Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @MusicReportsInc

This post first appeared on Artist Rights Watch.

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!

This comment from Music Reports gives some interesting insights into how The MLC is favoring the NMPA’s formerly wholly-owned Harry Fox Agency (HFA) which has been on the wrong side of most of the licensing debacles.  Chris posted some analysis on MediaNet’s comment about criticisms of the HFA-The MLC contract as well as its rather odd timeline as revealed at The Copyright Office roundtables on the next cluster jam, the unclaimed royalties.  At least that has the entertainment value of watching them steal in plain site with the Copyright Office drinking game of who will make the excuses for them this time like we don’t notice.  We’re not big MRI fans (or MediaNet fans for that matter), but when they’re right, they’re right.

The sad truth is that this entire MLC exercise has become about the rich getting richer from a data land grab for independent songwriters and publishers who have been duped into thinking it’s all for their benefit.  It was all so predictable, but nobody listened.  This is what they wanted, and now they’ve got it.  How about a rule that says if you had your fingerprints on any part of the debacle of the last 20 years, you are immediately disqualified?  Bye bye HFA, NMPA, MRI, MediaNet.  Unfortunately that is not and never will be the rule because these are the same people who make the rules and are the same people who gave songwriters frozen mechanicals from 1909-1978 and are still freezing the 9.1¢ statutory royalty for fourteen years.

MRI could have done with some editing, but stick with it, they make a lot of sense.]

Read Music Reports entire comment here.

Music Reports generally agrees with, endorses, and echoes the views of MediaNet as stated in the response to the NOI it filed today.

Music Reports also takes note of the MLC’s selection of HFA as a major provider of the capabilities required for its core operations. While the MLC is narrowly limited by the MMA to the principal purpose of administering the blanket license for Section 115-compliant audio-only streaming music services in the United States, and specifically prohibited from storing data about or administering public performance licenses, HFA/SESAC is not so constrained.

On the contrary, HFA/SESAC is free, as a non-regulated, for profit commercial music rights administration service, to administer any type of mechanical licenses. Moreover, SESAC, administers performance rights on a for-profit basis in competition with other PROs. Being hired by the MLC does not change the fact that HFA/SESAC is in competition with other commercial music rights administration services that are not the beneficiaries of a long term, highly-paid contract with the MLC. This is fair enough, so far is it goes.

snakeoil-cover-700x400-1

But as noted above, the boundaries between HFA/SESAC’s database and that which the MLC must build and make publicly available are completely unknown [want to bet that’s because they don’t exist?], as is the timeframe during which the former will substitute for the latter, and whether a proprietary MLC database built independently of HFA’s data will ever be the basis on which the MLC renders royalty distributions.

What is known, however, is that the MLC will enjoy publicity generated by its own statutory mandates (subsidized by the DLC), by the DLC itself, and by the Office, all of whom are authorized and required to devote budgetary allocations to direct publishers’ attention to registering their rights data with the MLC (the database of which is, for the foreseeable future, that of HFA/SESAC). Notwithstanding that the primary purpose of these provisions may be to publicize the existence of the database and of available unclaimed royalties, the consequence will be the direction of resources toward the focus of copyright owners’ attention on just one of several important, pre-existing music rights registries. This is in effect a set of reinforcing government subsidies of which one private enterprise, in competition with other marketplace actors, is the beneficiary.

To the extent HFA/SESAC directly benefits unfairly from a privileged place in the data ecosystem by virtue of this arrangement, the goal of the MMA to create a healthier music rights administration ecosystem will be perversely harmed by the creation of an uneven playing field that penalizes the investments in data made by other services. To be sure, other commercial services are free to compete with HFA to offer services to the MLC and others in the marketplace. But over time, a privileged place in the market’s information flow may distort competition to the determent of copyright owners and their administrators, DMPs, and the public.

Luckily, the Office can prevent this result quite simply by requiring that the MLC provide access to its public database on a competition-neutral basis.

As was noted above, there is an important temporal aspect to the management of music rights data. In order for two administrators to efficiently interoperate, they must be able to have a more or less shared contemporary view of the data about the works they are administering, even if they don’t always agree on every detail.

Therefore, the specific prescription called for here is a combination of the points made in the previous sections above: (a) the Office should use its authority under the MMA to adopt such regulations as it deems necessary to clarify that the public database which the MLC must establish and maintain will be identical to or at least contain the same data as the database on which the MLC will distribute royalties; (b) the MLC should make its public database available contemporaneously with the commencement of its royalty distribution efforts; and (c) the MLC must offer eligible parties bulk, machine-readable access to such data “on a basis that is both comprehensive and as frequent as necessary to efficiently manage the licensing and royalty distribution activities of the mechanical licensing collective itself, and not less than daily access to changed information within a day of any change to such information.”

Guest Post: Who Owns The MLC Database of Songs?

[This is crossposted from MusicTech.Solutions and is adapted from the author’s comment to the Copyright Office in the MLC regulations.]

By Chris Castle

If you’ve been following the evolution of the “aircraft carrier” revision of the U.S. Copyright Act styled the “Music Modernization Act,” you will remember that America now has a blanket license for the mechanical reproduction of songs (or will have as of 1/1/21).  The “MMA” comes in three parts (or as I say three and one-half):

  • Title I which establishes the blanket license, a willing-buyer willing-seller standard for mechanical royalty rate setting, the Mechanical Licensing Collective (called the “MLC”), the all-important safe harbor for Big Tech’s massive infringement of songs, and authorized the creation of the “musical works database” which is the subject of this post;
  • Title I-1/2 which gives certain small benefits to ASCAP and BMI;
  • Title II which provides meaningful relief and largely fixes the pre-72 loophole that the Turtles sued over (formerly the CLASSICS Act); and
  • Title III which gives producers a statutory basis for SoundExchange royalties, another truly meaningful change.

