David Lowery’s Suggestions to the Copyright Office for Regulation of the Mechanical Licensing Collective Part 4

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  The first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.

David Lowery did not file initial comments but as he notes, developments made him feel compelled to speak up in the reply comments.  We’re going to post his reply comments in four parts, and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  (If you want to skip ahead and read the entire comment, you can download it here.)  This is Part 4 of four parts.

Comments of David C. Lowery, Notice of Inquiry for Blanket License Implementation Regulations Issued by the United States Copyright Office Concerning the Orrin G. Hatch-Bob Goodlatte Music Modernization Act of 2018

Additional MLC Oversight: Transparency and Financial Disclosure

There is little financial disclosure required of the MLC or the DLC. As far as DLC is concerned, I expect they will represent the interests of the services. They are also paying the money for MLC which in a way is itself an inherent conflict but is under the oversight of the Copyright Royalty Judges. For the moment, DLC does not appear to be involved in the MLC operations or decision-making. Time may reveal a need to examine this relationship more closely for financial disclosures.

However, the MLC is mandated to engage in many operations fraught with moral hazard, not the least of which is matching and the black box distributions. The MLC has already demonstrated that it has the ability to pick the least appropriate vendors for inexplicable reasons other than the past ownership of HFA by the National Music Publishers Association.

This past ownership creates a special disclosure situation regarding the selection of HFA as a vendor given how long Title I had been in the works (the rumored “SIRA II”). Was the sale of HFA conditioned on HFA becoming the principle vendor of the MLC (like HFA was to be the “General Designated Agent” in SIRA I)? Was Blackstone’s withdrawal of opposition to MMA in the Senate conditioned upon some benefit flowing to HFA? Has the vendor selection process been the kabuki dance it appears to be? As my friend and co-amici Guy Forsyth wrote, “Americans are freedom loving people and nothing says freedom like getting away with it.” Did they get away with it? If the Copyright Office doesn’t force disclosure, we’ll never know unless the issue gets litigated in one of the pending lawsuits against Spotify—and isn’t redacted.

It only seems reasonable that the MLC should disclose any incentives, payments or other benefits received by its board members, non-voting members (DiMA, NMPA, NSAI or SONA for example), officers and other key employees from any person or entity MLC does business with. These benefits should include payments of the administrative assessment, real estate transactions paid for by the assessment, or shares of stock or units of Ether granted to anyone in the supply chain. This kind of anti-payola affidavit is required of various consultants in the music business already so there seems to be no reason why it should not be required for persons of influence at the MLC. And, of course, all such affidavits or disclosures should be part of the public record so that everyone from songwriters to Members of Congress should be able to have a clear picture of who is involved with MLC.

This will be particularly applicable to any payments from the black box which is truly other people’s money. Any proposed payments of the black box should be itemized, published online in an easy to read format prior to being distributed and certified by an independent CPA that is not related to MLC or any board member or vendor. This disclosure may help reduce the inevitable lawsuits. In fact, it would be best if any CPA undertaking certification work for MLC should agree in advance that they would do no other work for the MLC related parties for a significant period of time, say five years.

The “interim application of accrued royalties” is another clause that is fraught with conflicts of interest. Respectfully, the Copyright Office should clarify that MLC board members act as fiduciaries in their decisions to take money from the black box to meet the MLC’s expenses in the case of a shortfall from the administrative assessment. If they’re not fiduciaries, an explanation would be helpful.

In fact, the entire clause relating to the “interim application of accrued royalties” is itself vague and ambiguous. Consider the language:

In the event that the administrative assessment, together with any funding from voluntary contributions as provided in subparagraphs (A) and (B), is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.

This paragraph is, in my judgment, one of the most important yet least discussed clauses in the entirety of Title I. Absent implementing rules to the contrary, the clause allows MLC to effectively write itself interest free and nonrecourse loans from other people’s money to cover the costs of a budget that MLC itself determines at a burn rate solely in the control of MLC—currently with no oversight by anyone.

The clause raises a number of questions about the meaning of the statutory language which the Congress likely intended to be clarified in regulations regarding the spending of other people’s money by the MLC. In particular. terms in the statutory language that must be known in order to determine what sums are the “costs” concerned, when are they determined, and what happens if the loan once taken is never repaid. (Which raises income tax issues if nothing else.)

The statutory language also leaves to regulations what happens if the songwriters whose monies are taken from the black box and spent by MLC are later identified because they come forward or due to matching efforts of the DLC or the MLC.

Are those songwriters supposed to wait to be paid from “future collections of the assessment,” if ever? Which future collections? The next assessment after those songwriters are identified? Or another one some time in the future?

Are they to be paid in the normal course at the next accounting period after becoming identified? Immediately upon being identified?

And most importantly perhaps, how will anyone outside of the MLC know this loan is occurring? The mere fact that a board of directors thinks it’s a good idea to avoid themselves having to make voluntary contributions to the MLC’s operations by writing themselves an interest free non-recourse loan from monies they hold in trust (or should hold in trust) is a terrible position to put on board members voting against the loan.

I would respectfully suggest that this entire clause has no place in legislation that was sold as a great boon for songwriters. If it must be in the law, then the Copyright Office has a golden opportunity to shed sunlight on another mysterious operation of the MLC.
I suggest several areas of mandatory disclosure. First, the balance of the black box should be public and prominently posted on a monthly basis to the MLC’s website. Songwriters should be able to search for their titles and determine how much is being held. SoundExchange currently has this feature for the public as do other societies around the world.

The black box should be held in a true escrow account by an escrow agent (such as an unrelated bank) that has clear instructions in regulations as to how and when such funds are to be disbursed, either as a loan or royalty payment.

If the board of MLC decides to write itself a loan from these funds, they should not be able to use the black box as a piggy bank, but rather should borrow against identified funds based on available metadata so that repayment can be accomplished efficiently.
For example, if Songwriter X can look up on the MLC’s website that the MLC board borrowed money for songs A, B and C that were unmatched at the time of the loan, then if Songwriter X is later identified, she can demand payment of her royalties from MLC which the MLC should be required to pay from its current accounts and not take from future black box payments.

Failing to require payment from fresh cash will create an endlessly iterative process by which MLC borrows from Peter to pay Paul, using old money to pay new obligations.
Finally, all these transactions should be well documented and those documents should be published on the MLC website. For example, the statute requires board “approval” to initiate the loan. That approval should take the form of a recorded board vote with minutes to be published on the MLC website, or better yet in the Federal Register. The loan should be documented in the form of a promissory note to the escrow agent. It should also be clear that the MLC board has a fiduciary duty to the songwriters and publishers whose money it is borrowing that is separate from the board’s safe harbor elsewhere in Title I.

