Author: thetrichordist

Chris Castle’s Copyright Office Comments on the Black Box Controversy

Here’s some more MLC news you’ll never read about in the trade press.

Yesterday we posted a shocking revelation from the MediaNet/SOCAN ex parte letter to the Copyright Office: It appears that the digital music services have no intention of complying with the much ballyhooed benefit to the Music Modernization Act–in return for the “reach back” safe harbor that somebody decided to grant the services retroactively, the services would pay over (or you could say “disgorge”) all the unmatched and unpaid mechanical royalties that they were holding, sometimes for years, and always secretly. (Adding insult to injury, MediaNet seems to think that referring to SOCAN’s ownership of MediaNet somehow makes screwing us over into a songwriter-friendly act of good fellowship and felicity. More likely, SOCAN itself knows nothing about it.)

Remember, MediaNet straight up threatened to decline the reach back safe harbor and not pay over the black box. As it turns out, MediaNet’s position is not unique–as Chris Castle identified in his reply comment on the Copyright Office’s black box study, all of the services represented by the DLC made that exact threat to the Copyright Office. As Chris observes, these are not idle threats. They are made by the biggest corporations in commercial history, one of which may be broken up due to antitrust investigations on two continents.

Something must be done and done quickly before the DLC decides to take the blanket license without the limitation on liability for past infringements having successfully scared off anyone who could have sued but didn’t thinking that there was a fixed reach back safe harbor. That seems like it will result in the big guys having paid off the big guys in the NMPA’s secret settlement that was being negotiated simultaneously with the MMA (the NMPA’s umbrella December 17, 2017 Pending and Unmatched Usage Agreement referenced in the MediaNet ex parte letter and talked around in other filings. Remember–the MMA was introduced a few days after the secret NMPA agreement on December 21, 2017 and Wixen Music Publishing felt they had to sue Spotify by December 31, 2017 because of the reach back safe harbor. So everyone except the songwriters–and perhaps most Members of Congress–seems to have known that the fix was in on black box.)

Another fine mess they got us into. Here’s the except from Chris Castle’s reply comment:

The DLC’s Quid Pro Quo Revelation

The concept of a “black box” distribution is a pale mimic of a simple
fact: It is not their money. The fundamental step that Title I excuses
is basic and would solve much of the unmatched problem if Title I did
not exist: Don’t use a work unless you have the rights.

It is a fundamental aspect of copyright licensing and it is not metaphysical.
Yet the message from all negotiators concerned in this process seems
to shelter legitimacy in a complication of dangers to the black box that
come down to another simple fact: Obey and be quick about it or the
law will take your money and give it to someone else.

How much is in the black box? They won’t tell you. From where? Not
your business. From when? Confidential. Is it yours? Already paid it
to someone else before you even knew it was there. And Lord knows
that money once taken incorrectly in the dark is unlikely to be paid
correctly in the light.

Comments by the DLC demonstrate conclusively that addressing the
black box has taken on even greater urgency. The DLC’s Initial
Comment in a related docket is unusually revelatory for a group with a
multitrillion dollar market capitalization that loves them some
protective orders. This passage is particularly breathtaking:

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.

If that were “the deal” it is news to me, and I like to think that I’ve
been reading along at home pretty attentively. If I wasn’t aware of
“the deal”, I’m sure I wasn’t alone in my ignorance, but I’m far more
understanding of why the negotiators would have been motivated to
keep “the deal” under wraps if that’s really what it was.

If “the deal” wasn’t kept quiet, someone might have asked why there
was a “deal” when the services were simply agreeing to pay money
they already owed and that they were already obligated to pay for infringements that already occurred. Yet, services still got the new
safe harbor trophy to put on the wall in the copyright hunting lodge
next to the DMCA and Section 230.

The gall doesn’t end there, however. The DLC goes on to make this
threat of imminent harm:

[The “deal”] 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 it—i.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.

It is a bit odd that the DLC seems to think of Title I as their private
contract, but there it is. The DLC members’ anticipatory repudiation
of the purported deal that the world now knows underpins Title I was
both refreshingly brazen and starkly shocking. Given that the Eight
Mile Style case against DLC member Spotify (and both Spotify and
The MLC’s vendor the Harry Fox Agency) is a live action, the DLC is
not making an idle threat. The DLC tells us that if its market cap isn’t quite high enough to suit, Spotify could immediately dip into the black
box for “money to use in defending itself.”

The relationship with the services apparently has settled into the
customary laying about with threats and blackguarding both
songwriters and the Copyright Office. That’s reassuring in confirming
that human nature hasn’t actually changed and these companies really
were the Data Lords we had always known our betters to be after all,
sure as boots.17 Maybe one day the scorpion really won’t sting the frog.
Maybe another “unity dinner” is in order. But not today.

Regardless, it is clear that the Copyright Office is almost the only place
that songwriters can go for relief and an explanation of how the MMA
is to be implemented whatever secret deal the DLC now purports to
have made. Given the DLC’s unequivocal threat on behalf of its
members, there is no doubt of the imminent danger that the black
box currently being held is about to vanish into thin air if something
isn’t done immediately to preserve the status quo. The balance of
hardships pretty clearly tilts in favor of the songwriters as the safe
harbor services control the money and always have.

by thetrichordist

MediaNet Trying to Cut Off Black Box Payments

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

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

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

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

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

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

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

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

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

by thetrichordist

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

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

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

Read the entire comment here.

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

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

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

A/ Copyright ownership information and shares

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

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

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

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

Personal identifiable information

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

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

Point of contact for inquiries and Complaints

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

by thetrichordist

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

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

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

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

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

Read the entire post here.

by thetrichordist

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

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

Ownership of the Musical Works Database

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

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

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

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

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

Songwriter and Composer Names in the Public Musical Works Database

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

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

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

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

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

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

Read the whole comment here.

by thetrichordist

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

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

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

Read the entire comment here.

by thetrichordist

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

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

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

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

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

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

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

Database Ownership.

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

Read the full comment here

by thetrichordist

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

by thetrichordist

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?

by thetrichordist

#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

by thetrichordist