I supported Title II and Title III, but I have lots of bones to pick with Title I, not the least of which has to do with the musical works database.  A lot of my issues have to do with what I perceive as sloppy drafting and a mad rush to “get a bill” at all costs which has led to a strong need to “fix” a lot of “glitches” in Title I itself (such as the failure to dovetail the major change in the compulsory mechanical from a per-song basis to a blanket basis. This in turn has an affect on other copyright provisions such as the termination right for songwriters which is now having to get solved–maybe–through the caulking of regulations to cover sloppy workmanship.  (Caulk cracks.)

For those of us who sweep up behind the elephants in the circus of life, I fear that the musical works database of other people’s things is an 11th Century solution to a 21st Century problem–a list of things that will be very difficult to get right and even more difficult to keep right, not unlike William the Conqueror’s Domesday Book.  Static lists of dynamic things necessarily are out of date the moment they are fixed.

Domesday-book-1804x972

Who Owns the Crowdsourced Musical Works Database?

We are going to discuss Title I musical works database today from a very simple threshold question:  Who owns it?

Spoiler alert:  The public owns it.  This is logical, but like so many things in the drafting of Title I, the drafting is glitchy, which is what you call it if you’re in a good mood.  I apocryphally attribute the term “glitch” when applied to massive Internet data breaches to the Fathers of the Internet who did not take care that the cracks were sealed (looking at you, Vint Cerf).

When you consider that the most valuable asset of the MLC is going to be the song database, ownership matters.  This database of other people’s things must be created by the efforts of potentially hundreds of thousands of songwriters given no choice in the matter.  It would be a bit much for the U.S. Congress to require all this only to enrich one U.S. corporation controlled by the U.S. publishers by leveraging a compulsory license to create a very valuable private asset.  Particularly a database paid for by still other people that might then get taken and given to a replacement MLC.  (There’s that “taken” word again.)  That’s typically not what Congress does.

Ownership matters to the Digital Licensee Coordinator, too.  Let’s also remember that on paper, the MLC does not pay a penny for the cost of its operations, including the creation of the database.  The entire cost of the MLC’s operations is borne by the users of the blanket license through an organization called the Digital Licensee Coordinator.  (If you’re thinking what’s with these names, I know, I know.  Forget it, Jake, it’s Washington.)

This database ownership issue has been raised to authorities a couple times, and no one has answered it.  I made it part of a recent comment I filed with the Copyright Office in the current rule making for regulations implementing Title I.  Maybe they’ll get around to answering the question this time.  After a while, you have to wonder why they have not.

The MLC’s Short Track Record on Ownership of Other People’s Things

A side note demonstrating both that ownership matters and that The MLC is thinking about ownership:  a service mark registration for “The MLC”.  (A service mark is a kind of trademark.)  There is a difference between “the MLC” and “The MLC”.  That’s because “the MLC” is the organization envisioned by the Congress that has to be redesignated (think “re-approved”) by the Copyright Office every five years.  On the other hand, “The MLC” refers to “The MLC, Inc.” which is the corporation created by the super popular proponents of Title I who were designated the first MLC and who style themselves “The MLC” using the definite article. But if I told you that there was a difference between “the MLC” and “The MLC” would you find that confusing?

The clear implication of the definite article seems to be that they don’t envision any future in which they will not be the MLC, i.e., will not be redesignated.  They also probably don’t envision a future where a different corporation would be designated the MLC and The MLC would be looking for something to do.  Maybe they know something we don’t, but there it is.

This also raises some interesting trademark questions should The MLC seek to prevent a successor from trading under the name “MLC”, interesting enough to stop The MLC from claiming a proprietary interest in the statutory description.  That mark is arguably descriptive and probably should be denied.  In fact it’s so descriptive it actually asserts a private intellectual property interest in the statutory language that describes the organization created by statute.  Sort of like asserting a trademark in “TVA” or “ICC” or “FOIA”.

MLC TM Registration

Should Songwriters Bust a Move to Create Value for The MLC?

Let’s be clear about who owns the Congressional database.  As you will see, the musical works database does not belong to either the MLC or The MLC.  If there is any confusion about that, the Copyright Office should clear it up right away (which would save having to go to other avenues to do the same thing).  There really isn’t a practical alternative to the Copyright Office jurisdiction.  Congress gave the Copyright Office broad regulatory powers over the MLC (and, therefore, The MLC).

The public “musical works database” that Congress envisioned in Title I of the Music Modernization Act is largely a crowdsourced asset.  Congress has asked the world’s songwriters or copyright owners to spend considerable time preparing their catalogs in whatever format The MLC and the DLC determine is good for The MLC (with the Office’s blessing through regulations).  There inevitably will be quality control and accuracy review costs invested by the world’s songwriters and copyright owners in making sure that their catalogs are correctly reflected in the musical works database.  “Copyright owners” may also include sound recording copyright owners asked to contribute their ISRCs or other data that they, too, have invested considerable expense in creating and maintaining.

