Press Release: @SGAWrites Welcomes Appointment of Shira Perlmutter as New Head of the Copyright Office

 

[The Trichordist sez this is really great news!]

The Songwriters Guild of America applauds the selection of
Shira Perlmutter as the next Register of Copyrights.  Ms. Perlmutter has dedicated her entire professional career to serious study of the importance of strong copyright protections to maintaining a healthy democracy and a vibrant economy, and to acting on her knowledge to ensure that the voice of the creator is always heard.  Her love and respect for the creative arts is well known throughout the community of songwriters and composers, and there will likely be unanimous music creator approval of this excellent choice by the Librarian of Congress Dr. Carla Hayden. 

Thanks are due to her staff, and the entire staff of the US Copyright Office, including general counsel Regan Smith and especially acting Register Maria Strong, who is to be thanked and congratulated for an interim job superbly done.  Congratulations to Ms. Perlmutter, with whom we look forward to working for many years to come in the advancement and protection of the rights of authors and creators.

 –SGA President Rick Carnes

The MLC Posts its By Laws

The MLC finally posted its “by-laws” that gives some insight into its operations. For a non-profit like The MLC, Inc., the by laws are essentially the operating rules of the corporation.

Typically, a non profit’s by laws cover issues like the purpose of the organization, the location of offices, the general governing structure, the number of governing members (like the board of directors) and the process for the selection, election and removal of members, terms of service for governing members, qualifications for those serving to govern the organization, methods of conducting business and organizational policy statements, meeting times and dates (usually a minimum of annually), limitations of the organization and its governing body and its fiscal year (for accounting and reporting this has to be a twelve month period).

The MLC’s by laws have all these typical components, but also have an acknowledgement of the oversight role of the Copyright Office and the Librarian of Congress as required by Title I of the Music Modernization Act.

One thing is a bit unusual about The MLC’s by laws given that it was sold to songwriters by the NMPA on the basis that “the services pay for everything” is the broad indemnification clause in Article VIII of the by laws. What this means is that The MLC is going to cover the costs if any “Person” gets sued or criminally prosecuted:

Neither the Members nor any Director of the Collective shall be personally responsible for monetary damages for any action taken, or any failure to take any action, provided however, that this provision shall not eliminate or limit the liability of any Member or Director to the extent that such elimination or limitation of liability is expressly prohibited by applicable law, as in effect at the time of the alleged action or failure to take action by such Member or Director.

The Collective shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such Person is or was a Director or Officer of the Collective, or is or was serving any other corporation or any partnership, joint venture, trust or other enterprise, in any capacity at the request of the Collective, [that means HFA] to the fullest extent and in the manner set forth in and permitted by the DGCL, as from time to time in effect. Such right of indemnification shall not be deemed exclusive of any other rights to which such Director or Officer may be entitled apart from the foregoing provisions.

(b) The Collective shall pay expenses (including attorneys’ fees) incurred by a Director or Officer of the Collective referred to in Section 8.4(a) of this Article VIII in defending or appearing as a witness in any civil or criminal action, suit or proceeding described in Section 8.4(a) of this Article VIII in advance of the final disposition of such action, suit or proceeding. The expenses incurred by such Director or Officer shall be paid by the Collective in advance of the final disposition of such action, suit or proceeding only upon receipt of an undertaking by or on behalf of such Director or Officer to repay all amounts advanced if it shall ultimately be determined that the Director or Officer is not entitled to be indemnified by the Collective (which undertaking need not be further secured).

Wonder where that money is going to come from?

#ShowUsTheMoney: Guest Post: @CopyrightOffice Regulates the @MLC_US: Selected Public Comments on MLC Transparency: Chris Castle

[This is an except from Chris Castle‘s June 7 comment to the Copyright Office regarding the transparency of The MLC. You can read the entire comment here. Although The MLC has launched its “Data Quality Initiative” to great fanfare, that DQI process merely confirms how bad the HFA database is since there still is no MLC database as required by law. Since there’s no indication of when The MLC is going to launch and there is a strong indication that nobody in power is doing anything about it (looking at you, Copyright Office), this is a particularly timely excerpt. Remember you heard it here first if your mechanical royalty statements drop to zero once The MLC takes over on January 1. That is 113 days from today and we have yet to seen a thing from The MLC and we have no promise of when we will see anything. Given that there has been zero investigative journalism on this topic from industry outlets aside from “how does The MLC withstand its own awesomeness” the comments that we are serializing are about all you’re going to get in the way of transparency.]

Quality Control of The MLC’s Operations and Platforms

There is an immediate need for The MLC to demonstrate that its systems actually work.  That need will be ongoing, so it would be well for the Office to promulgate regulations requiring a periodic public demonstration of the operability of The MLCs systems, a frequent public disclosure of bugs and bug fixes, and a frequent public disclosure of any missed payments or other glitches.  These matters are appropriate for the transparency of The MLC because if either The MLC or another MLC are not required to disclose these items, no one may ever know there was a problem (but see the discussion of whistleblowers below).

In considering the timing, I would caution the Office against thinking in years rather than weeks.  There is a tendency to think about these things in annual or more time periods.  This will prove to be a mistake given the scale and volume of transactions.  Would you tell Visa it only need to confirm the integrity of its fraud detection systems once every three years?  Or should it be more frequently?  Financial services is a good corollary for streaming mechanicals, with the exception that the royalty payable for each stream starts several decimal places to the right unlike credit card transactions.

