Five and 1/2 Problems with The MLC’s Analog “Music Data Organization Form”

 

MLC Data Organization Form 1

We’ve been waiting for The MLC to show us how the best of breed solves the global rights database problem.  Hopefully the smart people will solve that problem before the January 1 deadline when the MMA’s blanket license comes into effect.  We’ve been told many times that HFA and ConsenSys were the elites and the smart people who would lead songwriters to the promised land.  So we have all been waiting.   And waiting.  And waiting….  The deadline is less than six months away and we have seen no tech demonstrated at all despite all the hoopla and promises.

VaporwareBut this week we got a look at what the elites have come up with in the form of the “Music Data Organization Form” that The MLC wants songwriters to use to “Play Your Part”.  Remember–The MLC got the tens of millions of dollars from the services and they want you to “Play Your Part” and “Eat Your Costs” to play your part for free.  Remember–they are the ones with a paycheck and fringe benefits paid for by the services that rip off songwriters every day.

Whenever we want to read a press release from The MLC we always turn to Music Row Magazine where we can usually read it word for word.  This is what Music Row “reports” about The MLC’s “Music Data Organization Form”:

The MLC created the Music Data Organization Form to help self-administered songwriters, composers and lyricists begin to organize their musical works’ data ahead of The MLC’s roll-out of The MLC Portal.

“The Music Data Organization Form is designed as a worksheet to help guide self-administered writers through the process of collecting the data they’ll need to register with The MLC,” said Kris Ahrend, CEO of The MLC. “The form essentially outlines the information self-administered writers will need to compile in order to register their musical works in The MLC Portal.”

The MLC intends to begin rolling out the first version of its user portal later this quarter. This version [of the portal, not the Music Data Organization Form] will enable users to set-up their accounts and then search, view and edit The MLC’s data for existing musical works and register new musical works.

So now it’s “later this quarter” which is a shift from what The MLC’s Richard Thompson said at the Copyright Office unmatched roundtable only last December when he said on the record: “So our current timeline has the first version of the portal going live late Q2, early Q3, of next year” meaning this year.  We are in early Q3 now, but now it’s “later this quarter.”  You know, Jesus is coming, look busy.

We can save you a trip–you don’t have a choice in participating in the blanket license because it’s even more compulsory than the old compulsory thanks to the Music “Modernization” Act.  On the other hand, you may not have to use this form because this form has no use to you as we will see, particularly if you already have all your song data organized in a format that works for you.

If you use The MLC’s “Music Data Organization Form” it appears that you’ll just have to do the same work all over again which the last paragraph of the Music Row press release tells you if you read closely.  (That’s the kind of daylight in the facts we expect journalists to catch.)

More importantly, entering your data in the Music Data Organization Form must be done manually.  At this rate, it may be that entering your data in whatever “portal” The MLC cooks up certainly looks like it, too, will require manual entry from independents.  Each of those manual steps will then be mistake-prone which could easily lead to…a bigger black box.

Just sayin.

The MLC’s “Music Data Organization Form” does not seem to serve much of a purpose and it surely can’t be a list of all the data fields that The MLC will require.  Those fields are still being argued over at the Copyright Office.  It seems to us that The MLC’s “Music Data Organization Form” is a make work step to mollify songwriters who are getting restless.  Because looking busy.

Here’s some problems with The MLC’s “Music Data Organization Form” that we’ve identified.  You may find others.  If you do, leave a comment privately.

Problem #1:  Once it is filled out, this form cannot be ingested by anyone for anything as far as we can tell.  We think we’re safe in saying that you shouldn’t use this form if you think that you can just hand it over to The MLC and have them then use it to automatically upload your song data into the global rights database by ingesting the metadata you laboriously inputted in the form.