Having just gone through the PledgeMusic debacle, I am sensitized more than ever to companies that go insolvent while handling the money of artists with the result that the artists never get paid. If the MLC cannot meet its obligations and requires “interim” loans from the black box, how is that not the case of a company operating while insolvent? Why should the officers and directors of MLC enjoy any lower standard of care or responsibility than they would if they were operating any other company while insolvent?

Surely this was not the intent of Congress.

Finally, I note that the budget proposed by the MLC to the DLC was less than the administrative assessment agreed to in the CRB settlement. Respectfully, the Copyright Office ought to make clear that this shortfall does not trigger the MLC’s ability to take an “interim” loan in the amount of the shortfall. This issue highlights another point requiring clarification—at what point is a shortfall determined? It seems that it should be at a time the shortfall occurs following investigation into why it occurred by an inspector general-type person (such as the Inspector General of the Library of Congress).

The MLC knows how much it’s got in its rather rich kitty to spend on all its various activities. If it also knows that if it goes over budget it can write itself interest free loans from the black box based on its own internal decision and authority, what incentive is there to stay on budget?

Additional MLC Oversight: Transparency and Songwriter Ombudsman

While Congress and the Copyright Office theoretically retain oversight over the MLC, this is of cold comfort to songwriters who are run over by MLC, its policies and its vendors. The vast unmatched problem is the most obvious foreseeable outcome where songwriters need a safety valve, but there are other possibilities.

For example, if the MLC continues HFA’s sad history of simply failing to pay songwriters, it’s just not adequate to say that songwriters can audit MLC or sue. Songwriters should not have to incur even more costs or engage in the labyrinthine process of individual or class action lawsuits against an entity funded by the largest corporations in the world.

The only real leverage that songwriters have over MLC is to persuade the Copyright Office not to re-designate the incumbent. In order for that to be a realistic threat, the Copyright Office regulations should provide for a feedback loop that songwriters can avail themselves of that the Copyright Office must take into account when determining its re-designation. Such complaints must be included in the Copyright Office’s oversight report to Congress. As such a practice is essentially the Copyright Office setting a policy or regulating itself, I see no reason why that practice cannot be set forth in regulations.

However, the Copyright Office is in an ideal position to create an ombudsman-type position with oversight of the entire MLC/DLC process. Such a role would allow the world’s songwriters an immediate outlet for surfacing negligence by MLC. By preserving anonymity of those complaining, any songwriter—whether or not affiliated with MLC—could have an outlet to report any objectionable behavior while being protected along the lines of the Whistleblower Protection Act.

The ombudsman should be completely unrelated to the incestuous practices of MLC and HFA, should be a paid position deducted from the millions in MLC’s rich operating budget, and should be meaningfully consulted in any re-designation.

Creating an ombudsman role would benefit the entire system by maintaining a watchdog and whistleblower role that would help keep the system honest.

Additional MLC Oversight: MLC and DLC Database Conflict of Interest Policy

I would also respectfully call the Copyright Office’s attention to the inherent conflicts between MLC and its vendor HFA in terms of reselling data HFA acquires by virtue of its role as MLCvendor. If the Copyright Office does not prohibit HFA from selling for other commercial purposes the data it acquires through its engagement by MLC to facilitate the compulsory blanket license, the Congress will have just handed HFA a near insurmountable advantage over its competitors. Remember there are other licenses like “micro sync” licenses that are outside of the compulsory mechanical license. Currently there is robust competition and innovation in this market segment, but without this prohibition HFA would crush its young competitors.

The same could be said of ConsenSys, which seems to be desperately seeking use cases for its Ether cryptocurrency. This creates an odd set of incentives for an MLC vendor, not to mention a need for disclosure by the MLC of any stock grants or Ether transfers.

Songwriters are compelled to do business with MLC despite bitter complaints about the imbalance in favor of major publishers in its governance. Songwriters are also compelled to do business with MLC despite bitter complaints about HFA due to what can be described as a bait and switch where the MLC pushed out a lot of hope only to go back to business as usual with long-time cronies.

This cannot be what Congress had in mind, and is even greater evidence for why the Copyright Office should require MLC candidates to fully disclose their vendors and their relationship with their vendors before designation.

Respectfully, any data vendor of the MLC should not be allowed to leverage their privileged role to private benefit after being paid absurd amounts of money to fail upwards.

As Madison said, we’re not angels. But songwriters rely on the Copyright Office to be our better angels.

Thank you for providing this opportunity to discuss these important issues.

Sincerely,
David C. Lowery

David Lowery’s Suggestions to the Copyright Office for Regulation of the Mechanical Licensing Collective Part 3

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  The first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.

David Lowery did not file initial comments but as he notes, developments made him feel compelled to speak up in the reply comments.  We’re going to post his reply comments in four parts, and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  (If you want to skip ahead and read the entire comment, you can download it here.)  This is Part 3 of four parts.

Comments of David C. Lowery, Notice of Inquiry for Blanket License Implementation Regulations Issued by the United States Copyright Office Concerning the Orrin G. Hatch-Bob Goodlatte Music Modernization Act of 2018

MLC’s Reporting and Failure to Account

This section responds to the Office’s question regarding MLC’s Payments and Statements of Account.

As an overall comment, the MLC should be required to publicly post at least an aggregated version of all information it receives from DMPs supporting the calculation of royalties (transactions, TCC, deductions from gross, etc.). It will be impossible for songwriters to conduct a desktop audit of their statements with their accountants if key elements of the calculations are missing. Respectfully, the Copyright Office really needs to understand how many times we have seen this movie and how we definitely know how it ends.

This is the old hide the ball trick where royalty statements include everything except the one key piece of information needed to duplicate the reported calculations. Again, let’s not have meet the new boss, worse than the old boss. The Copyright Office has a golden opportunity to get this right—so please, please take heed. It will save a lot of time and litigation.

For example, the MLC is already saying things like this:

Accordingly, the MLC believes that any regulations obligating the MLC to distribute royalty reports and payments to copyright owners on a monthly basis should not require that such reports and payments be for a particular royalty period, which is at least in part outside of the MLC’s control.

Actually, this is wrong. If the MLC reports do not designate which period the payment corresponds to, there will be no way for songwriters to know what they are being paid for. This boils down to receiving a statement that says, here’s some money, or worse, no money for you. If there is no explanation of when the royalties were earned or last paid on a service-by-service basis, there is no way for songwriters to know if any service is current.

Plus, the Congress gave the MLC fearsome powers over DMPs and songwriters. If services are late, we expect MLC to chase them and chase them hard. They wanted this job, and now they have it. If songwriters have to wait until MLC get around to auditing trillions of transactions to know a service is late paying, unpaid money is as good as gone even for matched works.