There is an immediate need for this transparency.  Recall that MLC executive Richard Thompson said at the Copyright Office panel on unclaimed royalties last December, “[A] lot of the time since July has been spent working very closely with the staff at HFA and ConsenSys, really starting to nail down how all of this is going to work at the, you know, lowest operational level, all of the things that we need to work out.”  (Referencing the July 8, 2019 designation of The MLC as the MLC.) [1]   

Of course, The MLC didn’t announce the selection of HFA and ConsenSys until November 26, 2019[2] and was evidently still interviewing vendors up to that date.  Even so, I’m sure The MLC has been hard at work on developing their platform.

Mr. Thompson also stated at the December 2019 panel:

So our current timeline has the first version of the portal going live late Q2, early Q3, of next year [i.e., 2020]. I emphasize again that is the first version. That will not be functionally complete. It will have the, you know, the first set of functionality that we want to make available to the rightsholder community. So in particular, sort of, being able to look at your catalog, manage your catalog.[3]

Late Q2 to early Q3 is now.  [As of this post, it is the end of Q3 and we still have nothing but Mr. Thompson still has a job.] To my knowledge, The MLC has made nothing available for songwriters to know what is going on at The MLC or how to start registering works. 

Mr. Thompson also stated:

“You know, the first version of the portal doesn’t have statementing on it, because we won’t need statementing until 2021, you know, the first quarter of 2021.”[4]

I would respectfully ask the Office to determine what happens if The MLC is not able to render statements on time.  Presumably the income from streaming mechanicals that had been paid by the services directly to songwriters or music publishers would be transferred over to The MLC as of the License Availability Date (currently January 1, 2021).  If that transfer occurs and The MLC is not then ready for “statementing” (or, presumably, its corollary, “paymenting”) for the billions if not trillions of streaming transactions for all the world’s music in less than a year’s time from today, then streaming mechanical royalties could drop to zero until The MLC could handle both statementing and paymenting.[5]

While Mr. Thompson seems to be focused on the Q1 2021 distribution date for royalties payable in the normal course, the other significant statementing and paymenting date is July 1, 2021 when the first unmatched distribution is to be paid under Title I.  There are also the obvious and expressly stated “public notice of unclaimed royalties” reporting requirements for The MLC’s public facing website listing all unmatched songs (or shares of songs) and publicity efforts for the unmatched.[6]  This provision, too, is glitchy, but  presumably will come into effect soon.  I realize there may be some side deals cut regarding extending that statutory payment date, but it would at least be a confidence building exercise to know that The MLC could make the unmatched payment as of the statutory date if called upon to do so. 

Songwriters have very little visibility into The MLC’s operations except what came out at the Copyright Office panels, for which I am grateful, and also various interviews.  There is little substantive information in the press, and even less on The MLC’s website.  Therefore, it would be very helpful if the Office could require The MLC to demonstrate to the public how its platform is to function.  Such a demonstration might bring helpful suggestions from their peers or the ex-US CMOs that have been operating for decades.

It would also be helpful if the Office promulgated a bright line regulation that told songwriters around the world if the July 1, 2021 goal posts have moved and if so where they have been moved to.  I must say I have somewhat lost the page on this, given former Register Temple’s last testimony to the House Judiciary Committee about who has agreed what on delaying distribution.  This rulemaking would be a great opportunity to tell the world if and how the insiders have decided to change the law.

As the House Judiciary Committee stated:

Testimony provided by Jim Griffin at the June 10, 2014 Committee hearing highlighted the need for more robust metadata to accompany the payment and distribution of music royalties….In an era in which Americans can buy millions of products via an app on their phone based upon the UPC code on the product, the failure of the music industry to develop and maintain a master database has led to significant litigation and underpaid royalties for decades. The Committee believes that this must end so that all artists are paid for their creations and that so-called ‘‘black box’’ revenue is not a drain on the success of the entire industry.[7]

Having accomplished their goal through compulsory legislation, we are all watching the database cadre get to work and looking forward to learning how it is done from their teaching.

Alternatively, as is widely suspected among some songwriters I have spoken to, The MLC might rely on HFA’s statementing and paymenting functionality to limp along by sending necessary but not sufficient statements to HFA publishers or publishers that HFA can match.  This would be, essentially, the same process that got a couple of HFA’s licensing clients sued repeatedly, and ironically led to the Title I safe harbor in the first place. 

Absent proper transparency in the runup to the License Availability Date, any sudden drop in revenue would catch songwriters by surprise.  In the time of the pandemic, such a sudden contraction of income could be even more devastating than usual.[8]

Transparency would help shine sunlight on that problem.  While The MLC may give interviews and appear on panels describing their activities, we should remember the words of the great Bruin John Wooden who cautioned that we should not mistake activity for achievement.  If you practice free throws by yourself all weekend, it doesn’t mean you’ll be a better player with the team at Monday practice—or that the team is any more likely to win when it is game time at Pauley on Saturday.


[1] Transcript, United States Copyright Office Unclaimed Royalties Study Kickoff Symposium (Dec. 6, 2019) at 28 ln 15 hereafter “Kickoff Transcript”.

[2] Tatania Cirisano, Mechanical Licensing Collective Selects Leadership, Partners for Copyright Database, Billboard (November 26, 2019).

[3] Kickoff Transcript at 40 ln 2.

[4] Kickoff Transcript at 40-41.

[5] It is well to note that such a contraction probably would not affect direct licenses or HFA’s modified compulsory licenses.

[6] 17 U.S.C. § 115 (d)(3)(J)(iii).

[7] House Report at 8.