Problem #2:  Even though the “Music Data Organization Form” is in Excel, it may as well be in WordStar–there are no formulas in any cell.  We know this because we checked each cell, but here’s another way to find out:

MLC Data Organization Form Split

Note that the Lennon and McCartney shares sum to 110%, but you wouldn’t know you had incorrect splits from the “Music Data Organization Form” because there is no formula in the cells that totals the splits for you.  Which is, by the way, the most basic arithmetic in Excel.  You can eyeball the splits in the easy case of 50/50 but if you had 9 writers, you might overlook if all the splits don’t sum to 100%.  Which is why you have the machine do it for you!

Problem #3:  You have to do a separate Excel file for each song in your catalog.  So you’ll get lots of practice at filling out this form manually.  That could lead to getting it right more often or getting tired and making more mistakes.

MLC Data Organization Form 2

Problem #4:  The MLC thinks you can use this to handwrite your metadata.  Yes, you read that right.  It’s already set up with print fields, so they got that printing thing right at least.

MLC Data Organization Form FAQ

Problem #5:  The writers are not tied to publishers in any permanent way.  One wrong sort of the cells in the “Music Data Organization Form” at The MLC and there’s no telling how many mistakes there will be.

Problem #5A:  There’s only an implication that The MLC will want you to send them these worksheets.  They don’t actually say they want you to send them.  Frankly, if you have to do a separate work sheet for each song, they probably don’t even want them.  But–because The MLC’s “Music Data Organization Form” is not automatically inputted into The MLC’s systems, if The MLC did get their hands on the individual forms, there is nothing stopping The MLC from sending a copy to others, like, oh say HFA or another vendor.  Nobody would ever know.  And it would keep those interns busy with data entry.

We could go on, but let’s stop there.

Hey, DLC!  This is what you get for $30 million?  We think ya been robbed.

But seriously folks, you never get a second chance to make a first impression.  What we expected was something just a tad more comprehensive and useful.   Something befitting the best and brightest, the global elites in our business.  Something that was smarter than what the average ConsenSys asteroid miner would come up with.  We don’t rule out the possibility that this is some magical blockchain solution hiding in plain sight but we’re not smart enough to see how that works if that’s the secret.

But even so it still leads us back to the same conclusion.

If The MLC is getting paid to process our data then they should take our data in the format that’s convenient for us.  If they don’t like that, then they should pay us to change the data into a format that’s convenient for them to build the core asset they are being paid millions to create. They already got the money to do this job.

It’s that simple.  But please don’t pawn off this kind of manual solution on us and tell us that we just need to make copies of their lo-fi worksheet for each song in our catalogs.  It can’t even add up the splits.

by trichordist

#OregonManBad: Senator @RonWyden is still #justone Senator sneaking around trying to screw creators in the shadows–ArtistRightsWatch

oregonmanbad

Oregon Senator Ron Wyden is still sneaking around in the shadows abusing the anti-democratic secret hold to stop the CASE Act from passing the U.S. Senate, the copyright small claims bill.  And get this–the CASE Act is bipartisan legislation that has been in the works for years and years and has already passed the U.S. House of Representatives and his own Senate Judiciary Committee!

But Senator Wyden is abusing a little known procedural trick to stop the bill from coming to a vote in the Senate so it can bring relief to independent creators in a vast number of copyright fields like photographers, authors, illustrators, songwriters and recording artists.  And it’s not like his constituents want him to oppose it, they want him to pass it!

wyden billboard
Oregon Professional Photographers Association Billboards

Little Ronnie doesn’t like the nasty billboards.  Do you think he thinks he can stomp his little foot and tell Senator Kennedy, Senator Durban and all his other colleagues to bark at the moon?  Who does this guy think he is?  Do you think he thinks he can get the billboards down if he holds his breath long enough?  Did he ever consider that maybe we’re just getting started bringing heat to his butt?

He’s clearly in the pocket of Big Tech and has been for a very long time.  This is a man who holds up every copyright bill that comes through the Congress and he does it the same way every time.

But this time he’s beginning to think he might actually get unelected because he underestimated the number of independent creators who are going after his job.