As drafted, Title I places great emphasis on the user of the blanket license’s obligations to account and pay royalties but there is no corollary obligation for MLC. Indeed, it seems that the MLC is already backtracking on timely payments by lowering expectations of timely DMP payments. The DMP has a lot to lose if they are not timely with payments and statements.

There is virtually no downside for the MLC. I respectfully suggest that there be some teeth put into the MLC’s failure to account, for both the “known knowns” and the “known unknowns,” that tracks the penalties on the license user.

It does not appear that sufficient attention has been paid to the MMA’s major change in the compulsory licensing structure—the insertion of another gatekeeper into the stream of payments, a gatekeeper that has selected the former affiliate of one of its principal promoters with a known and well litigated history of failures for the very functions it is to take on with a Congressional mandate.

Incredibly, no one has included language addressing what happens if the MLC defaults. Auditing years after the fact is not going to get it done. In fact, the audit language in Title I is so antiquated that it could easily have come from a 1980s record deal. (Not to mention the meaningless and expensive requirement of a CPA to conduct royalty audits.) The audit language is simply not fit for purpose in a world of trillions of individual transactions rather than hundreds of millions of CDs. Songwriters forced to use the compulsory license need a much more immediate and much toothier remedy against the government’s MLC monopoly. In other words, the Music Modernization Act already needs to be modernized and the Copyright Office has a chance to do it—but the clock is ticking.

Language could be adopted in regulations that mirrors the statutory language for default by users of the blanket license, substituting the copyright owner for the MLC and the MLC for the digital music provider. For example:

“If the copyright owner does not receive the monthly payment and the monthly and annual statements of account from the MLC when due for reasons within the control of the MLC, the owner may give written notice to the MLC, unless the default is remedied not later than 30 days after the date on which the notice is sent, the MLC’s ability to administer the compulsory license for such copyright owner will be automatically terminated. “

Because the Copyright Office is charged with implementing regulations under a broad statutory grant, it seems that this loose end could be remedied in regulations without need of an amendment to Title I, particularly because the failure to include such a provision benefits those who controlled the pen for the drafting of Title I.

The Copyright Office should also take into account any failures to account when reviewing the re-designation of MLCI at the five year review mark.

Additional MLC Oversight: FOIA

Continuing the theme of sunlight as the best remedy, please consider the relationship of the Freedom of Information Act and the MLC. The Copyright Office complies with Freedom of Information Act requests (FOIA). The public interest would be served in having access to all correspondence and internal materials not subject to a FOIA exemption that relate to Title I of the Music Modernization Act as well as the “address unknown” NOI process that preceded and contributed to it.

Availability of these materials is particularly relevant given the lack of transparency required of MLC and the DLC (odd redactions in CRB filings for the administrative assessment is but one example) and the general mystery of why HFA was selected by MLC given the history of HFA with NMPA and the legislative process.

Rather than wait for a FOIA request for these materials, the Copyright Office should voluntarily make these materials available on Copyright.gov. I would recommend this process be repeated annually if not more frequently.

To be continued in Part 4

David Lowery’s Suggestions to the Copyright Office for Regulation of the Mechanical Licensing Collective Part 2

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  The first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.

David Lowery did not file initial comments but as he notes, developments made him feel compelled to speak up in the reply comments.  We’re going to post his reply comments in four parts, and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  (If you want to skip ahead and read the entire comment, you can download it here.)  This is Part 2 of four parts.

Comments of David C. Lowery, Notice of Inquiry for Blanket License Implementation Regulations Issued by the United States Copyright Office Concerning the Orrin G. Hatch-Bob Goodlatte Music Modernization Act of 2018

Failure is Not an Option

Given my perspective of HFA’s horrendous track record of reporting to independent songwriters and publishers of both Anglo-American and all foreign language repertoire, the Copyright Office really must demand public oversight of the MLC in the crucial run-up to the License Availability Date.

We don’t want to find out on January 2, 2021 that the thing doesn’t work and get either a cobbled together manual accounting statement or no accounting statement or payment at all—and consequentially an exponential increase in the unmatched “black box” monies. I cannot imagine that the DLC wants this result, either.

The Congress did not mandate that the MLC could send out defective or placeholder accounting statements with no or low royalty payments. Unless the Copyright Office regulations holds their feet to the fire, this is entirely possible particularly if there is no downside for MLC. It is also important to keep in mind that the major publishers receive direct accountings from the services and will not use the MLC in all likelihood. These would be the same major publishers on the MLC board.

Do you think that the MLC is likely to punish itself for failing to do its job, especially for unrepresented songwriters or non-Anglo-American repertoire? I don’t. If the unmatched royalties are liquidated in the usual fashion they will be paid out by market share to the biggest publishers. Yes, whether intended or not there is a known perverse financial incentive for the biggest publishers to hope the MLC does a poor job. A large unmatched royalties pool will likely benefit big publishers. In theory the Unmatched Royalties Oversight Committee is supposed to look after this and counterbalance this mismatched incentive structure. However, it appears there is no funding allocated to the UROC. Thus, it is not clear how this oversight will be performed.

Respectfully, the Copyright Office should consider that its role is about to change—going forward the Office has been charged by Congress with an oversight responsibility for the entire process. If I end up being correct—that MLC will not only will fail to launch on the License Availability Date but it will be in total meltdown—the Congress must be able to know of any failures well in advance to be able to apply the pressure through saving legislation of some kind, or to at least have some notice there is a serious problem.

It is well within the Office’s current regulatory mandate to specify the deliverables the MLC must make public at key dates leading to launch for 1/1/21. Because there will be a strong tendency caused by extreme moral hazard for the MLC to view its operations through rose colored glasses, these deliverables require a maximum of public disclosure and peer review in order to be both credible and informative.

Here are some considerations the Copyright Office may wish to take into account:

(a) Systems should be publicly disclosed for peer review and comment on rolling basis starting immediately and continuing on a monthly basis thereafter until the launch, and then after the launch to determine how effective the systems work. If MLC fails operational milestones, then detailed explanation must be made in public with a plan to get back on track.

(b) There is no competition for MLC given its quango status and Congressional exclusivity, so no need for secrecy or redactions in its filings.

(c) Systems tests and certifications should be conducted on no less than monthly basis starting immediately with milestones to completion. These milestones and their results should be published in the Federal Register and on Copyright.gov and also circulated to Hill staff.

(d) If MLC is not fully operational by 9/30/20 then both the Copyright Office and the MLC leadership should report to Congress on why and critical path to full operational functionality. Because of the unprecedented nature of the MLC enterprise, “full operational functionality” may be a moving target, but MLC should not be able to set a low bar that results in only the rich people getting paid.