[8] Songwriters are already expecting lower royalties in January 2021 according to BMI’s President and CEO Mike O’Neil: “[We] anticipate an impact in January 2021, when today’s performances and corresponding licensing dollars (2nd quarter 2020) will be reflected in your royalty distributions. While you may see a lower distribution that quarter than you might typically receive under ordinary circumstances, given BMI’s business model, we have the time and ability to plan for this outcome.” A Message from Mike O’Neil, BMI.com (April 7, 2020) available at https://www.bmi.com/news/entry/a-message-from-bmi-president-ceo-mike-oneill-regarding-royalty-payments

Guest Post: This is the Only Question for the Next Head of the Copyright Office

by Chris Castle

At some point in the coming days, there will be an announcement for the new head of the U.S. Copyright Office. I fully expect that everyone will have their litmus test for whether the new person (called the “Register” for historical reasons that have probably outlived their usefulness) should be appointed. The fact is that the Register is, if you ask me, a thankless job that has been filled by wonderful people for many, many years. It’s not a job that is really suited to anyone’s litmus test.

The reason it is not susceptible to a “factiness” approach is that the job is a balancing act between creators across all copyright categories, some of the biggest tech corporations in commercial history, and users (or as we call them, fans). When you review the past Registers all but the last two or so had one thing in common–they didn’t have to deal with corporations who were dedicated to the corrosion and eventual recasting of copyright into something that wasn’t what anyone previously thought of as copyright and so did not deserve the name.

Google Lobbyist and DNC Speaker Susan Molinari

Past Registers didn’t have to deal with corporations with trillion dollar market caps that have an endless lobbying budget. They didn’t have to deal with corporations who could get their lobbyist a speaking slot at the Democratic National Convention just in case you didn’t get the point. (Remember–AOC got 60 seconds.) Like the anaconda in the chandelier, they didn’t even have to say a word about the real issue.

Prior Registers didn’t have to deal with big tech corporations who hired prior employees of the Copyright Office to lobby–or at least advocate–against copyright.

True, there has been a revolving door at the Copyright Office before, but those hires were all devoted to preserving strong American copyrights which is also the mission of the Copyright Office to a large extent. They were not devoted to destroying copyright as we know it, distorting exceptions into giant loopholes, and looking the other way while major search corporations filed millions of “address unknown” notices for songs that started with the absurd premise “Google can’t find…”

So really there is simply one question for the next Register. “Do you support codifying Google’s terms of service in the law?” That’s a yes or no question. And it is absolutely serious with not a hint of sarcasm.

There are many signals that this is exactly what the anti-artist cognoscenti have in mind. Lawrence Lessig, Brewster Kahle, Pamela Samuelson, Christopher Sprigman, Fred von Lohmann, the EFF, Engine Advocacy, R Street Institute, Tech Freedom, Public Knowledge, the list goes on and on and on. All of them are dedicated to codifying Google’s terms of service in U.S. law. And that is where they will start if they capture the Copyright Office–they will use the springboard of the vast influence that the U.S. has on treaty negotiations to do the same in other countries and eventually the world.

You could throw a dart at a map of the world and you will hit a country where Google, Facebook, Amazon and the rest are trying to destroy copyright as we know it. Try South Africa, the European Union, Canada, Australia, New Zealand, India, Brazil. All are on the menu.

And by the way it’s not just the Register. Remember the Google Transparency Project (now the Tech Transparency Project) identified through public records the vast influence that Google and other FAANGS companies had over the Obama White House (Facebook, Amazon, Apple, Netflix, Google and Spotify). (Remember President Obama’s #POTUSPlaylist? Not an Apple playlist, a Spotify playlist.) And who has post-term deals from Netflix and Spotify? Just sayin.

Which multinational corporation had more meetings at the White House than any other? Just sayin.

Roger McNamee, long time Silicon Valley venture capitalist and member of the band Moonalice summed it up in a recent Wired opinion post as an open letter to Vice President Biden:

One of the policy areas that demands a new approach is technology. New technologies like facial recognition and artificial intelligence have been plagued by racial and gender bias, with particular harm in areas like law enforcement, job hiring, and mortgage applications. Internet platforms like Facebook, YouTube, Instagram, and Twitter have amplified hate speech, disinformation, and conspiracy theories, undermining our politics, our pandemic response, and the safety of our citizens….

Imagine my disappointment last week when The New York Times reported that President Obama had suggested that you work with two members of the Silicon Valley establishment, former Google CEO Eric Schmidt and LinkedIn founder Reid Hoffman. I know both men well. They are brilliant and very successful. Their money and expertise may be valuable to your campaign, but I hope you will not turn to them for policy guidance. They were architects of the culture and values that produced the problems I described above.

Let’s be clear–this is not about politics.  I know some of your political knees are jerking right about now.  But be clear–this is about survival and these are facts.  As Roger McNamee says–and he’s hardly the only one saying this–we all have to do everything we can to fight back Silicon Valley’s government takeover.  You don’t have to be for or against any particular candidate to understand that Google & FAANGS once had pretty much all they ever wanted in the wildest dreams of any lobbyist or swamp creature.  They liked that control over the administrative state and they mean to have it again–if they ever really lost it.

Also remember that the FAANGS have been vastly enriched by the COVID crisis while artists have been weakened like never before.  Now is the time that the anaconda in the chandelier is most likely to strike and crush its prey.

So let’s ask the only question that’s relevant of the next Register:  Do you intend to codify Google’s terms of service.  Yes or no.  And take good notes on the answer because they need to be held to it.  It is an absolutely serious question, particularly now.

Copyright Office Regulates The MLC: Selected Public Comments on the Copyright Office Black Box Study: The DLC Spills the Beans, Part 3

[Read Part 2 here.  This is the last of 3 parts]

The services tell us in their Copyright Office comment that the whole point of the Music Modernization Act was this (largely secret) deal to get them a new retroactive safe harbor so their massive infringement couldn’t be stopped by songwriters.  (That’s their third statutory safe harbor counting DMCA and Section 230.)  What do you think that MMA safe harbor is worth to them to avoid what they call “ruinous litigation”?