Unfortunately, the transaction cost to the songwriter and copyright owner for participation in The MLC and crowdsourcing Congress’s database is an unfunded mandate at the moment.  From a commercial perspective, the dynamic evolution of data is a potentially limitless expense, yet we have both this unfunded mandate which will spike in the early years but continue on a rolling basis essentially forever.  Yet the MLC’s administrative assessment appears to be capped at a fixed increase by a settlement agreement.  Again, a “glitch.”  Still, The MLC’s executives seem positively giddy about their prospects with all the relief of someone who got tapped for lifetime employment with a pension (no doubt) while the songwriters these leaders are to serve are having the fight of their lives for survival.

What Did Congress Do?  Or Not Do?

Yet, it seems clear that at the time of passing Title I, Congress had no intention of using a public law to create a private asset.  Neither was their intention to use the law to leverage the creation of an asset for private ownership by whoever the head of the U.S. Copyright Office designated to be the MLC, regardless of how “popular” they might have been.

The creation of the musical works database is replete with hidden costs paid or incurred by songwriters and copyright owners.  Neither the Congress nor the Copyright Royalty Judges  were asked to directly address these hidden costs of creating the musical works database.   (The Copyright Royalty Judges (or “CRJs”) are relevant because they approve the DLC’s financial contribution to the MLC through the “Administrative Assessment.”  The assessment is intended to cover the “collective total costs” which includes broad categories of cost items related to the database.)  And as usual, these costs appear to have gone straight over the heads of the Congressional Budget Office in their mandated assessment of the costs of Title I.

Even so, the MMA Conference Report from Congress addresses the cost issue head on:

The [Congress] rejects statements that copyright owners benefit from paying for the costs of collectives to administer compulsory licenses in lieu of a free market. Therefore, the legislation directs that licensees should bear the reasonable costs of establishing and operating the new mechanical licensing collective. This transfer of costs is not unlimited, however, since it is strongly cabined by the term ‘‘reasonable.’’[1]

It will be impossible for the “new mechanical licensing collective” to fulfill its statutory duties or build the complete musical works database to which the United States aspires without songwriters and copyright owners around the world doing the intensive and costly spade work to prepare their data to be exported to The MLC.[2]  It is clear that the reasonable costs of preparing and exporting that data should be borne by The MLC[3] as part of the “Administrative Assessment.”[4]  This material cost clearly is covered by the definition of “collective total costs”[5] and so was, or should have been, included in the current Administrative Assessment,[6] unless the intention was to cover The MLC’s side of these costs and force songwriters and copyright owners to eat their side of the same transaction.  If that is the case, it would be helpful for the Copyright Office to clarify that intention in the name of transparency through their broad regulatory authority.

If there is another drafting glitch there, it is worth noting that the CRJs clearly contemplated revisiting the Administrative Assessment  on their own motion for good cause.[7]  If there were ever good cause, the staggering cost of registering potentially millions of songs would be it.[8]

It should be clear that no one’s intention was for the services to pay to create the musical works database and for the songwriters and copyright owners to labor to export their data to make the musical works database complete, only to have The MLC claim ownership of the musical works database, particularly if The MLC were not redesignated as the MLC following the five-year review by the Copyright Office.  That unhappy “take my ball and go home” arbitrage event is foreseeable and would entirely cut against the “continuity” contemplated by Congress.[9]

It is critical that the Copyright Office clarify in regulations that neither The MLC nor any other MLC owns the musical works database.  In fact, the MMA clearly states that “if a new entity is designated as the mechanical licensing collective, [the Office shall] adopt regulations to govern the transfer of licenses, funds, records, data, and administrative responsibilities from the existing mechanical licensing collective to the new entity.”[10]  Since The MLC will have to transfer the musical works database and the other statutory materials to the new MLC if they fail to be redesignated, there should be no misconceptions that The MLC “owns” the database and could withhold all or part of it.[11]  Because The MLC is just An MLC.

It should also be made clear that any MLC or DLC vendor does not obtain an ownership interest in any copy of all or part of the musical works database they may obtain for any reason.

Again, just like the termination right “glitch”, these are threshold questions that should have been answered in the statute itself.

Clarifying ownership of The MLC’s most important asset should be an easy ask of the Copyright Office.  Watch this space to find out if it is.

          * * * * * * * * *

[1] Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen and Ranking Members of Senate and House Judiciary Committees, at 1 (2018) at 2 (emphasis added).

[2] This effort is referred to as “Play Your Part™” a business process trademarked by The MLC available at https://themlc.com/preparing-2021.

[3] I would point out that the way The MLC should work—and in the end probably will end up functioning as a practical matter–is that The MLC needs to be able to handle however songwriters ingest their data.  Instead, it appears that The MLC is trying to dictate to all the songwriters in the world how they should assemble their song data beforethey register with The MLC. If The MLC wants to shift that burden, they should expect to pay for it.  Otherwise, this is exactly backwards.

[4] 17 U.S.C. §115 (d)(7)(D).  The Administrative Assessment is what makes the MLC different from other PROs or CMOs where members bear their own cost of participation.  The Administrative Assessment is to cover the entire cost of creating the musical works database, not just The MLC’s startup or overhead costs.  If nothing else, another way to treat these out of pocket costs is as a contribution to the operating costs of The MLC by songwriters and copyright owners that should be offset against future Administrative Assessments.

[5] 17 U.S.C. § 115 (e)(6).

[6] Order Granting Participants’ Joint Motion to Adopt Proposed Regulations, In re Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective (U.S. Copyright Royalty Judges Docket No. 19-CRB-0009-AA (Dec. 12, 2019)).

