Khanna — who considers himself a “copyright reform” advocate (but in our opinion could more accurately be called a “Derek Khanna” advocate) — created a moral panic over cell phone unlocking as the first step in a sustained “war” against artists and creators, the goal of which is to strip them of their already weak legal protections.

Khanna, you may recall, first stepped into the spotlight last November after he authored a memo for the Republican Study Committee that called for severe and regressive changes to copyright law. The memo was filled with historical and factual errors (as well as numerous typos) but was considered one of the most eloquent writings to come from the copyleft; it was quickly withdrawn from the RSC’s website.

Earlier, we had noted that Khanna himself has publicly admitted of the memo, “No one requested it. I just thought it was a good idea.”

khannareddit

Interesting. Because just a few days ago, Khanna spoke about the memo to Ezra Klein at the Washington Post. His story was a little bit different this time. According to Klein:

It was November 2012 and Derek Khanna was working as a staffer in the Republican Study Committee, which acts as a kind of think tank for the conservative wing of the House Republican Conference. Khanna, whose job was to follow issues pertaining to technology, homeland security and government oversight, was asked to draw up a short brief on copyright law — something the group could hand out to House Republicans in the hopes of getting some legislation moving. “The memo wasn’t my idea,” he says.

(Tip to Derek Khanna: if you want to get into politics, you have to make your flip-flops a little less obvious.)

The Internet Radio Fairness Act’s Attack on Free Speech

In case you missed it: yesterday, the Future of Music Coalition held its annual summit, a full day’s worth of varied speakers and varied topics. The primary topic was the Internet Radio Fairness Act (IRFA) — Pandora’s Tim Westergren led off the summit with a “conversation panel” designed to drum up support for the bill. Senator Ron Wyden, sponsor of the Senate’s version of the bill, had the honor of keynoting the event, and his remarks centered around the legislation.

The Trichordist’s own David Lowery participated on a panel in between the two devoted to the bill. He was joined by General Counsel of the American Federation of Musicians Patricia Polach, SoundExchange General Counsel Colin Rushing, Consumer Electronics Association lobbyist Michael Petricone, and AccuRadio founder Kurt Hanson.

Lowery had earlier challenged Westergren on the free speech implications of Section 5 of IRFA. Westergren deflected: “I’m not going to get into a back and forth over legislative language.”

During the panel discussion, Lowery focused again on the chilling effect that Section 5 would pose to artists and artist organizations. The AFM’s Polach echoed his concerns.

When Senator Wyden took the podium, he attempted to address these concerns. With his voice raised, he conceded that “If the consensus in the legal community is that this restricts the First Amendment, it will be a very short-lived provision.” Techdirt’s Mike Masnick jumped to Wyden’s defense:

As we noted in our prior post, IRFA’s chilling effect on free speech is not a bizarre interpretation.

Satellite radio provider Sirius XM is currently suing SoundExchange and the American Association of Independent Music (A2IM) primarily because of blog posts expressing their opinion on direct licenses pursued by Sirius. It is seeking monetary damages, a permanent injunction, the dissolution of SoundExchange, and the invalidation of all copyrights licensed by SoundExchange — copyrights involving over 70,000 performers — because these organizations representing artists engaged in speech that Sirius disagrees with.

These groups have explicitly raised the First Amendment in defense. As A2IM argues in its memorandum supporting its motion to dismiss, filed last June, “a trade association’s mere recitation of facts and its opinion on an issue or standard cannot constitute an antitrust violation.”

Instead, such a recitation is protected free speech. … Sirius pleads nothing more than just such protected expressions of A2IM opinion.

Artists and artist advocates should not need to run things by their lawyer whenever they want to communicate to other artists their thoughts and opinions on deals offered by Sirius, Clear Channel, or any other business that relies on their music.

We don’t have to wonder if there is a free speech concern with Section 5 of IRFA — there is. We don’t have to guess if corporations will sue artist organizations for speaking up — they already are.

Section 5 would only codify and set in stone this suppresion of dissent.

That IRFA’s own authors, self-described defenders of the First Amendment, weren’t aware of the definite chilling effect of the bill until yesterday only reinforces the idea that Congressional tampering with artists’ royalties is not yet ready for prime time.