To be continued in Part 3

 

David Lowery’s Suggestions to the Copyright Office for Regulation of the Mechanical Licensing Collective Part 1

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  The first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.

David Lowery did not file initial comments but as he notes, developments made him feel compelled to speak up in the reply comments.  We’re going to post his reply comments in four parts, and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  (If you want to skip ahead and read the entire comment, you can download it here.)

Comments of David C. Lowery, Notice of Inquiry for Blanket License Implementation Regulations Issued by the United States Copyright Office Concerning the Orrin G. Hatch-Bob Goodlatte Music Modernization Act of 2018

I respectfully submit these comments in response to the Copyright Office’s September 24, 2019 Notification of Inquiry and request for comments to assist the Office in drafting regulations relating to the implementation of certain parts of Title I of the Music Modernization Act.

Most relevantly for these purposes, I am an American songwriter, music publisher and member of the bands Cracker and Camper van Beethoven. I teach music business courses at the Terry College of Business at the University of Georgia and am co-author with Steven Winogradsky of the latest edition of the book “Music Publishing: The Complete Guide.” I also founded and am the principal writer of the blog The Trichordist (www.thetrichordist.com). I have testified before the House Judiciary Committee and am active in public policy discussions of the copyright law. I was briefly a member of the Mechanical Licensing Collective’s statutory unmatched funds committee, but resigned.

It was not my intention to respond to the Copyright Office request for comments on these regulations. However, several recent events changed my mind: The MLC’s selection of the Harry Fox Agency (formerly owned by NMPA) as its principal vendor; the selection of ConsenSys apparently as the cryptocurrency vendor of MLC; and the adoption by the Copyright Royalty Judges of the voluntary settlement of the initial administrative assessment after allowing the Songwriters Guild of America to be hounded out of the proceeding by the MLC while ignoring the many helpful points and suggestions made by SGA while it was in the proceeding including in its withdrawal papers.

These events range from the bizarre to the suspicious but lead me to the same conclusion—this process needs a whole lot of sunlight.

I found this language in MLC’s comments particularly troubling:

[G]iven that the MLC’s policies and procedures are still being developed with the [License Availability Date] still over one year away, the MLC believes that regulations concerning the Office’s oversight role may be premature at this time. The MLC believes that the promulgation of regulations concerning the Office’s role in overseeing and regulating the MLC’s operations and policies would be more fruitful once the MLC has fully developed its policies and procedures and is able to provide them to the Office for review.

That is exactly backwards. While the MLC may think oversight is not a fit until they decide how they wish to govern themselves with the power of the compulsory license and the biggest corporations in history behind them, the Copyright Office shouldn’t delay establishing the rules of the road.

The MLC is rapidly becoming a self-licking ice cream cone wrapped in cronyism inside a cryptocurrency. The Copyright Office is in a position to turn this erosion of MLC’s statutory mission back to the light and away from “new boss-ism” as in “meet the new boss, worse than the old boss.”

It seems impossible to ignore the fact that the MLC quango has announced their selection of vendors in a news dump over the Thanksgiving holiday. Having selected the Harry Fox Agency and a cryptocurrency outfit as best of breed vendors, I would expect both the substance and the process of this selection to be fair game for a comment about the MLC, its operations and, of course, its management.

I am reminded of James Madison’s warning in Federalist 51:

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.

Notices of Blanket and Nonblanket Activity

The Office’s request for comments on notices must be seen in light of the subsequent selection of HFA by the MLC. The implications from the MLC being permitted to select their cronies at HFA as a vendor comes up in many places in the Office’s request for comments. In terms of notices, I assume that HFA will be permitted to continue with its business practice of representing both copyright owners and digital music services, most specifically Spotify. In other words, HFA will be on both sides of the same transaction, a clear moral hazard and conflict of interest. Further if HFA is going to continue to collect money from services and pay songwriters, what is the point of inserting a $60 million-dollar layer of MLC bureaucracy in the middle of this transaction? In economic terms this appears to be pure “deadweight loss.”

The MMA clearly envisioned that the establishment of a single MLC would create market efficiency in music licensing. The selection of HFA as a vendor makes a mockery of the MMA by making the market less efficient, and essentially turns the MLC into a parasitic middleman. This is an “own goal.”

At the outset, I must respectfully say that I have first-hand experience with the HFA work product in two different class actions against HFA tech clients. In addition to my two class actions, there have been seven significant lawsuits that I am aware of brought against Spotify, an HFA client. All these lawsuits have similar facts—they were brought by (1) independent publishers that (2) opted out of the “settlement” between Spotify and the National Music Publishers Association and (3) whose claims were summarily ignored until they sued.

In my case, after I sued Spotify I received non-compliant NOIs from HFA (as Spotify’s agent) relating to songs at issue in the case that were backdated approximately five years. These notices were sent from an address that HFA would not have until several years after the back date and that were signed by an officer of Spotify who had left his job over a year before the mailing date. I don’t know what kind of game they were playing—perhaps trying to trick me or my business manager into cashing a paltry check they would argue indicated my acceptance of their license. It didn’t work, and the rest is history.

I have nothing personal against HFA and I actually placed part of my catalog with HFA for administration to see how they would do. At this writing, the jury is out.

I can also not ignore the fact that the entire MLC selection process appears from the outside to be a giant Kabuki dance to cover up business as usual with the reunion of the NMPA with the HFA unit they just sold off. I think it’s fair to say that I’m not alone in raising these questions, which relate directly to the Copyright Office’s questions and the initial round of comments from several commenters.

Public Test of Operability

The following responds to the Office’s questions about usage and reporting requirements.

The MLC announced with no oversight or explanation that is has selected HFA as one of its principal vendors. Because the MLC dragged their heels on disclosing who their vendors would be, the Copyright Office was forced to designate the MLC before the MLC announced its vendors. The Office was therefore largely buying a pig in a poke—as were all songwriters in the history of music. The Office (and the Congress) unintentionally empowered the MLC to essentially do whatever it wanted to fulfill its statutory mandate. The MLC chose HFA in what may be the least suspenseful announcement of the decade.

Respectfully, I think that when the Copyright Office reflects on that decision in a few years, it will be shown to have been a mistake or I will be shown to have been a goat. If HFA works out, I will be happy to be a goat. But if it doesn’t, the bill for both these decisions will come due—and the services won’t be paying that one. Self-published songwriters will be paying with missing or miscalculated royalties.