Say it like a mantra and share it with your friends–Oregon Man Bad!

 

by trichordist

Guest Post: Follow the Money: YouTube’s Failure to Pay Retroactively Gives “Conversion Rate” a Whole New Meaning

[Cross-posted from MusicTechPolicy]

by Chris Castle

Conversion

A performance metric one hears from the digerati is the term “conversion rate.”   “Conversion rate” for a streaming service usually means the rate at which users of an ad-supported free service are “converted” to paying users.  That motivation is usually because they are so fed up with the advertising they are willing to pay.  (This was one of the many failed pitches from Spotify before people stopped trying to justify hanging on until the IPO riches flowed in.)

YouTube, of course, has never been too terribly interested in anything that moves users away from advertising.  That resistance (and potential internal competition between the massive ad sales team and the ever changing YouTube managers), may explain the many failed efforts at launching a YouTube subscription service by a company that knows more about user behavior than anyone in history.  They just couldn’t seem to get it right for the longest time.  You don’t suppose that YouTube’s apparent lack of interest in getting large numbers of users to substitute away from free to subscription was because YouTube made a lot more money from the ads than they ever would from the subscriptions?

One of the ways that YouTube (and Google) makes money from advertising is by taking money that is not theirs to take (sometimes called “monetizing” content).  The civil law calls that act a claim of “conversion” and   the criminal law calls it the crime of “theft”.  Conversion and theft are two sides of the same coin and often one implies the other, albeit with different burdens of proof.

theft

YouTube’s Content ID tool is a way for copyright owners to block or permit advertising on user-generated content that includes their copyrights, often music.  Users of Content ID will tell you that it works just well enough that Google can say it is an effective tool, but even with Content ID music still gets through (and is often monetized by YouTube) for a variety of reasons.  This requires time consuming and costly manual searches.  Companies like AdRev make it a bit easier, but are essentially third party Content ID users.  These companies are compensated with a commission on infringing works they find on YouTube that they convert–there’s that word again–from infringing to monetized, which means that YouTube now splits the advertising revenue with the copyright owners who in turn split their share with an AdRev.

But see what happened there?  If you have Content ID, you can block on the upload some of the time, or you can do a search.  If you don’t have Content ID (see Maria Schneider’s class action) then you can’t block on the upload only chase the infringements manually.  But quite rightly from an economic perspective, companies like AdRev are not that interested in doing that work on a rev share basis if there’s no rev share when you block.

Here’s the point–you have a property right in your copyright.  You have a property right to license that copyright.  Any revenue derived from exploitations of that copyright is your money.  YouTube uses its monopoly power to impose a deal to monetize your copyright (under duress, of course, due to whack a mole DMCA).  That deal involves a revenue share.  (Let’s just assume you decide to take the King’s shilling and accept Google’s deal under duress which you shouldn’t have to do and which may not even be enforceable.)

The question is, when should that revenue share attach–when they start exploiting your copyright in violation of your property rights or when you catch them doing it.  And if (1) you catch them violating your property rights and (2) agree to monetize, when should they pay you your agreed upon share of the revenue from monetizing?  Should they pay retroactively to the first exploitation?  Or only prospectively after you catch them?

The correct answer is they should pay retroactively.  But they don’t.  They just keep the money.  For millions of infringements.  And they get away with it because of their monopoly power, which leaves one choice most artists won’t make, which is to sue them like Maria has.

Remember–Content ID operates largely like any other fingerprinting tool.  (Psychoacoustic fingerprinting is old technology–remember Jonesy in “The Hunt for Red October”?  That’s fingerprinting.  A “fingerprint” is simply a mathematical rendering of the waveform of an audio file.)