[7] The CRJs included this footnote in their ruling on the administrative assessment (emphasis added):  “The Judges have been advised by their staff that some members of the public sent emails to the Copyright Royalty Board seeking to comment on the proposed settlement agreement. Neither the Copyright Act, nor the regulations adopted thereunder, provide for submission or consideration of comments on a proposed settlement by non-participants in an administrative assessment proceeding. Consequently, as a matter of law, the Judges could not, and did not, consider these ex parte communications in deciding whether to approve the proposed settlement. Additionally, the Judges’ non-consideration of these ex parte communications does not: (i) imply any opinion by the Judges as to the substantive merits of any statements contained in such communications; or (ii) reflect any inability of the Judges to question, [on their own motion without a filing from a participant] whether good cause exists to adopt a settlement and to then utilize all express or reasonably implied statutory authority granted to them to make a determination as to the existence…of good cause [to reject the settlement now or in the future].”   Order Granting Participants’ Joint Motion to Adopt Proposed Regulations, In re Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective (U.S. Copyright Royalty Judges Docket No. 19-CRB-0009-AA (Dec. 12, 2019) n.1 (emphasis added)).

[8] There is a simple solution to determining these costs to songwriters and copyright owners.  The Copyright Office could designate several metadata companies who could compete to handle the various steps of creating and exporting metadata to The MLC, such as in the CWR format, for example North Music Group and Crunch Digital have such tools.  To avoid picking winners and losers and to preserve competition, the Office could alternatively establish a benchmark of quality control or some other criteria for becoming an approved company.  The costs charged would likely vary depending on the size of the catalog, but The MLC need only pay the invoice of these companies which would be included in the Administrative Assessment.  Obviously, the entity performing such work should be independent of The MLC, the DLC or any of its members, or any of their respective vendors.  This would, of course, introduce the concept of competition into the monopoly which may interest no one but might benefit everyone.

[9] See H. Rep. 115-651 (115th Cong. 2nd Sess. April 25, 2018) at 6 (hereafter “House Report”); S. Rep. 115-339 (115thCong. 2ndSess. Sept. 17, 2018) at 5 (together with identical language, hereafter “legislative history”) (“Although there is no guarantee of a continued designation by the collective, the Committee believes that continuity in the collective would be beneficial to copyright owners so long as the entity previously chosen to be the collective has regularly demonstrated its efficient and fair administration of the collective in a manner that respects varying interests and concerns. In contrast, evidence of fraud, waste, or abuse, including the failure to follow the relevant regulations adopted by the Copyright Office, over the prior five years should raise serious concerns within the Copyright Office as to whether that same entity has the administrative capabilities necessary to perform the required functions of the collective.”)

[10] 17 U.S.C. § 115 (d)(3)(B)(ii)(A)(II).

[11] It seems that if an incumbent MLC that was not redesignated and continued to operate, it would almost unavoidably compete with the newly designated MLC but with a substantial leg up.  I realize there have been some statements made about The MLC taking on work beyond the blanket license, such as voluntary licenses.  That additional work might require additional investment, or a sharing of the total collective costs by third parties.  I have not addressed that allocation as I for one would like to see The MLC stick to their knitting and succeed at the job they are obligated to do, and, frankly, paid to do, before worrying about expanding into profitable roles for the non-profit corporation.   It does seem that if The MLC is not redesignated, there would not be much for them to do once they transfer the public’s assets to the new MLC.

Guest Post: Copyright Office Regulates the MLC: Selected Public Comments on MLC Transparency: MediaNet

By Chris Castle

The wisest among us learn to use their portents well
There’s no need to hurry, it’s all downhill to hell.

From “Don’t Stand Still“, written by Original Snake Boy, performed by Guy Forsyth

The Copyright Office has solicited comments on the transparency of The MLC and received quite a few well-thought out comments (if I say so myself).  MediaNet

has raised some very interesting questions about the NMPA’s relationship with HFA and The MLC that many have questioned both in prior comments and in the many lawsuits against HFA clients like Spotify for its various licensing failures.  (Note that I don’t really fault HFA all that much because I think it really boils down to choices made by Spotify, another Internet company that is in a rush to enrich themselves at the expense  of songwriters and artists.  If you can fault HFA for one clear choice in that cluster, it’s that they didn’t resign from the job both during and after their ownership by NMPA and SESAC.  Maybe they got stock, too.)

MediaNet raises this interesting point:

In passing the MMA, Congress recognized that the party who controls the database may enjoy an economic advantage over others.9 Although not applicable to the MLC-HFA contract, The Federal Acquisition Regulation System, codified at 48 C.F.R. § 1.000 et seq., provides guidance regarding the principle cited by Congress under the MMA. For example, under FAR 9.505 a contracting officer cannot award a federal contract to a contractor where an organizational conflict of interest (or “OCI”) cannot be avoided or mitigated.

But here’s the clincher:

Applying the principles from the FAR, the arrangement between MLC and HFA raises a number of questions regarding the potential for unfair economic advantage to HFA as a consequence of its control over the operation and administration of the MLC database, including the following:

· Who owns the database, MLC or HFA? [The answer is neither]

· If HFA is terminated by MLC, does HFA own or have a claim to any proprietary or intellectual property rights in the database?

· Will HFA have access to “Confidential” or “Highly Confidential Information” (e.g., contract terms, payments and financial information) of music publishers or other similarly situated organizations such as PROs and administration service providers?