There have been many notable lawsuits brought against services since I filed my class action in 2015. Some say that these cases drove the services to accept the Title I blanket license due to the retroactive safe harbor. All of these cases have two things in common: They were brought by independent songwriters or publishers and HFA was the backend matching and royalty accounting service in every case. So I would say it differently. What drove the services to take the safe harbor deal (which was great for them) was not the songwriters, it was HFA’s repeated inability to get the job done.

Not only was HFA not punished for its failures, it has been rewarded. This is curious. And the MLC is now supposed to accomplish in 12 months or less that which the industry has been unable to accomplish in decades. Using HFA. Which makes it all very mysterious to people like me.

One way to solve that mystery would be for the MLC to disclose the actual selection criteria and internal recommendations to support the supposed “unanimous” selection of HFA. Was this the work of a dedicated group of likeminded people or was it based on objective criteria? If, for example, MLC were to have given HFA and MRI a problem to solve, I would like to know exactly what that problem is so that I could assign the solution of the problem set as an academic project. I would be happy to publish the results, as could any other academic wishing to conduct such peer review.

Unfortunately, I seriously doubt that MLC has any intention of being that transparent unless they are required to do so by regulations. Which leads one to ask, why so secretive?

To be continued in Part 2

 

@SGAWrites Suggestions to Copyright Office on MLC Operations Part 3

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  This is Part 3 and you can read Part 1 here and Part 2 here.  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

III. The Imperative of the Librarian of Congress Acting Quickly to Appoint A New and Experienced Register of Copyrights

SGA was disappointed by the news on December 9, 2019 that Register of Copyrights Karyn Temple had made the decision to step down from her position as head of the USCO, effective immediately. However, the SGA was pleased that Dr. Hayden acted quickly and appointed Maria Strong as Acting Register. Given Ms. Strong’s breadth of experience in the Copyright Office and knowledge of copyright law, the SGA firmly believes she will adeptly lead the Copyright Office through this transition. Both Dr. Hayden and Karyn Temple shared this confidence in Ms. Strong’s ability in the press release announcing her appointment as Acting Register of Copyrights.

The Copyright Office sits at a crucial time in the MLC oversight and MMA implementation process. It is therefore imperative that the Office act quickly and appoint a permanent register.

The SGA was gratified when Senators Tillis and Coons, the chair and ranking member of the Senate Intellectual Property subcommittee, wrote to Dr. Hayden urging her to promptly appoint the next permanent register and offered to assist the Librarian of Congress in selecting an appropriate replacement for Ms. Temple. (See Attachment F).
In light of the many sensitive issues outlined in its Initial and Reply comments, however, SGA would like to take this opportunity to respectfully urge that any candidates selected as permanent Register be especially knowledgeable about and sympathetic to the needs and Constitutionally based rights of the creator and author community. Such person should also, quite naturally, be without conflicts of interest in regard to prior service on behalf of digital distributors, big tech, and/or corporate copyright owners, and all of their respective trade associations. We are confident that Dr. Hayden and her Library of Congress staff, in coordination with Congress, will be enabled to find a number of qualified candidates who satisfy these criteria, and who will lead the USCO forward into a future in which the implementation of the MMA will prove a resounding positive for all US and global music creators.

IV. Conclusion

SGA thanks the US Copyright Office and the Librarian of Congress for their careful concern regarding protection of the rights and interests of songwriters and composers under the MMA, and for the opportunity to respectfully submit these Reply Comments. SGA further looks forward to providing more of its insights and suggestions in its future submissions, and will gladly respond to any further questions regarding MMA implementation and proceedings.

Respectfully submitted,

Rick Carnes
President, Songwriters Guild of America

@SGAWrites Suggestions to @CopyrightOffice on MLC Operations Part 2

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  This is Part 2 and you can read Part 1 here.  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

B. Copyright Office Review and Oversight of Controversial Activities By the MLC As
Denoted By David Lowery and Others

It is well beyond the scope of these comments to delve into the details and individual
administrative issues with which the MLC must deal, such as formulating contractual
arrangements with outside vendors in order to effectively accomplish its statutory duties.

Nevertheless, as noted above, according to independent press reports recently published by sources including former MLC Committee Member David Lowery (“MLC Selects As Digital Services Provider the Company That Sent Fraudulent License Notices to Songwriters”), certain activities of the MLC have aroused legitimate concerns in the independent music creator community that conflicts of interest are already influencing MLC decision-making (see article citations below). As SGA has urged in prior submissions, the USCO and the Librarian of Congress have been empowered under the MMA to monitor, oversee and review MLC activities, and should utilize such authority at the very least to question on an ongoing basis whether the MLC is being managed by its board members in ways consistent with such members’ fiduciary and other duties and responsibilities.

In that regard, SGA believes it is imperative to include for the record citations to three such recent publications concerning MLC activities, in order to call specific attention to the need for robust USCO oversight of issues that rise to the level of potential conflicts of interest such as self-dealing. It is, of course, up to the USCO and the Librarian of Congress to determine the criteria for its active intervention in such potentially problematic MLC matters, consistent with the statutory authority assigned to them under the law. Again, however, SGA urges that strict scrutiny of such issues, once brought to their attention by interested and informed members of the press and public, should at the very least be carefully reviewed and if necessary, investigated and acted upon. Moreover, as some commentators have suggested, the mandating of adoption by the MLC of conflict of interest policies in coordination with the USCO and the Librarian of Congress would likewise be a wise and welcome development.

The three recent, independent articles electronically appended to these Reply Comments for the review and records of the USCO and the Librarian of Congress are as follows (see Attachments C-E):

https://thetrichordist.com/2019/11/27/mlc-selects-as-digital-services-provider-thecompany-that-sent-fraudulent-license-notices-to-songwriters/

https://www.digitalmusicnews.com/2019/11/27/hfa-mechanical-licensing-collectivecontract/

https://www.hypebot.com/hypebot/2019/12/copyright-office-should-establishconflict-
of-interest-policy-for-the-mma-musical-works-database-op-ed.html

C. Failure to Disclose Amounts of Unmatched Royalties Being Held By Digital Distributors

On December 6, 2019, the USCO held a full day MMA symposium in Washington, DC billed as the “Unclaimed Royalties Study Kickoff.” The event was attended by several dozen copyright experts and other interested parties, some of whom represented the MLC and the DLC, and many of whom participated on one or more of several organized discussion panels. At the end of the event, a representative of SGA took the opportunity to note from the podium that in the approximately seven hours of discussion, not one panelist or participant had raised a single question concerning the aggregate size of the unmatched royalty pool being held by the major digital distributors of music (the very subject of the event). The answer to that question, SGA noted, is certainly a key factor in determining the best practices for scoping the size of the problem, and for identifying and distributing such monies to their proper owners. Or it is concerning why this question was not proactively addressed during any of the day’s panels, otherwise asked, SGA asserted, let alone not answered.