Let’s use Spotify’s market cap as a proxy for the value of the safe harbor–imperfect, yes, but at least it is transparent unlike anything else having to do with Title I of the MMA.

SPOT Safe Harbor Value

Around October of 2018 when the MMA was signed into law, Spotify traded at $189.  A recent closing price for SPOT is $268.  Is it fair to say that the MMA was the rocket fuel that made Daniel Ek a billionaire?  Not entirely.  You can see from the graph that Spotify actually broke through a $190 per share support level to the downside right after the MMA was signed and bounced around below that price for a year or more.

The clear driver of Spotify CEO for Life Daniel Ek’s wealth and profiteering is the COVID virus.  Make no mistake, human misery–not the MMA safe harbor–is what provided the rocket fuel for Spotify’s 2020 growth.  In fact, the same rocket fuel of misery seems to have benefited each of the exploitative cohort as this graph shows using Live Nation as a proxy for the collapse of touring:

COVID MISERY INDEX 8-22-20

So it could be said that the entire “ruinous litigation” argument from the DLC is simply so much bullshit that these companies fed to the MMA negotiators by the plateful.  What is not bullshit, however, is that the one thing the negotiators could have scored that they didn’t is a waiver of the services appeal rights in the Phonorecords III rate setting decision.  This is the appeal that the services recently won when the appeals court handed the negotiators heads to them.  There could also have been a settlement since they seem to like those so much.  The negotiators didn’t do either.  We’ll see how the do-over turns out, but one thing we know is that there will be millions in legal fees that songwriters will have to eat one way or another that could easily have been avoided.

What is also not bullshit is the other side of the MMA transaction:  The loss to songwriters of this heretofore secret deal.

You will note that none of the music services appear to have paid out jack in the way of newly matching the previously “unmatched” in the years since the signing of the MMA. Why?  Because the MMA negotiators did not require any interim payments of matched funds or any public reconciliation of black box to matching efforts.  No, no, the first time the black box gets disclosed publicly is when those funds are paid to the MLC, not to the songwriters who earned the money.  Round and round and round it goes, and where it stops, nobody knows.

If you believe as we do that the services have not lifted a finger to increase their matching efforts (and based on the DLC’s disclosures seem to have already paid out pre-MMA black box on a market share basis), you will better understand why we think this was a colossally terrible deal for songwriters.  You will also understand why this part of it was largely kept secret or downplayed.

The Eight Mile Style complaint against Spotify and the Harry Fox Agency (which is the same Harry Fox Agency that is now going to be handing your royalties for The MLC, how curious) has an informative passage about the timing of this retroactive safe harbor:

In addition, the retroactive elimination of the right to profits attributable to infringement, statutory damages, and attorneys’ fees under the MMA is an unconstitutional denial of substantive and procedural due process, and an unconstitutional taking of Eight Mile’s vested property right, and this Court should so declare.

It is settled law that an infringement claim is a property right that vests in a plaintiff the moment the infringement occurs. The Bill that ultimately became the MMA, written by the NMPA, with input from Spotify, became law in October 2018, but provides retroactively that a plaintiff who did not file an action by December 31, 2017, could lose any right to profits attributable to infringement, statutory damages, and attorneys’ fees if successful in a case against Spotify or other DMPs of interactive streams. On information and belief, the MMA, according to the NMPA’s own announcements, lobbyist spending, and congressional testimony on Capitol Hill, was jointly crafted by members of the NMPA (whose three top markets shares and dues-paying affiliated companies own equity in Spotify) and Spotify, DiMA, and other interactive streaming companies.

They knew what they were doing….

[W]ith the removal of these remedies, it cleared the last hurdle for Spotify to go public, thereby reaping tens of billions of dollars for its equity owners, including the major music companies as mentioned above. The unconstitutional taking of Eight Mile’s and others’ vested property right was not for public use but instead for the private gain of private companies.

The reference to timing on Spotify “going public” means Spotify filing their “DPO” to sell stock on the public markets–the really big money.  That’s relevant to the MMA negotiation because the MMA bill was introduced on December 21, 2017.  Spotify filed a confidential paper with the Securities and Exhange Commission on January 3, 2018 and Spotify’s stock started trading on April 3, 2018.  The MMA allowed them to show the markets that they were doing something about their systemic copyright infringement problem and gave fuel to the specious argument that lawsuits against them were merely opportunistic gotcha lawsuits and not a bellweather for their utter incompetence and cavalier treatment of songwriters.

Why is this timing important?  Because the MMA was filed on December 21.  What happened on December 22?  Congress closed for the holidays and would not reopen until after January 1, 2018.  That meant there would not be an official version of the bill until after January 1, 2018, the deadline to sue before the retroactive safe harbor would eventually take effect.  Various copies leaked, but since the entire music industry was also shut down for the holidays, it was unlikely that any songwriters would see it, particularly because we can’t find that their so-called “representatives” ever brought it up in any public messaging before the January 1 deadline had passed.

Do you think that timing is a coincidence?

As Eight Mile Style tells us:

The proof is in the pudding: Spotify was sued many times prior to December 31, 2017, for similar acts of copyright infringement as alleged herein, but not once since December 31, 2017. This is because the Bill that ultimately became the MMA first publicly leaked shortly before December, 2017, leaving music publishers with little or no time to investigate or file a lawsuit for infringement, even if they somehow became aware of the Bill at that time.

It just happened that Wixen Music Publishing was already on a war footing from opposing the various Spotify settlements and was able to easily pivot to filing its own lawsuit against Spotify before the December 31, 2017 deadline in a move worthy of General Patton at Bastogne.  But Wixen was alone.  No one else probably even knew the deadline was passing or what it meant.

