The Copyright Office has asked for comments from the public on important issues for rulemakings under the Music Modernization Act. This will potentially affect the operations of The MLC and related rights especially because the Copyright Office recently extended the scope of that rulemaking. The proposal drew a mixed response.
We will be posting selected comments that we think might be interesting to Trichordist readers. The project is a bit wonky, but important to stay informed on.
Spirit’s thesis:
We commend the US Copyright Office (USCO) for its highly regarded work in protecting rightsholders and their intellectual property rights. Your efforts have achieved great strides to prevent the misuse and abuse of music copyrights.
Although the [Notice of Proposed Rulemaking]’s original intent was to address the ambiguity in certain aspects of the Termination Right, the USCO’s extension of the scope beyond Termination Rights disrupts standard practices that have been long tested and put into practice by rightsholders. The administrators of copyrighted material are best suited to understand the most current and pragmatic business practices. As such, the administrators should be the ones to establish the day-to-day standards of copyright administration and to make the recommendations pertaining to the administration of copyrights and their respective payments at the MLC.
We believe the administrators’ standard practices and pragmatic solutions must be considered.
I’ve resigned from my role leading the Audio team at Stability AI, because I don’t agree with the company’s opinion that training generative AI models on copyrighted works is ‘fair use’.
First off, I want to say that there are lots of people at Stability who are deeply thoughtful about these issues. I’m proud that we were able to launch a state-of-the-art AI music generation product trained on licensed training data, sharing the revenue from the model with rights-holders. I’m grateful to my many colleagues who worked on this with me and who supported our team, and particularly to Emad for giving us the opportunity to build and ship it. I’m thankful for my time at Stability, and in many ways I think they take a more nuanced view on this topic than some of their competitors.
But, despite this, I wasn’t able to change the prevailing opinion on fair use at the company.
This was made clear when the US Copyright Office recently invited public comments on generative AI and copyright, and Stability was one of many AI companies to respond. Stability’s 23-page submission included this on its opening page:
“We believe that Al development is an acceptable, transformative, and socially-beneficial use of existing content that is protected by fair use”.
For those unfamiliar with ‘fair use’, this claims that training an AI model on copyrighted works doesn’t infringe the copyright in those works, so it can be done without permission, and without payment. This is a position that is fairly standard across many of the large generative AI companies, and other big tech companies building these models — it’s far from a view that is unique to Stability. But it’s a position I disagree with.
I disagree because one of the factors affecting whether the act of copying is fair use, according to Congress, is “the effect of the use upon the potential market for or value of the copyrighted work”. Today’s generative AI models can clearly be used to create works that compete with the copyrighted works they are trained on. So I don’t see how using copyrighted works to train generative AI models of this nature can be considered fair use.
But setting aside the fair use argument for a moment — since ‘fair use’ wasn’t designed with generative AI in mind — training generative AI models in this way is, to me, wrong. Companies worth billions of dollars are, without permission, training generative AI models on creators’ works, which are then being used to create new content that in many cases can compete with the original works. I don’t see how this can be acceptable in a society that has set up the economics of the creative arts such that creators rely on copyright.
To be clear, I’m a supporter of generative AI. It will have many benefits — that’s why I’ve worked on it for 13 years. But I can only support generative AI that doesn’t exploit creators by training models — which may replace them — on their work without permission.
I’m sure I’m not the only person inside these generative AI companies who doesn’t think the claim of ‘fair use’ is fair to creators. I hope others will speak up, either internally or in public, so that companies realise that exp
By Chris Castle
We’re about to experience an historical event—the U.S. government’s statutory mechanical rate for physical and permanent downloads will increase twice in 12 months. This is because the record companies agreed in “Phonorecords IV” to raise the statutory mechanical rate from 9.1¢ to 12¢ for physical and permanent downloads (with corresponding long-song royalties) effective January 1, 2023.
This is quite a change from the frozen rate that lasted for 17 years. Not only did the labels agree to increase the rate to 12¢, they agreed to index that increased rate to inflation annually starting in 2024.
Indexing requires increasing the 12¢ rate to current inflation based on a “COLA” or “cost of living adjustment” by applying an uplift formula to the 12¢ rate. That formula itself is a function of the Bureau of Labor Statistics Consumer Price Index which itself comes in a number of varieties. A common version of CPI that the record companies agreed to is the “Consumer Price Index for All Urban Consumers (U.S. City Average, all items),” or “CPI-U.” The CPI-U is weighted toward the cost of living for urban consumers. (Compare CPI-U to the “CPI-W” or Consumer Price Index for Urban Wage Earners and Clerical Workers which is used by Social Security, for example.)
We have experienced a time of high inflation for the last few years and given the indicators, we are likely to continue to suffer with inflation for years to come. So the labels’ agreement to a COLA protects the purchasing power of the hard-won mechanical royalty for physical and downloads and may end up being a critical deal point over the 5 year rate period covered by Phonorecords IV.