SGA has time and again over the past several years posed this same question to representatives of both digital distributors and music publishers (including in private discussions that took place at the Kickoff event), and even to the USCO. Not once has the question of aggregate unmatched amounts been answered, generally because the information appears to be either willfully undetermined or is purposely being withheld by the digital distributors. Estimates have ranged from several hundred million dollars (based upon extrapolations derived from the past experiences of organizations such as SoundExchange) to a high of $1.6 billion discussed at an Austin, Texas SXSW panel in 2017 that featured representatives of NMPA and a legal representative of one of its affiliated creator groups, who appeared to quote that number.

As the MLC and DLC are well aware, the MMA requires demonstrative actions by each that will “ensure that the policies and practices of the collective are transparent and accountable.” See, Section 102(d)(3)(D)(ix)(I)(aa). SGA suggests that consistent with this requirement, the time has come to at last address the issue of how much money in unmatched royalties is being held by the digital distributors, so that the scope of this daunting problem is publicly disclosed and can be fully and effectively addressed. The community of songwriters and composers has the right to know this information, and a USCO regulation requiring its public disclosure by a date certain in the very near future is clearly warranted. SGA respectfully requests that the USCO issue such a regulation as soon as possible concerning this most basic issue of transparency and accountability as required under the MMA, regarding disclosure of unmatched withholdings both now and in the future.

D. Budgetary Earmarks in Support of Bona Fide Efforts to Identify Unmatched Royalties by the MLC

In its Initial Comments, SGA described in some detail its experience as a participant before the United States Copyright Royalty Judges of the Library of Congress’ Copyright Royalty Board (“CRB”) regarding the Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective, CRB Docket No. 19-CRB-0009–AA. Following both SGA’s withdrawal as a participant in those proceedings, and its subsequent submission of its Initial Comments to the USCO, on December 12, 2019 the CRB issued an order (“Order”) approving the settlement negotiated between the MLC and the DLC concerning the issue of Administrative Assessments.

In that Order, the CRB judges interestingly took note of their receipt and rejection of several comments concerning the proceedings submitted by non-parties:

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 nonparticipants 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 exparte 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, sua sponte, 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, vel non, of good cause.

The above CRB statement omits, quite unfortunately, the fact that while still a participant in the proceeding, SGA (despite its withdrawal) did indeed file a motion with the CRB that included specific comments applicable to any proposed settlement negotiated between the MLC and the DLC. The September 12, 2019, SGA filing included the following clear statement by SGA on behalf of US and global independent music creators, concerning their desire to ensure justice in the eventual distribution of currently unmatched royalties:

[E]ven as it seeks to withdraw its Petition to Participate in this Proceeding, SGA respectfully implores the Judges…to make the proper funding for MLC activities specifically designed to identify the proper owners of unmatched musical compositions [and royalties] wherever they may reside in the world… one of the highest priorities of these Proceedings…. It further, respectfully requests that the Judges undertake whenever appropriate, to emphasize their intention and expectation that certain resources have been specifically provided for and must therefore be devoted to use in identifying the proper owners of such unmatched compositions and royalties by the MLC…. The clear articulation of such judicial intent, if the Judges deem it appropriate, will be enormously helpful in ensuring transparency, fairness and hopefully success in the carrying out by the MLC of its duties, a result that will be appreciated by every music creator not only in the United States, but throughout the world.” Motion to Withdraw Petition to Participate filed by SGA with CRB, September 12, 2019, Docket No. 19-CRB-0009–AA.

The decision by the CRB judges to put aside SGA’s requests, presumably on the grounds that SGA’s withdrawal (the reasons for which are explained in SGA’s Initial Comments) negated the ability of the CRB to consider such comments, is disappointing at best. SGA, however, is appreciative for being enabled to make the same requests of the USCO, for the same reasons articulated in its motion to the CRB and in its Initial Comments. As SGA stated:

[I]n a situation in which those who control the MLC will likely benefit from not identifying the proper owners of unmatched works (by reason of the fact that potentially hundreds of millions of dollars in royalties pertaining to ‘permanently’ unmatched works will eventually be distributed on a market share basis), every effort must be made to ensure that the search process for those rightful owners be a bona fide and sufficiently financed global effort. (emphasis added)…. Moreover, despite contrary assertions by the MLC, SGA remains unconvinced that the presence on the MLC board of a small minority of music creators (no matter how diligent and well-meaning they may be) will be able to prevent the major music publishing corporations from attempting to successfully exert undue influence. SGA is highly concerned that such multi-national conglomerates may already be seeking to diminish the MLC’s ability to secure proper financing specifically earmarked for designing and carrying out a global program to identify the proper owners of the musical compositions connected to the huge, above-referenced cache of unmatched royalties. SGA similarly doubts that the independent music publishers on the MLC board, many of whom are contractually and/or commercially tied to the major music publishers, will be sufficiently motivated to join with those few MLC songwriter board members to ensure that the rights and interests of such yet-to-be identified music creators and small publishers are properly respected.

In consideration of the foregoing, SGA once again respectfully requests that the USCO and the Librarian of Congress promulgate regulations that make clear to the MLC the expectation that a certain, adequate percentage of the MLC’s Administrative Assessment shall be devoted to undertaking a bona fide and reasonably exhaustive, global search for the rightful owners of currently unmatched royalties, as explicitly intended by Congress under the MMA.

To be continued in Part 3.

@SGAWrites Suggestions to @CopyrightOffice on MLC Operations Part 1

The US Copyright Office solicited comments from the public about the operations of the Mechanical Licensing Collective.  Those first round of those comments (called “initial comments”) were due in November and the second round of those comments (which are called “reply comments” because they essentially comment on the initial comments) were due December 20.

The Songwriters Guild of America filed initial comments and also filed reply comments.  We’re going to post SGA’s reply comments in three parts and then we’ll post other commenters who we think made really good points (like CISAC and BIEM among others).  Note that SGA’s comment includes a post by Chris Castle, but we are going to link to that post rather than reproduce it as you may have already read it.

All the comments focus on some central themes that seem to be on everyone’s mind which can be boiled down to oversight, oversight and more oversight.  While the DLC controls the MLC’s purse strings, the MLC has been given largely uncontrolled power over songwriters that needs to be checked by the government on behalf of the governed.  SGA’s comment can be boiled down to its motto:  Protect Songwriters.