The value of what the “negotiators” gave away cannot realistically be measured for the reason that Eight Mile Style clearly states, which is also the same reason that the retroactive safe harbor is unconstitutional:

The only practical or realistic remedies in these cases is the statutory damage remedy, and profits attributable, together with the ability to receive attorneys’ fees, and the drafters of the MMA knew it. The elimination of these remedies takes away from Eight Mile and others who may be similarly situated any practical or realistic remedy, immunizes complying DMP’s from suit, and should be declared an unconstitutional deprivation of due process and a taking of a vested property right.

So what’s the value that songwriters gave up in the MMA?  Wixen sued for $1.6 billion.  You figure it out.

Copyright Office Regulates The MLC: Selected Public Comments on the Copyright Office Black Box Study: The DLC Spills the Beans, Part 2

[Continued from Part 1]

The DLC’s comment to the Copyright Office makes it clear that there is a substantial likelihood that the services are holding substantial monies in the black box—substantial amounts of other people’s money.  Probably some—or a lot—of your money.  The comment suggests more strongly and openly than we have seen before that not only are the services holding more money than they intend to acknowledge that they owe, they know they are and they intend to get away with it.  And as our friend Guy Forsyth has written in his classic song Long Long Time, nothing says freedom like getting away with it.

The DLC’s comment makes it clearer than ever that the whole point of Title I was for the services to get away with it under the guise of doing you the huge favor of paying you the money that they already owe you in return for “stakeholders” acting under color of authority to give away the few rights songwriters have.  And we’d bet you didn’t even know it happened.  Yet you are going to be bound by the deal these people made who don’t represent you and had no actual authority to make any deal on your behalf.  The DLC tells us:

This was the heart of the deal struck by the stakeholders in crafting the MMA: to provide legal certainty for DMPs, through a limitation on liability, in exchange for the transfer of accrued royalties. That is a crucial point for the Office to keep in mind as it crafts rules in this space. If the regulations make it less likely that a DMP will be able to rely on that liability protection when it needs iti.e., if it increases the risk that a court would deem a DMP to not have complied with the requirements in section 115(d)(10)—a DMP could make the rational choice to forego the payment of accrued royalties entirely, and save that money to use in defending itself against any infringement suits.

Read that last clause again:  “a DMP could make the rational choice to forego the payment of accrued royalties entirely, and save that money to use in defending itself against any infringement suits.”

The DLC is threatening to use your money to cover the costs of defending itself against lawsuits yet to be filed.  Perhaps that assertion proves too much—if the deal was that the services would use your money to buy themselves a safe harbor, if they don’t pay you the money then they don’t get the safe harbor?

Presumably they would also seek to get their assessment money back from The MLC, too.  Which of course gives them even more leverage now that the Fox is in the henhouse.  Given that The MLC seems to be teetering on the edge of a complete meltdown and seems to exist for the sole purpose of driving signups to HFA, maybe songwriters should be saying, if the DLC threatens to abandon The MLC can we please get that in writing?  They should understand that threatening to withhold money from The MLC is pushing on an open door for most songwriters who are not part of the insider cabal.

It’s pretty obvious from this comment that there’s an imminent danger that the monies owed by the services for the black box are likely to evaporate if something isn’t done to preserve the status quo.  You couldn’t ask for a more clear and compelling reason that the concern is justified.  Plus, what the services complain of is that the Copyright Office’s proposed regulations would make payments more accurate and that they might end up matching more than they already have.

They couldn’t be clearer:

DMPs supported enactment of the MMA fully intending to pay over any accrued royalties still on their books, with the assurance that the limitation on liability the MMA establishes in exchange will protect them from ruinous litigation.

Or said another way, getting caught.  And that’s what they really want to avoid.  One person’s “ruinous litigation” is another person’s justice.  Here they say it yet again:

The Copyright Office has proposed a regulation that requires DMPs to provide a “clear and detailed explanation” of any difference between “the total royalty payable” as reported on the cumulative statement of account (which reflects the royalties for all unmatched usage) and the “royalties actually transferred to the mechanical licensing collective.” We agree with this proposal, with one minor modification: we would suggest changing the phrase “total royalty payable” to “total royalty reported,” to avoid any suggestion that the amount reflected on the cumulative statement of account is necessarily “payable” to the MLC. DLC otherwise agrees with the Office that the MLC is entitled to such an explanation when there are such discrepancies.

The difference between “payable” and “reported” is the difference between what a service in fact owes compared to what they say they owe.  Remember, none of these statements will have been subject to a royalty compliance examination (or “audit”) at the time, if ever, that the money is paid over to The MLC.

Plus, we have absolutely no confidence that The MLC is going to be able to process the trillions of transactions involved which will inevitably lead to a huge black box problem that no one seems to be in a hurry to solve.  So the Copyright Office is exactly right to seek as much clarity as possible on the sums paid over to The MLC.  The balance of hardships tilt’s decidedly in the favor of songwriters.

As the House Judiciary Committee stated:

Testimony provided by Jim Griffin at the June 10, 2014 Committee hearing highlighted the need for more robust metadata to accompany the payment and distribution of music royalties….In an era in which Americans can buy millions of products via an app on their phone based upon the UPC code on the product, the failure of the music industry to develop and maintain a master database has led to significant litigation and underpaid royalties for decades. The Committee believes that this must end so that all artists are paid for their creations and that so-called ‘‘black box’’ revenue is not a drain on the success of the entire industry.

It’s obvious now that the only way to save the black box from total collapse is to have the services disclose immediately how much they are holding and for which songs, artist name and track name if nothing else.  There’s a real danger in not doing that—and the DLC is telling us clearly what their intentions are in a conclusive statement that raises serious questions.