· Will HFA have access to the reporting of usage and required payments of the administrative assessment by significant nonblanket licensees (“SNBLs”) in the notices of nonblanket activity (“NNBAs”) required under the MMA?

· Sources suggest HFA may offer [an “ethical wall”] between its work on the MLC database and other work for third parties not using the blanket digital license, and an audit right to ensure HFA complies with this separation. Can HFA effectively separate such third party work from the database it administers for the MLC?

What are the remedies for non-compliance with such measures?

MediaNet respectfully requests that the Copyright Office, as part of its regulatory and oversight authority to ensure transparency, require that the agreements between MLC and all of its vendors be made publicly available, and with respect to the MLC agreement with HFA, if the information requested above is not disclosed in such agreement, require MLC and HFA to submit answers to the forgoing questions.

It should be obvious to everyone that there is an inherent conflict of interest between NMPA and HFA.  Insufficient care was taken at the Copyright Office and at The MLC to create systems to reduce the fact of this conflict negatively affecting the operations of The MLC which presents an opportunity to leave the bad days behind.  But that didn’t happen and here we are again.

But let’s not forget that The MLC is essentially a quasi-governmental organization and must comply with the Copyright Office’s oversight role despite the intimidation tactics.  And the Copyright Office is already looking a bit ragged around the edges from even the little connection to corrosion they’ve had to date.

For example, the Copyright Office announced that “the Butler Report” was commissioned by the Copyright Office to poll ex-US CMOs about their black box practices, knowledge which likely was common to everyone on The MLC’s board.  I must have missed where this work product was put out for bid, which leads me to think it was a single source consulting contract which is what they use to pave the road to hell when good intentions have supply chain disruptions.  Nothing against Susan Butler who is very competent and engaging, but I can think of several academics who would be better suited and would have been peer reviewed.  We can disagree about that, but why not have them submit proposals?  And also deliver all the work product that the taxpayer financed?

MediaNet raises many more excellent points about the inherent conflicts in the NMPA-The MLC-The HFA relationship and The Copyright Office’s designation process that are well worth reading.  You can find the full comment here.

And keep this in mind:

MLC executive Richard Thompson said at the Copyright Office panel on unclaimed royalties last December,[1] “[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.)  Of course, The MLC didn’t announce the selection of HFA and ConsenSys until November 26, 2019. [2]

If The MLC was already working with HFA in July as Mr. Thompson says, why did they give the world the impression that they had not picked a vendor until November?

 

 

 

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

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

 

Why So Secretive? Copyright Office’s Public Consultation on Setting Rules for MLC’s Operation: Future of Music Coalition

[The Copyright Office is bravely trying to regulate The MLC to keep the MMA from becoming a feeding frenzy for the data lords.  As Chris Castle said in his comment on what should be stamped “Confidential” and kept away from songwriters: “The premise of confidential information under Title I is that there is in rock and roll certain information deserving of government-mandated secrecy.”  Or as Otis said, too hot to handle.  Keep that in mind–when they say “confidential information” they mean information they can keep away from you.

We are going to excerpt some of the good comments that support independents in the other Copyright Office “rulemaking” consultation that just closed devoted to confidential treatment of data by The MLC and the DLC.  You can read them all here.]

The Future of Music Coalition made some great points in their filing, read the whole thing here.

Restrictions on use by MLC and DLC Vendors and Consultants FMC shares concerns expressed by other commenters about the possibility of vendors using confidential data for competitive advantage or purposes beyond what the MLC was created to do. There should be no provision for HFA to use confidential data for “general use”, even on an opt-in basis. The risk of anti-competitive harm is too great.

Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @KerryMuzzey

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Read the comment by Kerry Muzzey

The launch of iTunes in 2001 began the democratization of music distribution: suddenly independent artists had a way to reach their fans without having to go through the traditional major label gatekeepers. Unfortunately most of those independent artists didn’t have a music business background to inform them about all of the various (and very arcane) royalty types and registrations that were required: and even if they did, Harry Fox didn’t let individual artists register for mechanicals until only recently.

The result? 19 years’ worth of unclaimed royalties by so many independent artists who have no idea how to access them.

We had hoped that the MMA would fix this, but the “black box” of unclaimed royalties is going to be distributed to the major publishers based on market share. We independent artists don’t have “market share” – but we do have sales and streams that are significant enough to make a difference to our own personal economies. A $500 unclaimed royalty check is to an independent musician what a $100,000 unclaimed royalty check is to a major publisher: it matters. Those smaller unclaimed royalty amounts are pocket change or just an inconsequential math error to the majors but they’re the world to an independent writer/publisher. And that aside, these royalties don’t belong to the majors: they belong to the creators whose work generated them.

Please, please, please: you have to make that database publicly accessible and searchable like Soundexchange does. There needs to be a destination where all of us can point our friends and social media followers to, to say “you may have unclaimed royalties here: go search your name.” They can’t remain in the black box and they can’t go to the major publishers. These royalties must remain in escrow and all means necessary should be used to contact the writers and publishers whose royalties are in that black box: absolute transparency is required here, as is a concentrated press push by the MLC to all of the music trades and music blogs (Digital Music News, Hypebot, et al) and social media platforms encouraging independent artists to go to the public-facing database and search their name, their publisher name, their band name, and by song title, for possible unclaimed royalties.

Please: the NMPA can’t be allowed to hijack royalties that do not belong to them. Publishers are fully aware of how complex royalty types and royalty collections are: they and the NMPA must make every effort here to ensure that unclaimed royalties reach their rightful legal and moral recipients.

Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @JonathanCoulton

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Read the comment by Jonathan Coulton

I am an independent musician, and I make my living full time as such. I have spent years dealing with the wide array of entities who collect royalties on my behalf. Errors happen all the time – songs are misattributed, missing, publisher information is wrong, royalty splits are wrong. This is to be expected when the dataset is this vast and complicated, and coming from many disparate sources. This is why for me, absolute transparency is essential. I need to be able to search for my name and my song titles so that I can look for errors like these and make sure I am getting paid all the royalties I am due. As an independent, my slice of the pie is very small on the scale of the entire industry, but it is essential to me and my ability to make a living. I have nobody but myself representing me in this process. Even with the best intentions, an entity like the MLC cannot possibly look out for all of us, so I hope that this structure provides us the tools with which we can look out for ourselves.

I very strongly encourage maximum transparency, granularity, and searchability be provided to rightsholder with regards to this data.

Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @zoecello — Artist Rights Watch

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Comment by Zoë Keating:

Some version of the usage data that the DSPs report to the MLC should be easily accessible to the public so that songwriters do not need to hire a legal team in order to independently verify if their statements from the MLC are correct. Major publishers can and will continue to get usage reports directly from music services. Self-published songwriters must rely on the MLC to collect and administer royalties on their behalf. Given that the major publishers of the NMPA are directing the design of the MLC, transparency of the reported data from DSPs will help eliminate any conflicts of interest.

Related to this, given the past occurrence of and future likelihood of metadata reporting errors*, usage data for compositions that are unmatched to any owner should be publicly searchable. Songwriters and other entities should be able to search for likely misspellings and errors, thereby offering crowd-sourced assistance to the persistent problem of unmatched royalties. (*Anecdotally I have heard of metadata errors preventing the collection of mechanicals and it happened to me. The mechanical royalties for my songs went unclaimed for 10 years until 2019 until I was able to raise an employee of HFA via twitter who then “found” $5000 that had been unmatched due to an unspecified metadata error.)

via Copyright Office Regulates the MLC: Selected Public Comments on MLC Transparency: @zoecello — Artist Rights Watch–News for the Artist Rights Advocacy Community

@musictechsolve: Defiance or Collaboration? The Role of the Presidential Signing Statement in MLC Board Appointments

[Jem Aswad reports in Variety that Concord Music Publishing and Pulse Music Group have announced a joint venture with Concord acquiring a majority stake in Pulse.  Both Concord and Pulse have board seats on the Mechanical Licensing Collective.  This presumably means there will be an opening on the MLC board that will have to be filled.  There is a question as to whether the Librarian of Congress has to approve a new board member.  Chris Castle discusses this issue in this post from last year on MusicTech.Solutions.]

Even though they have a long history, Presidential Signing Statements are not exactly front and center in every civics class or constitutional public law class in America.  You may be hearing about them for the first time now.  But that doesn’t mean they have not been an important part of Constitutional law-making and jurisprudence.

Presidential Signing Statements were first used by President James Monroe in 1822 in the form of a “special message” to the Senate. Presidents Andrew Jackson, John Tyler and Ulysses Grant also issued signing statements, but they were used infrequently until the 20th Century.  Then their use picked up quite a bit starting with President Theodore Roosevelt and continuing to the present day.  So the use of Signing Statements is quite bipartisan.  While Signing Statements may not themselves have any actionable legal effect, they should not be ignored, either.

The MMA Presidential Signing Statement

Not surprisingly, there is a Presidential Signing Statement accompanying the Music Modernization Act (“MMA”) specifically relating to Title I and at that specifically relating to the MLC board appointments.  The relevant language is:

One provision, section 102, authorizes the board of directors of the designated mechanical licensing collective to adopt bylaws for the selection of new directors subsequent to the initial designation of the collective and its directors by the Register of Copyrights and with the approval of the Librarian of Congress (Librarian). Because the directors are inferior officers under the Appointments Clause of the Constitution, the Librarian must approve each subsequent selection of a new director. I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.

Let’s explore why we should care about this guidance.

According to Digital Music News, there have been changes at the Mechanical Licensing Collective, Inc. (“MLCI”) the private non-profit permitted under Title I of the MMA [in addition to the potential opening due to the Concord/Pulse consolidation]:

[I]t appears that two separate MLC board members are jumping ship.  The details are just emerging and remain unconfirmed, though it appears that two members — one representing indie songwriters and the other on the publishing side — are out of the organization.

Because the board composition of MLCI is preemptively set by the U.S. Copyright Act along with many other aspects of MLCI’s operating mandate, the question of replacing board members may be arising sooner than anyone expected.  As MLCI is a creature of statute, it should not be controversial that law-makers play an ongoing role in its governance.

The Copyright Office Weighs In

The Copyright Office addressed board appointments for MLCI in its first request for information for the designation of the Mechanical Licensing Collective (83 CFR 65747, 65750 (December 21, 2018) available at https://www.govinfo.gov/content/pkg/FR-2018-12-21/pdf/2018-27743.pdf):

The MLC board is authorized to adopt bylaws for the selection of new directors subsequent to the initial designation of the MLC. [If these bylaws have been adopted, we haven’t seen any announcements and as far as we know, they have not been posted.  If you know otherwise, please let us know.  The MLC website appears to be down.  UPDATE:  as of 1/13/20 the mechanicallicensingcollective.org now resolves to songconnect.org]

MCLI Down

The Presidential Signing Statement accompanying enactment of the MMA states that directors of the MLC are inferior officers under the Appointments Clause of the Constitution, and that the Librarian of Congress must approve each subsequent selection of a new director. It also suggests that the Register work with the MLC, once designated, to address issues related to board succession.