Reply Comments of the Songwriters Guild of America, Inc.
Re: Notice of Inquiry Issued by the United States Copyright Office Concerning the Orrin
G. Hatch-Bob Goodlatte Music Modernization Act of 2018 Titled “Blanket License
Implementation Regulations”

I. Introduction and Statement of Interest

These Reply Comments are respectfully submitted by the Songwriters Guild of America, Inc. (“SGA”), the longest established and largest music creator advocacy and copyright
administrative organization in the United States run solely by and for songwriters, composers, and their heirs. Its positions are reasoned and formulated solely in the interests of music creators, without financial influence or other undue interference from parties whose interests vary from or are in conflict with those of songwriters, composers, and other authors of creative works.

Established in 1931, SGA has for 88 years successfully operated with a two-word
mission statement: “Protect Songwriters,” and continues to do so throughout the United States and the world.

SGA’s organizational membership stands at approximately 4500 members, and through its affiliations with both Music Creators North America, Inc. (MCNA) (of which it is a founding member) and the International Council of Music Creators (CIAM) (of which MCNA is a key Continental Alliance Member), SGA is part of a global coalition of music creators and heirs numbering in the millions. Of particular relevance to these comments, SGA is also a founding member of the international organization Fair Trade Music, which is the leading US and international advocacy group for the principles of transparency, equitable treatment, and financial sustainability for all songwriters and composers.

These Reply Comments are meant to supplement the initial comments (“Initial Comments”) filed by SGA in its submission dated November 8, 2019 (see Attachment A), the full content of which is hereby repeated and reconfirmed.

The two most important points stressed by SGA in those Initial Comments were as follows:

1. The obvious and overwhelming necessity for inclusion of music creator information in
the Mechanical Licensing Collective’s (“MLC”) musical works database; and,

2. The equally imperative necessity for robust US Copyright Office oversight of the MLC’s
carrying out of its statutory duties, commitments and activities, especially regarding the
identification of unmatched works and royalties.

It was originally anticipated that SGA’s Reply Comments would focus chiefly on the recommendations submitted by other individuals and organizations as part of the initial round of inquiry. Intervening events concerning the activities of the Mechanical Licensing Collective (MLC) since SGA’s initial submission, however, have caused SGA to recalibrate its focus. Due to the importance of conveying to the US Copyright Office (“USCO”) and the Librarian of Congress some of the very concerning information that has come to light over the past several weeks, SGA believes its Reply Comments must now of necessity deal principally and forthrightly with those issues rather than with the critiquing of submissions filed by its colleagues.

II. Additional, Recent Developments Illustrating the Necessity for Close Scrutiny and Oversight of the MLC by the USCO and the Library of Congress

A. The Resignation of Recording Artist/Songwriter/Music Creator Activist David Lowery from the MLC, and the Process of Replacing Music Creator Members on the MLC Board and Committees Prior to its designation by the USCO and the Librarian of Congress as the organization that would serve as the MLC, the entity established principally by the major music publishing conglomerates and known as the NMPA/MLC conducted an extensive campaign aimed at gaining industry support for its MLC candidacy.

As part of that campaign, it and its affiliated music creator and publisher organizations frequently raised the participation of recording artist/songwriter/music creator activist David Lowery on the Unclaimed Royalties Oversight Committee (“URO Committee”) as potentially the most compelling proof of the entity’s commitment to ensuring that the voice of the independent music creator would always be heard.

Throughout his career, Mr. Lowery has been an outspoken advocate for the rights and interests of musical artists and creators. His mere presence within the NMPA/MLC’s proposed Committee structure legitimized for many the group’s candidacy among independent songwriter and composer groups. Those organizations might otherwise have objected more strenuously to an entity controlled in large part by the multi-national music publishing conglomerates being designated to serve as the MLC.

On July 5, 2019, the NMPA/MLC was indeed selected as the official MLC, and Mr. Lowery was simultaneously approved to serve on its URO Committee. Within a few short weeks after that announcement, however, Mr. Lowery resigned from the URO Committee and disassociated himself from the MLC with the statement that he “lacked the bandwidth” to carry out the watchdog role he had hoped to fill. Shortly thereafter, Mr. Lowery began to publish commentaries highly critical of certain decisions and activities being carried out by the MLC (and highly revealing of his apparent reasons for resigning), the gravity of which issues will be discussed further, below.

Mr. Lowery’s sudden and unexpected departure from the MLC and the URO Committee,
however, has raised even more immediate concerns within the independent music creator community, not only as to the reasons why he might have resigned, but also over the process by which he will be replaced. It is the position of SGA that a system which would allow the MLC board of directors (consisting of ten music publisher representatives and just four music creators) to select and/or approve replacement directors and committee members on behalf of the creative community, without meaningful input from creators or approval by the Librarian of Congress and the Register of Copyrights, is an absurdity. Such an unbalanced, unchecked process would virtually guarantee the removal of what little influence actual music creators have over future MLC activities and decision-making—a result wholly inconsistent with Congressional and Executive intent (especially as regards the crucial work of the URO Committee).

As SGA pointed out in its comments to the US Copyright Office dated April 22, 2019 concerning the original designation of the MLC (see Attachment B):
With the knowledge that ‘permanently’ unmatched royalties will eventually be
distributed on a market share basis to them, [the] largest music publishers will almost certainly do all they can to influence, hamstring and obscure the search process…. It will take highly experienced, non-conflicted and strongly independent-minded board members of the Mechanical [Licensing] Collective to resist this pressure, and to act in ways that fulfill their duties up to the mandated standards of fairness, transparency and accountability set forth in the Act.

The necessity for those characteristics in board members is amplified by the fact that the Mechanical Collective board may even override the recommendations of its own, statutorily established Unclaimed Royalties Oversight Committee if it sees fit to do so. It thus falls to the Register of Copyrights to serve as investigator, analyst and arbiter concerning this crucial, threshold issue of appropriate board and committee member selection as part of its evaluation of the competing candidates for designation as Mechanical Collective.

In honing in on its concerns regarding that specialized duty of the Register, members of Congress took the opportunity in both the Senate and House Reports to elaborate on their expectations regarding the qualifications of board and committee members proposed for service by any Mechanical Collective candidate, and the obligation of the Copyright Office under the direction of the Register to use its own, appropriate judgement in independently evaluating and verifying the credentials of those directors and committee members proposed. That Congressional posture was undoubtedly taken to ensure that all board and committee members of the Mechanical Collective possess the proper background and abilities to execute their duties to protect the rights of creators and other interested parties without conflict, pursuant to the terms of the Act.