There is a reference databases of recordings that are “known knowns” (which is why it is important to be included in the Content ID database as Maria Schneider correctly points out in her class action.)  The fingerprinting tool encounters a new file, takes a fingerprint, then looks for a match in the reference database and reports a result that triggers an action.  Typically, fingerprinting tools are binary:  match or no match.  What happens after the tool finds a match is entirely in the control of the operator.  (So while the tool could have a match rate of 90%, the operator could report a random number of matches or a fixed number of matches, like one every ten, or one every 1000.  That means 90% accuracy could turn into a much lesser percentage of reported matches.  It’s important to know how many matches trigger an action.)

Having had some experience with audio fingerprints, I think you will find that once a fingerprint is in the reference database, the recognition tool (Content ID in this case) will spot the reference fingerprint a very, very high percentage of the time.  The fingerprinting tool I’m most aware of caught matches over 90% of the time.  I can’t imagine that a tool developed by the biggest technology company in commercial history would do less–unless they wanted it to.  Remember, this is not taking into account re-records unless the re-record is itself in the database, or pitch bends.  This is an exact match which is very common use of Content ID.  (See Maria’s class action complaint, and Kerry Muzzey has a great description of this in his recent Senate testimony.)

If Content ID is actually missing matches to known knowns on the upload (assuming exact matching is possible), I find it very odd that Content ID is missing much.  Maybe it’s not, but one way to find out is to force Google to reveal the inner workings through discovery in the class action case.

But if Content ID does miss exact matches, it would be interesting to know what percentage of those misses end up being monetized, and of those, what percentage end up getting caught later by a subsequent use of Content ID or a manual investigative process.  This will give an idea of the scale of the retroactive payment issue.

As Maria rightly points out, it is virtually impossible for an artist or film maker without Content ID to catch YouTube monetizing infringing works.  But I think the analysis has to go a step further–even if you have Content ID, at the moment you catch YouTube monetizing illegal versions, you are in no different position than the artist who lacks access to the Content ID tool.

Both have the same problem–YouTube is profiting from illegal copies.  If when you catch them you then elect to monetize, YouTube will pay you going forward, i.e., prospectively.  But I do not believe they will pay you retroactivelyfor the illegal use.  (There is a rumor that some music publishers do get paid retroactively under some settlement, but that needs to be confirmed.)

That means that YouTube is directly profiting from piracy for the retroactive views which could total into the hundreds of millions per day given the massive number of daily views on YouTube.  If you elect to monetize due to YouTube’s monopoly power, you are essentially releasing them from liability under duress.  If you catch them.

So YouTube takes your property, monetizes it, and refuses to pay you for how much they made before you caught them if you ever do catch them.  They dare you to sue them because you would be taking on the biggest company in commercial history that controls 90% of the access to information in the world and routinely defies governments.  Not everyone has the spine of Maria Schneider.

Failing to license at all or failing to pay retroactively means that YouTube profits from piracy by converting your property to their own.  And as Maria rightly points out, Google scrapes user data through non-display uses in the background even if YouTube is not monetizing overtly which they then use to compile user profiles in “millions of buckets” (which dribbled out before Judge Koh in the Gmail litigation (In Re: Google, Inc. Gmail Litigation,  Case No. 13-MD-02430-LHK, (U.S.D.C. N.D. California, San Jose Division, Sept. 26, 2013)).

In either case, the value of the amount converted or stolen should rightly include the value of these user profiles scraped in the background, as well as the advertising revenue.

And don’t forget that Google is controlled by Larry Page, Sergei Brin, and Eric Schmidt through their “supervoting” shares of stock.  It’s hard to believe that this YouTube policy was created without their blessing.

The simplest move for Google would be to simply pay both retroactively and (if the copyright owner elects to monetize) prospectively.  Otherwise, it seems like a huge number of crimes are going on in a very planned and organized way dreamed up by YouTube and Google employees.  “Dreamed up” is also called a conspiracy, and if there’s an actual conspiracy it’s not a theory (which came up in an interesting trade secret misappropriation RICO case against Google they managed to wriggle out of, at least for the moment).