 

 

 

Copyright Office Regulates The MLC: Selected Public Comments on the Copyright Office Black Box Study: The DLC Spills the Beans, Part I

We once had a mechanical licensing system in the U.S. that worked well enough for songwriters for 100 years.  The problem with the mechanical licensing system wasn’t so much the licensing function it was the royalty rate.  The government held down songwriters for 70 years to a 1909-based royalty rate that for some reason was frozen in time (more on frozen mechanicals here).  But if users failed to license, songwriters could at least sue for statutory damages.

After the Music Modernization Act passed in 2018, they managed to even give away songwriters’ rights to sue.  The songwriter part of the three-part MMA is called “Title I” and that’s the part that gave away the one hammer that songwriters had to be heard when their rights were infringed.  They called it the “limitation on liability” and it was retroactive to January 1, 2018—before the bill was actually passed by Congress and signed into law.

It’s entirely possible that even if you knew about the MMA, you didn’t know about this new safe harbor created by the same uber-rich companies that wrote themselves the DMCA safe harbor that has created the value gap and plagued artists for years and the “Section 230” safe harbor in the “Communications Decency Act” that services use to profit from human trafficking and revenge porn stalkers.  And now there’s the MMA safe harbor.

Only a handful of insiders got to be at the table when they gave away your rights in Title I without your even knowing what they were up to.  Don’t get us wrong, there are great things in the other parts of MMA dealing with closing the pre-72 loophole, some important changes to the rules for ASCAP and BMI with rate courts, and the fix for producers getting a fair share of SoundExchange royalties.  These are all good things.

The part that sucks is Title I that created this new safe harbor give away that will bedevil songwriters for generations to come.

So you may be asking how do we know this?  Since the so-called “negotiations” for the Title I give away happened behind closed doors, how do we even know what happened?  The answer is that we didn’t have the proof because anyone who tried to offer constructive criticism to the “negotiators” for songwriters was menaced, threatened and stabbed in the back.  Nobody was talking about the safe harbor give away.

But now we do have the proof courtesy of the music services representative at the “Digital Licensee Coordinator” who opened the kimono in their recent comments to the Copyright Office about the black box.  (Read the entire DLC comment here.)  Their comments make for quite a read, not only about the so-called “negotiations” by the unrepresentatives of songwriters but also about the run-up to the MMA in the private settlements that nobody sees.

The first issue is that the Copyright Office has proposed some well-meaning regulations to increase the likelihood that the black box will actually get paid to the songwriters who earned the money.  The services seem to be all in a huff about rules applying retroactively when they’ve been using old rules to organize their data.  You know, they don’t like this retroactive thing unless it’s a retroactive expansion of their safe harbor.  Then they like it just fine.

“The DLC emphatically opposes the Office’s proposal to retroactively expand the required reporting of sound recording and musical work information beyond that which is required by the existing regulations in 37 C.F.R. § 210.20. Those regulations were issued in interim form in December 2018, and finalized in March 2019, and unambiguously required collection of reporting information under the existing monthly statement of account regulations in 37 C.F.R. § 210.16. The Office has now proposed, in paragraph (e) of the proposed rule, to change the required reporting elements for the individual tracks, nearly two years after the MMA’s enactment and months before cumulative statements of account are due to be served.”

Sorry, but we think that the richest companies in commercial history, with trillions and trillions of dollars in market capitalization and the most advanced data mining capability in the known universe, can manage to figure out how to pay songwriters in a way that will actually result in songwriters getting paid. The truth is that they are so used to screwing songwriters that they are not going to lift a finger to help beyond the absolute minimum they have to do.

They got their retroactive safe harbor to give away, so don’t come whinging about retroactivity if it makes the distributions more likely to get to the right person, something the services have uniformly failed to do from their founding.

But now it gets interesting.

“It is well-known that—prior to enactment of the MMA—a number of DMPs entered into industry-wide royalty distribution agreements under the auspices of the NMPA, structured to allow all unmatched works to be claimed by their owners and all accrued royalties to be paid out, in what became the model for the MMA. These agreements were designed to, and did, put tens of millions of dollars in statutory royalties in the hands of copyright owners—money that they had been unable to access due to the broken pre-MMA statutory royalty system.”

First of all—“money that they had been unable to access due to the broken pre-MMA statutory royalty system” is utter crap.  The reason that services didn’t pay out is because they didn’t clear the songs but exploited them anyway.  For example, that’s also why Spotify got sued so many times and is still getting sued.  It’s not that the system was broken, it’s that the services didn’t care and handled licensing in an incompetent manner. In case you missed it, that’s what they want to keep doing by extending into the future the same sloppy practices they got sued for in the past.  The only thing new and improved about it is their absurd and undeserved safe harbor.

We don’t know what these “industry-wide royalty distribution agreements” were all about, but one thing we know for sure is that they weren’t “industry-wide” and the NMPA wouldn’t have had the authority to make those deals “industry-wide” in the first place.  “Industry-wide” seems to mean “with the major publishers” or with NMPA members or just plain insiders.  The implication is that “industry-wide” means everyone, which it clearly does not and cannot if you think about it for 30 seconds.

And if the copyright owners were owed a payment with their own money, the only reason that they couldn’t “access” the funds is that the services wouldn’t let them.  When you owe somebody money, you should pay them because you owe them, not act like you’re doing them a favor.

But here it comes:

Congress in the MMA’s limitation on liability provision enacted a compromise among stakeholders’ interests: elimination of the uncertainty of litigation facing DMPs in exchange for the transfer of accrued royalties to the MLC.