The statutory basis for the COLA is found in 37 CFR §385.11(a)(2):
Annual rate adjustment. The Copyright Royalty Judges shall adjust the royalty rates in paragraph (a)(1) of this section each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index for All Urban Consumers (U.S. City Average, all items) (CPI–U) published by the Secretary of Labor before December 1 of the preceding year. The calculation of the rate for each year shall be cumulative based on a calculation of the percentage increase in the CPI–U from the CPI–U published in November, 2022 (the Base Rate) and shall be made according to the following formulas: for the per-work rate, (1 + (Cy−Base Rate)/Base Rate) × 12¢, rounded to the nearest tenth of a cent; for the per-minute rate, (1 + (Cy−Base Rate)/Base Rate) × 2.31¢, rounded to the nearest hundredth of a cent; where Cy is the CPI–U published by the Secretary of Labor before December 1 of the preceding year. The Judges shall publish notice of the adjusted fees in the Federal Register at least 25 days before January 1. The adjusted fees shall be effective on January 1.
One must have the published CPI-U in order to make the COLA calculation. The CPI is published by Bureau of Labor Statistics (technically “by the Secretary of Labor”) on a regularly published schedule. If the regulations require that the relevant CPI-U must be published before December 1, that will be the CPI-U for October to be published next week on November 14 because the CPI-U for November won’t be published until December 12 (which of course is after December 1).
According to the Cleveland Federal Reserve, month over month inflation for November is projected to be pretty much the same as October. So based on the Phonorecords IV Subpart B formula, the minimum statutory rate will likely increase from 12¢ to approximately 12.41¢ starting January 1.
Keep an eye out for the October CPI-U next week when it is announced by BLS at 8:30am ET on November 14. The Copyright Royalty Board is to publish the new COLA-adjusted mechanical rate in the Federal Register, on or about December 8. And remember that the same calculation with then-current CPI-U will apply in December 2024, 2025, 2026 and 2027.
Remember, this COLA rate increase only applies to physical and permanent download configurations, not to streaming. This is because the services refused to engage on the topic. There’s really no good explanation for why the streaming services refused to give a COLA. A COLA really should be mandatory given that the government essentially takes away the songwriters’ ability to bargain for their inflation expectations during a five year rate period.
[This post first appeared on MusicTechPolicy referenced by David in his post below from X]
Remember the millions of flawed “address unknown” NOIs that the Copyright Office allowed to be filed by the largest corporations in commercial history, including Google, because they were unable to locate the copyright owners? Aside from the sheer hilarity of the statement “Google can’t find [X]” it is almost certain that the absence of the line of researchers at the Copyright Office at the time suggests that the big tech companies never really did all the research and were allowed to file false statements with the government. Any guesses as to which Copyright Office lawyer was principally involved in allowing them to get away with that massive charade to the tune of approximately 100,000,000 notices? (See my article from the ABA Entertainment & Sports Lawyer.). That might be the one who left the Copyright Office for the riches of private practice shortly after the incident. Mr. Damle also has pretty consistently represented the Digital Licensee Coordinator. More on that later.
Another fake enterprise seems to have been uncovered by Politico this week, this time apparently in what I think is Mr. Damle’s latest assault on creators, his fascination with Open AI. As Politico reports:
The message in the open letter sent to Congress on Sept. 11 was clear: Don’t put new copyright regulations on artificial intelligence systems.
The letter’s signatories were real players, a broad coalition of think tanks, professors and civil-society groups with a stake in the growing debate about AI and copyright in Washington.
Undisclosed, however, were the fingerprints of Sy Damle, a tech-friendly Washington lawyer and former government official who works for top firms in the industry — including OpenAI, one of the top developers of cutting-edge AI models. Damle is currently representing OpenAI in ongoing copyright lawsuits.
Damle did not sign the letter, and did not reply to multiple attempts to contact him with questions about his involvement. But data contained in a publicly posted PDF of the letter show the document was authored by “SDamle,” and three signatories confirmed to POLITICO that Damle was involved in its drafting and circulation. Two of them said they were first made aware of the letter by Damle, and signed it at his invitation.
The letter’s covert origin offers a window into the deep and often invisible reach of Big Tech influence in the Washington debate over AI — a fast-moving part of the policy landscape where Congress is hungry for outside advice, and which is still new enough to create strange political bedfellows. Signatories included the American Library Association, the progressive nonprofit Public Knowledge and the free-market R Street Institute.
Oh my. This bears all the hallmarks of Google policy washing, while the company is at the same time engaging in a charade with artists through the YouTube AI Music Incubator. And as usual, Mr. Damle is only too happy to accommodate.
Oh snap. It’s Tuesday.
Read up on MusicTechPolicy. Remember the “DLC” is the Digital Licensee Coordinator who represents the services against songwriters and pays for the MLC. Talk about your interlocking boards!
The Trichordist 
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