Specifically, the applicable section of the Senate Report reads:

The Board of Directors of the new collective is required to be composed of individuals matching specific criteria. The detailed requirements concerning the overall framework of the Board of Directors of the collective and its three committees, the criteria used to select individuals to serve on them, and the advance publication of their names and affiliations all highlight the importance of selecting the appropriate individuals. Service on the Board or its committees is not a reward for past actions, but is instead a serious responsibility that must not be underestimated. With the advance notification requirement, the Register is expected to allow the public to submit comments on whether the individuals and their affiliations meet the criteria specified in the legislation; make some effort of its own as it deems appropriate to verify that the individuals and their affiliations actually meet the criteria specified in the legislation; and allow the public to submit comments on whether they support such individuals being appointed for these positions. It has been agreed to by all parties that songwriters should be responsible for identifying and choosing representatives that faithfully reflect the entire songwriting community on the Board.” (emphasis added) S. Rept. 115-339 at 4-5.

The otherwise identical section of the House Report concludes on the following note:

During the entire discussion of the legislation, it has been agreed to by all parties that songwriters should be responsible for identifying and choosing the songwriter representatives on the Board. The Committee strongly agrees with such an approach. (emphasis added) H. Rept 115-651 at 5.

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.’ (emphasis added)

Pursuant to such clear guidance from both Congress and the White House concerning the selection and replacement of music creator board and committee members, SGA urges the adoption by the USCO of regulations mandating inclusion in the MLC by-laws of a process that includes meaningful music creator participation in the selection process without music publisher interference, with further review and approval by the USCO and the Librarian of Congress of all music creator candidates for MLC board and committee service. To do otherwise would be akin to empowering the wolves to select the watchdogs that purportedly guard the sheep. And that is a result that is not only emphatically in conflict with Congressional intent, but one that is also guaranteed to produce exactly the opposite, long-term results Congress and the Executive Branchwere seeking by passage of the Music Modernization Act (“MMA”): remunerative fairness and justice for creators consistent with the principles set down in Article I, Section 8 of the US Constitution.

To be continued in Part 2.

Press Release: Songwriters Guild Of America Files Reply Comments With Us Copyright Office Again Urging Stringent Oversight Of Music Licensing Collective

We wanted to post this press release from the Songwriters Guild regarding its reply comments to the Copyright Office public consultation on regulating the Mechanical Licensing Collective.

The Guild generously raises some very helpful issues and also is concerned about David’s departure from the MLC.  Unfortunately, the Guild’s comment is still not available on the Regulations.gov website, so Artist Rights Watch linked to a copy of it.  We’re not quite sure why the Copyright Office hasn’t gotten around to posting the Guild’s comment (or David’s yet for that matter) along with the 32 others they have posted before the Christmas break, but we’ll keep you informed on their progress.  Hopefully that’s just an oversight that we noticed because we’re back to work now.

Here’s the press release.

New York, December 20, 2019–  The Songwriters Guild of America (SGA), the longest established and largest music creator advocacy and copyright administrative organization in the United States run solely by and for songwriters, composers and their heirs, has submitted a series of comments and requests to the US Copyright Office regarding oversight of the newly-formed Mechanical Licensing Collective (MLC).  Its comments were filed on December 20, 2019 at the invitation of the Register of Copyrights, pursuant to the duties assigned to the Librarian of Congress and the Copyright Office under the Music Modernization Act of 2018 (MMA).  SGA’s comment is here.

“Due to the inherent and sometimes unavoidable conflicts of interest surrounding the formation and activities of the MLC under the law,” states SGA president and songwriter Rick Carnes, “the music creator community believes that the highest degree of scrutiny must be applied by the US Government in overseeing MLC activities.  Hundreds of millions of dollars in songwriter and composer royalties will be at stake on an annual basis, and to protect us from conflicts of interest within the MLC in regard to such issues as matching currently unclaimed royalties to their proper owners, Congress wisely placed the responsibility of evaluating MLC  activities for fairness, transparency and accuracy to the US Copyright Office.  SGA fully supports the efforts of the Register of Copyrights to formulate regulations that protect the rights of music creators as Congress intends, and will work with the Office to help ensure it is enabled to vigorously and effectively perform its oversight functions.”

Specifically, the comments filed by SGA include requests for regulations governing the MLC that mandate:

  1. Recognition of the obvious and overwhelming necessity for inclusion of songwriter and composer information in the MLC Musical Works Database;
  2. Adoption of internal MLC rules requiring adherence by board and committee members to strict conflict of interest policies;
  3. Inclusion in the MLC by-laws of a process for replacing music creator board and committee members that includes meaningful music creator community participation in the selection process without music publisher interference, and review and approval by the USCO and the Librarian of Congress of all such music creator candidates and appointees. (“To do otherwise,” states Carnes, “would be akin to empowering the wolves to select the watchdogs that purportedly guard the sheep”);
  4. The immediate compilation, calculation and publication of the aggregate amounts of unmatched royalties being held or already transferred to the MLC by digital music distributors, and to update such information on an ongoing basis;
  5. The allocation of sufficient funds specifically enumerated in the MLC budget to be utilized solely for mounting a bona fide, global effort to identify unmatched royalties.

SGA also applauded the recent appointment of Maria Strong to serve as Acting US Register of Copyrights, and urged the Librarian of Congress to select as permanent Register a person  especially knowledgeable about and sympathetic to the rights and needs of the creator and author community, and without conflicts of interest in regard to prior affiliation with digital distributors, big tech, and/or corporate copyright owners (and their respective trade associations).

Finally, SGA suggested that the Copyright Office exercise diligent oversight in reviewing certain recent MLC initiatives, including the awarding of contracts to potentially controversial third parties such as The Harry Fox Agency and ConsenSys, and in investigating the sudden withdrawal from participation on the MLC  Unclaimed Royalties Oversight Committee of songwriter, recording artist and music creator rights activist David Lowery.

“SGA’s intended role in this process,” concludes Carnes “is to serve as an independent monitor of MLC activities, working with the US Copyright Office and other US Government agencies in ensuring that the rights and interests of music creators under the MMA are fully observed.  We have operated as an organization for over 85 years with a two-word mission statement: Protect Songwriters. And that is exactly what we intend to do in this case.”

 

 

Happy Holidays and David’s Copyright Office Comments

We wanted to wish all our readers happy holidays and thank you again for supporting the Trichordist!

As some of you may know, the Copyright Office comment period for MLC regulations just closed.  We will be posting David’s comments and selected other commenters here for some holiday reading starting tomorrow.

We want to thank the Society of Composers and Lyricists for mentioning David in their comments.

SLC NOI Reply Comments

 

RIP Scott Timberg and GoFundMe Page

We were devastated to hear of the death of Scott Timberg, a good friend of the artist rights movement and gifted writer.  His most recent work the definitive Culture Crash: The Killing of the Creative Class will be a vital resource for advocates for many years to come.

A GoFundMe memorial and college fund page was set up by David Dailey for Scott’s wife and son.  We urge everyone to contribute something however small.