When you consider that MLCI is, for all practical purposes, a kind of hybrid quasi-governmental organization (or what the Brits might call a “quango”), the stated position of the President, the Librarian of Congress and the Copyright Office should not be surprising.

Why the Controversy?

As the Songwriters Guild of America notes in comments to the Copyright Office in part relating to the Presidential Signing Statement (my emphasis):

Further, it seems of particular importance that the Executive Branch also regards the careful, post-designation oversight of the Mechanical Collective board and committee members by the Librarian of Congress and the Register as a crucial prerequisite to ensuring that conflicts of interest and bias among such members not poison the ability of the Collective to fulfill its statutory obligations for fairness, transparency and accountability.

The Presidential Signing Statement, in fact, asserts unequivocally that “I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.”

SGA regards it as a significant red flag that the NMPA-MLC submission to the Copyright Office devotes the equivalent of ten full pages of text principally in attempting to refute this governmental oversight authority, and regards the expression of such a position by NMPA/MLC as arguably indicative of an organization more inclined towards opaque, insider management control than one devoted to fairness, transparency and accountability.

So the Presidential Signing Statement to the MMA is obviously of great import given the amount of ink that has been spilled on the subject.  Let’s spill some more.

How might this oversight be given effect and will it be in the public record or an informal process behind closed doors?  Presumably it should be done in the normal course by a cooperative and voluntary collaboration between the MLC and ultimately the Librarian.  Minutes of such collaboration could easily be placed in the Federal Register or some other public record on the Copyright Office website.  Failing that collaboration, it could be done by either the Department of Justice (unlikely) or by individuals (more likely) asking an Article III court to rule on the issue.

Of course, the issue should not delay the Copyright Royalty Judges from proceeding with their assessment determination to fund the MLC pursuant to the controversial voluntary settlement or otherwise [which was released after this original post].  One could imagine an oversight role for the CRJs given that Congress charged them with watching the purse strings and the quantitative implies the qualitative.  The CRJs have until until July 2020 to rule on the initial administrative assessment and appeal seems less likely today given the voluntary settlement and the elimination of any potential objectors.

Since the Title I proponents drafted the bill to require a certain number of board seats to be filled by certain categories of persons approved by Congress in a Madisonian balance of power, the Presidential Signing Statement seems well grounded and furthers the Congressional mandate.

Yet there is this conflict over the Presidential Signing Statement.  What are the implications?

A Page of History is Worth A Volume of Logic

The President’s relationship to legislation is binary—sign it or veto it.  Presidential Signing Statements are historically used as an alternative to the exercise of the President’s veto power and there’s the rub.

Signing Statements effectively give the President the last word on legislation as the President signs a bill into law.   Two competing policies are at work in Presidential Signing Statements—the veto power (set forth in the presentment clause, Article I, Sec. 7, clause 2), and the separation of powers. 

Unlike some governors, the President does not enjoy the “line item veto” which permits an executive to blue pencil the bits she doesn’t like in legislation presented for signature.  (But they tried–Line Item Veto Act ruled unconstitutional violation of presentment clause in Clinton v. City of New York, 524 U.S. 417 (1998).) The President can’t rewrite the laws passed by Congress, but must veto the bill altogether.  Attempting to both reject a provision of a new law as unconstitutional, announce the President’s intention not to enforce that provision AND sign the bill without vetoing it is where presidents typically run into trouble.

Broadly speaking, Presidential Signing Statements can either be a President’s controversial objection to a bill or prospective interpretive guidance.  Signing Statements that create controversy are usually a refusal by the President to enforce the law the President just signed because the President doesn’t like it but doesn’t want to veto it.  Or to declare that the President thinks the law is unconstitutional and will not enforce it for that reason—but signed it anyway.

The President can also use the Signing Statement to define or interpret a key term in legislation in a particular way that benefits the President’s policy goals or political allies.  President Truman, for example, interpreted a statutory definition in a way that benefited organized labor which was later enforced by courts in line with the Signing Statement.  President Carter used funds for the benefit of Vietnam resisters in defiance of Congress, but courts later upheld the practice—in cases defended by the Carter Justice Department.  The practice of using Presidential Signing Statements is now routine and has been criticized to no avail for every administration in the 21st Century including Bush II, Obama and now Trump.

Since the 1980s, it has become common for Presidents to issue dozens if not hundreds of Presidential Signing Statements during their Administration.  So it should come as no surprise if the Department of Justice drafted up the statement for the MMA prior to it being presented to the President to be signed into law.  (See the American Presidency Project archives https://www.presidency.ucsb.edu/documents/presidential-documents-archive-guidebook/presidential-signing-statements-hoover-1929-obama)

Defiance or Collaboration?

What does this mean for the MMA?  The President certainly did not call out the statutorily required board membership of the MLC as an unconstitutional overreach that he would not enforce.  To the contrary, the MMA Signing Statement expresses the President’s desire that the legislation comply with the requirements of the Constitution.

Moreover,  the MMA Presidential Signing Statement is not a declaration about what the President will or won’t enforce but rather interprets a particular section of a long and winding piece of legislation.  (Title I principally amended Section 115 of the Copyright Act—now longer than the entire 1909 Copyright Act.)  This kind of interpretation seems to be consistent with the practices of prior Presidents of both parties, not an end-run around either the veto power or separation of powers.