In other words, the services sat on the money and refused to pay until they got the MMA safe harbor.  That was the “trade”—do something the services were already required to do in return for something the songwriters were never obligated to do.  The songwriters paid for the safe harbor with their own money.

“As set forth in the relevant statutory provision, in exchange for payment of accrued royalties from “unmatched” usage prior to license availability date (and related reporting), DMPs are protected from the full brunt of copyright damages in any infringement lawsuits based on alleged failures to comply with the requirements of the prior mechanical licensing regime. The provision provides a clean slate for any past failures under the prior licensing regime for those DMPs who pay those back royalties and provide associated reporting. It provides requirements for DMPs that seek to take advantage of the limitation on liability, ensuring that DMPs that pay accrued royalties to the MLC can do so without having to second-guess whether the payment was worth it—that is, whether they qualify for the limitation.

This was the heart of the deal struck by the stakeholders in crafting the MMA: to provide legal certainty for DMPs, through a limitation on liability, in exchange for the transfer of accrued royalties.

Which “stakeholders” were these?  Did they include any of the plaintiffs who were then suing the services?  No.  Did they include anyone who didn’t drink the Kool-Aid?  No.

So let’s be clear—the reason that the services deigned to actually pay money they owed for failing to license properly is because they didn’t want to be sued for screwing up.  They wanted a vig of a new safe harbor, and as the DLC tells us very, very clearly this issue was at the core of the deal you didn’t make for Title I.

More in Part II

 

 

 

 

Must Read by @superwuster: A TikTok Ban Is Overdue

[Professor Tim Wu has a must read post in the New York Times that nails the problems with TikTok (and WeChat).  The subtitle are words that will live forever:  “Critics say we shouldn’t abandon the ideal of an open internet. But there is such a thing as being a sucker.”  Wowsa.]

Were almost any country other than China involved, Mr. Trump’s demands would be indefensible. But the threatened bans on TikTok and WeChat, whatever their motivations, can also be seen as an overdue response, a tit for tat, in a long battle for the soul of the internet.

In China, the foreign equivalents of TikTok and WeChat — video and messaging apps such as YouTube and WhatsApp — have been banned for years. The country’s extensive blocking, censorship and surveillance violate just about every principle of internet openness and decency. China keeps a closed and censorial internet economy at home while its products enjoy full access to open markets abroad.

The asymmetry is unfair and ought no longer be tolerated.

Read the post on the New York Times.

What’s Good for Google is Not What’s Good for the USA: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle, Part 6

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is the last installment.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Moreover, Amici believe that Google’s fair use expansion campaigns are designed to serve as a honeypot for Google’s data scraping business model that feeds its outsized profits from ads. Google likewise seems to promote expansion of the fair use doctrine as way to easily keep more videos on YouTube, while providing material support to its partners that allows them to outlast any songwriter or artist in the game of whack-a-mole under its copyright strike policies. No one is giving creators a shadowy milliondollar fund to defend against the misapplication of fair use.

Amicus Mr. Lowery summed it up in his 2014 testimony to the House Judiciary Committee:

I am not concerned with parody, commentary, criticism, documentary filmmakers, or research. These are legitimate fair use categories. I am concerned with the illegal copy that masquerades as fair use, but is really just a copy. This masquerade trivializes legitimate fair use categories and creates conflict where there need be none.

Scope of Fair Use at 22.

Unfortunately, Google manipulates fair use to extract value by monetizing verbatim  copies to the great disadvantage of creators who can little afford to fight back against the multi-national, trillion dollar corporation, and usually do not. Thus, independents
are caught without leverage in cases that rarely get to court.

The end result is that even where its use is “free,” Google’s interests are steadfastly commercial. Accordingly, the Federal Circuit was correct in finding that the nature and purpose of Google’s use was entirely commercial in nature.

III. GOOGLE’S PRIVATE INTERESTS ARE
NOT THE PUBLIC INTEREST.

The ultimate question in a fair use analysis is “whether, and how powerfully, a finding of fair use would serve or disserve the objectives of the copyright.” Leval at 1110–1111; see also Harper & Row, 471 U.S. at 546 (noting purpose of copyright is to give creators
“a fair return for their labors”).

Google’s only response to whether its use furthers the public interest—i.e., in promoting an effective system of copyright—is that allowing it to copy verbatim Oracle’s declaring code and structure would be “promoting software innovation.” Such verbatim copying is a “facile use of the scissors.” Folsom v. Marsh, 9 F. Cas. 342, 345 (C.C.D. Mass 1841) (Story, J.).

Yet what is good for Google is not synonymous with what is good for the public—no more than “[w]hat’s good for General Bullmoose is good for the USA.” Johnny Mercer and Gene De Paul, Li’l Abner (1956).  In fact, a ruling for Google would be “promoting” software innovation only in that the purported “innovation” would be furthering Google’s private
interest—i.e., using works without permission or a license fee.

This case again appears to be the latest in Google’s long-term strategy to use its market dominance and overwhelming commercial power to continually distort copyright exceptions, thereby artificially depressing the market price of copyrighted works.  Google’s proposed outcome would be yet another distortion. Were Google to prevail here, Amici expect Google (and its proxies) to throw its full weight behind such a ruling, far beyond the confines of its text. This case would become another totemic faux license or safe harbor that Google could use as a cudgel against creators and copyright owners.

Left unchecked, eventually the copyright distortions they seek—including in the case at bar—could nullify copyright, particularly for those who cannot afford to fight back or fear retaliation for doing so. Under the Google anti-copyright regime, exceptions would devour the rules of protection in whole, digesting art and culture along with them.

CONCLUSION

Amici respectfully suggest that the Court should consider whether a decision in favor of Google would merely “unleash” yet another weapon for Google’s private benefit, and whether Google’s infringement of Oracle’s declaring code and structure constitutes
“simple piracy” for which the company should most certainly be held accountable.