The law has another word for organized theft at scale–we sometimes call it “racketeering.”

racketeering

 

by thetrichordist

Guest Post: The Royal Scam: Content ID and Google’s Massive Profits From Piracy and Crime

By Chris Castle

Google and YouTube have managed to create a scam that has gone both largely undetected and largely unpunished for a decade–illicit activity that can be both seen and quantified through the sale of advertising and is also unseen and unquantified through data scraping in the background.  (I leave it to you to speculate which is more valuable.)

It is rare for Google to get caught like they were with the massive multi-agency sting operation and grand jury investigation by the then-U.S. Attorney for Rhode Island that led to the $500,000,000 punishment and non prosecution agreement in 2011.  (Which led to a very expensive shareholder lawsuit against Google’s board of directors and bizarre settlement.  We’ll come back to the board of directors issue here.)

If you had to put your finger on a moment in time that Google began buying Washington in earnest, it was this sting.  It was also the closest that Larry Page ever came to going to prison with all its earthly delights.  That evidently got his attention.

Google has also faced down civil RICO claims for racketeering through the theft of intellectual property.  The last reported RICO case against Google offers a checklist for how to make a civil RICO claim stick against the Leviathan of Mountain View.  I like the YouTube case a lot better than the inventor’s case they beat back.

But most of the time Google just keeps the money when they get caught.  A prime example is YouTube’s standard practice of refusing to pay a revenue share retroactively after you catch them infringing your work using Content ID.  That unjust enrichment creates an incentive to sharply limit the number of artists or songwriters who get access to Content ID in the first place.  I think this is why Google massively overreacted to Mississippi Attorney General Jim Hood’s Civil Investigate Demand and subpoena that they never did respond to.  Maybe they were covering up the same crimes that got them prosecuted in Rhode Island and they did not want to go through that again.

And therein lies the rub and our topic today:  If Google never gets caught, Google quietly keeps all the money.   For our world, this happens because they’ve artificially limited the tools that independent creators can use to catch the massive infringements.  And even if the majors and a handful of independents get the Content ID tool, YouTube still has the incentive to make Content ID just good enough that they can say it works, but not so good as to actually stop the infringement before it starts.

The majors using Content ID have to employ still other means to catch them, sometimes manually, at great cost.  In fact, you have to wonder if net-net the total costs of administering the YouTube deals actually exceeds the minimum guarantee and royalty payable.  Those tools are simply beyond the reach of the creators, even the few who YouTube grants access to Content ID.

And of course, any user of Content ID (big or small) has to sign up to the take-it or leave-it shakedown deal that limits what you can do about it when you catch them.  Which is just another form of the protection rackets.

This criminal enterprise comes in two flavors (at least):  Ad sales for illegal products (like the drugs, counterfeit tickets and the like), and selling legitimate advertising around content that Google knows or should have known was illegal (like YouTube’s monetization of infringing works).  And, of course, Google scrapes data in the background on all these criminal activities to its great–and secret–profit.

As we saw with the drugs case, Google knew exactly what it was doing, and I’m not willing to believe their rudderless ad sales teams don’t also know exactly what they are doing (remember Google’s ad sales team gave credit terms to infringers, and the drugs sting operation also shows that they brainstormed many criminal dodges to deceive Google’s own best practices team).

What little evidence we can lay hands on in the open source demonstrates that Google must know very well that it engages in criminal behavior–why else was Eric Schmidt advised by then-counsel David Drummond to refuse to answer Senator John Cornyn’s questions regarding the drugs case when Schmidt testified before a 2011 Senate Antitrust Subcommittee hearing?  (Also known as “taking the Fifth.”)  After engaging in a weak attempt at misdirection.  Did they think this question wouldn’t come up so didn’t prepare for it?  I doubt that very much.  (If they cooked up this story without the lawyers, this might well have been a conspiracy.  Attorneys take note:  Crime/fraud execution?)

schmidt senate
Eric Schmidt Takes the Fifth on drugs case to Senator John Cornyn: ” I have been advised — unfortunately, I’m not allowed to go into any of the details and I apologize, Senator”

Now that the U.S. Senate is investigating the effectiveness of the safe harbors under DMCA, this would be a good time for the Department of Justice to investigate Google’s business practices and potential criminal activities.  Smells like RICO to me.