Failing to acknowledge the admonition of the signing statement would seem an unnecessary collision both with long-standing jurisprudence and with a sensible recommendation from the President of how the Librarian, the Copyright Office and the Justice Department expect to approach the issue in collaboration with the MLCI.  That’s possibly why the Copyright Office restated the Signing Statement in the RFP.

Title I of the MMA is a highly technical amendment to a highly technical statute.  A little interpretive guidance is probably a good thing.  Collaboration certainly makes more sense than defiance.

Monica Corton Consulting Suggestions to the Copyright Office for MMA Regulations

Monica Corton’s comment in the Copyright Office’s request for comments makes some excellent points (you can read the entire comment here), particularly about educating songwriters about the necessity of complying with the formalities of registering with the Mechanical Licensing Collective in order to get paid.  This question is important and again raises the question of who bears the direct transaction cost on songwriters for that registration which was not addressed in the Music Modernization Act.

Ms. Corton comes to a similar issue also raised by others regarding the black box, but has a great point that a helpful way to reduce the black box would be by requiring the copyright owners to pay for third party services to assist MLC in cleaning up the data.  That’s a great idea, although it does seem that the cost of MLC registration should be paid by the services  as part of the assessment (which would be more consistent with what was promised).  It would be simple to require the MLC to pay the third party vendors on an ongoing basis (and of course would not be able to write itself a loan from the black box to pay for those costs as David has pointed out).

We have bolded some of the language in Ms. Corton’s post to help connect the dots:

The [Music Modernization Act] does not require publishers to provide data to the MLC. This is a problem because it could mean that smaller independent publishers or self-published songwriters may not know that they have to submit their data to the MLC in order to get paid from the digital services. They may not understand that they will not get paid without submitting data and that their money will go into an unallocated account that gets liquidated by to publishers based on their market share.

This is why there was so much time devoted to the education piece of the MMA during the recent symposium at the Copyright Office on December 6, 2019. I attended the symposium and in the following week, I had conversations with John Raso of HFA and Bill Colitre at MRI. I spoke to them both about my concern for the education piece and told them I thought the MLC was missing an education committee which I would be happy to help put together. It should include music publishers, digital representatives and educators.

We need a year to promote and educate people about the MMA, the MLC, why it’s important to register, how to obtain all their necessary data (i.e. ISWCs, ISRCs, publisher splits etc.) and the steps required to submit an accurate registration. John Raso urged me to write to Alisa Coleman making this suggestion regarding adding an education committee to the MLC. I emailed Alisa Coleman on Monday, December 9, but I have not heard back from her.

It is the feeling among many independent publishers, songwriters and even some DSP representatives that there is no real will to educate the masses about the MLC and registration. The reason is a majority of the members of the MLC board stand to gain millions of dollars from unallocated royalties if the MLC does not locate the publishers/songwriters of these unclaimed works.

There is evidence for this. When the NMPA negotiated a $30 million dollar settlement with Spotify, Spotify offered up their unclaimed works files to the settlement group. Every publisher that participated in the NMPA Spotify Settlement was given the chance to claim those works. When David Israelite visited the AIMP in NYC to discuss the matter after the process was well underway, he informed the AIMP membership that something like 15-20% of the unclaimed works were eventually claimed. However, this means that 80-85% of those works still need to be matched to their rightful owners. These works are also most probably part of the NOIs that have been sitting at the Copyright Office and were filed by the DSPs to avoid liability. It is a massive undertaking to try to match these unclaimed works, however, a well thought out education initiative that is strategically based could probably solve at least 50-60% of the unclaimed works identification. I’m suggesting an “edutainment” approach where we utilize celebrity songwriter/artists to get our message out over YouTube and other social media sites. We raise awareness about the reasons why registration to the MLC is so important. We give great tutoring videos on how to locate your appropriate registration information and we assist in getting them to submit spread sheets with all of their data laid out in the best way that the MLC can ingest it.

Without the education piece fully in place, I fear that a majority of the unclaimed works are going to be put in this unallocated fund and distributed by market share to the biggest publishers in the business. This has been the practice of every single NMPA settlement since the distribution of the NMPA Late Fee Settlement, and the major publishers, as well as the large independent publishers have benefited greatly from this practice.

In order to avoid this happening, I would like to support MRI’s suggestion that “the MLC make the raw data from the DSPs available to qualified, third party data processors, hired by such copyright owners, in order that they may verify the completeness and accuracy of such records and potentially claim ownership of musical works associated with the sound recordings listed in such records. Such efforts, to take place no less than six months prior to any liquidation event, would be meant to supplement, not replace, the MLC’s own efforts to identify the copyright owners of “unclaimed” musical works. In addition to promoting greater transparency in such matching efforts, these supplemental efforts will give music publishers-the parties best placed to identify their own works-a seat at the table as the MLC prepares for this critical initial distribution of unclaimed royalty funds. They will also reduce the burden on the MLC’s nascent claiming system and assist the MLC in bringing greater accuracy to the musical works database it will have established by such time.”

In light of the suggestions…for a third party representative to assist in claiming works, there needs to be an approved list of such “qualified third-party data processors” available on the MLC website. Many DIY songwriters will not know who these companies are and could get taken in by people who are not qualified. The Copyright Office should be the arbiter of providing the list of qualified third-party data processors. Certainly, MRI should be on this list.