This Court should affirm the decision of the Federal Circuit below.
Respectfully submitted,
CHARLES J. SANDERS
Counsel of Record
29 KINGS GRANT WAY
BRIARCLIFF, NEW YORK 10510
(914) 366-6642
cjs@csanderslaw.com

CHRISTIAN CASTLE
CHRISTIAN L. CASTLE, ATTORNEYS
9600 GREAT HILLS TRAIL
SUITE 150W
AUSTIN, TEXAS 78759
(512) 420-2200
asst1@christiancastle.com
Counsel for Amici Curiae

 

How Google Treats Copyright as an Inconvenience: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle, Part 5

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 5.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

B. Google Benefits Commercially from Weaker Copyright Protection.

Amici, as creators in the digital age, are largely beholden to the whims of distributors. As romantic the notion is of solitary artists laboring over their works, the fact remains that they will ultimately need to distribute their creative expression. That means going
through Google far more often than not.

Artists like Amici have a tense relationship with Google and its subsidiaries. On the one hand, Google controls access to the market directly or indirectly. On the other hand, Google has consistently abused or outright ignored copyright when it comes to
interactions with creators and their intellectual property.

For example, when YouTube rolled out its subscription service, it reportedly warned independent artists and labels that if they refused YouTube’s licensing terms, their music would be blocked on YouTube’s free service, and YouTube would keep any advertising revenue. Ben Sisario, Independent Music Labels Are in a Battle with YouTube, N.Y. Times
(May 24, 2014) https://www.nytimes.com/2014/05/24/business/media/independent-music-labels-are-in-abattle-with-youtube.html.

In Amici’s experience, Google has a long history of leveraging copyright exceptions for its enormous profit at creators’ expense. Through YouTube, Google profits directly from verbatim copies of Amici’s own works. These copies are often unauthorized, unlicensed, and severely undermonetized. See Jonathan Taplin, Do You Love Music? Silicon Valley Doesn’t, L.A. Times (May 20, 2016).

Google is able to artificially lower the floor for the market for music and other copyrighted works by strategically leveraging a variety of copyright exceptions and loopholes across all of its platforms, particularly YouTube and search.

As discussed above, in order to maximize user engagement with its ads, Google needs a constant influx of creative content. Copyright is treated as an imposition, and Google avoids liability through an abuse of exceptions such as the safe harbor provisions
in the Digital Millennium Copyright Act. See 17 U.S.C. § 512(a)–(d). Google frequently argues that these provisions immunize Google from liability for infringing content, while also making it very easy for Google to restore content with the check of a box.

Google has cobbled together a system of copyright “strikes” based on DMCA notices received from copyright owners against infringing YouTube channels. With sufficient strikes, YouTube blocks public access to the channel. The channel operator, however, can easily restore content by filing a counternotification with YouTube often attesting without firm legal grounds to a good faith belief that their unauthorized use of the material is non-infringing.

Such an assertion frequently mimics Google’s general assertions that the fair use doctrine is malleable enough to accommodate any use no matter how damaging, non-transformative, commercially based or unnecessarily broad. See 17 U.S.C. § 512(g)(3)(C).
Assuming the copyright owner does not seek relief in court—and very few do because of the prohibitive costs and time required—then YouTube restores the content, and Google has another video to monetize.

Thus, assertions of fair use (real or imagined) play a critical role in this scheme, and therefore ultimately Google’s advertising inventory. YouTube’s counternotification
webform, in fact, arguably encourages a channel operator to claim a good-faith belief that its infringing video was fair use under the broadest of circumstances. See Lenz v. Universal Music Corp., 801 F.3d 1126 (9th Cir. 2015).

These channel operators are rarely represented by counsel, meaning their claims of fair use are more folk wisdom and internet legend than law. Five-time Grammy Award winner and independent composer and band leader Maria Schneider gave an example of this culture in comments to the Copyright Office:

“As just one small example, just put in the YouTube “search” bar the phrases “fair use” and “full CD.” There are literally countless whole albums digitally uploaded by users who state that it is “fair use” (which it obviously isn’t).

YouTube knows there is infringement of epic proportions broadly across its platform, and . . .certainly makes it possible, and easier, for infringement to occur.”

Coupled with its porous repeat infringer policy, YouTube has leveraged counternotifications into a broad-based fair use business strategy—truly an attempt to fashion its non-existent “fair use industries” entirely out of whole cloth.

Google overamplifies fair use in other ways. For example, since 2015, YouTube has  sponsored an initiative to subsidize legal fees for certain fair use cases that it decides are “some of the best examples of fair use on YouTube by agreeing to defend them in
court if necessary.”34 YouTube announced that it intended to “indemnify creators whose fair use videos have been subject to takedown notices for up to $1 million of legal costs in the event the takedown results in a lawsuit for copyright infringement.”

Google tells us “[they] believe even the small number of videos [Google] are able to protect will make a positive impact on the entire YouTube ecosystem, ensuring
YouTube remains a place where creativity and expression can be rewarded.”

The promise of Google’s million-dollar fair use indemnity promotion effectively provides a faux license against copyright liability without the consent of the copyright owner, and purports to protect YouTube partners for fair use cases that Google judges worthy, i.e., cases that promote Google’s private interests in protecting and expanding YouTube’s advertising inventory. It is unclear which, if any, cases Google or YouTube have taken on under this indemnity or what the criteria would be because Google does not disclose
when or if they get involved. One can easily discern through market behavior, however, that the threat alone more than satisfies Google’s imputed aims to dissuade creators from even attempting to enforce their rights.

[To be continued…]