As independent composer (and MTP guest poster) Kerry Muzzey highlighted in his recent testimony before the United States Senate regarding Content ID:

My name is Kerry Muzzey, and I am a film and television and modern classical composer.

I am one of the very few independent artists who has access to YouTube’s Content ID system; and most of my experience with notice and takedown has been on YouTube. Content ID has become a core piece of my licensing business: it is the x-ray that reveals the theft of my music to me. This is why I am also nervous about speaking out today – because I fear retaliation by YouTube and Google. I am concerned that they may take Content ID away from me for raising my concerns publicly. The technology behind Content ID is nothing short of brilliant, and I don’t want to lose access to it.

Growing up, my mom always said: “You’re not allowed to complain unless you’re gonna do something about it.” Senators, my being here today is my “doing something about it.” Today, I have the most unique opportunity I have ever had in my lifetime. I have the opportunity to ask Members of my United States Senate to fix a broken law.

Let’s also not forget the way Google is governed (as is Facebook, Spotify and many others).   Larry Page, Sergei Brin and Eric Schmidt hold a special class of  “supervoting” shares, what SEC Commissioner Robert Jackson has called “corporate royalty”.

These insiders get 10 votes for every one share they own of a special class of supervoting stock.  This means that the insiders control over 60% of the voting stock and win all shareholder votes—including votes to appoint the board of directors.

Supervoting shares give insiders absolute control of Google–one of the most successful public companies in commercial history.  Because they control every aspect of Google’s operations, Google truly is their “alter ego.”  One purpose of Google’s lobbying spend must be to keep the corporate royalty out of prison.

These supervoting Google Class B shares are not available to the public.  The public can buy two classes of stock:  GOOGL shares are Class A (one vote per share) and GOOG shares are Class C (no votes per share).  (GOOG shares were issued in a dividend to GOOGL holders.)  GOOGL shares typically trade slightly higher than GOOG which may demonstrate that the market has priced in a lack of meaningful voting rights in GOOGL.

It should not be surprising that Google shareholder meetings are a one-way communication event. The supervoting corporate royalty tell the other shareholders how things are going to be and vote down any move by GOOGL holders to change the status quo—like converting supervoting shares into one share one vote.  As Floyd Norris reported in his New York Times “Economix” column, “Rarely has a shareholder vote been less suspenseful.”

So Google’s profit from evil is not an accident.  If Congress wants to fix the DMCA, let’s fix all of it.  And as U.S. Attorney Peter Neronha discovered ten years ago, that requires a grand jury.

 

by thetrichordist

Composer Maria Schneider Files Class Action Suit Against YouTube

Grammy award-winning composer-performer Maria Schneider has filed a class-action lawsuit against YouTube and parent companies Google and Alphabet. The lawsuit is brought on behalf of independent rights holders that do not have access to the Content ID system (most of us).  As the complaint states:

Defendants Alphabet, Google, and YouTube reap billions of dollars annually from the online hosting of videos, including millions of works that infringe on the exclusive copyrights of Plaintiffs and the Class. Defendants permit and facilitate this infringement because it furthers their growth and revenue strategies and because they have determined that Plaintiffs and the Class— unlike YouTube’s preferred Content ID partners—lack the resources and leverage necessary to combat copyright infringement on the scale at which it is perpetuated on YouTube.

YouTube has consistently claimed that it protected by the DMCA safe harbor against copyright infringement lawsuits.  The complaint argues that Youtube has behaved in a manner that disqualifies the company from seeking DMCA safe harbor protection. We look forward to this playing out in court!

Read the complaint below:

Click to access maria-schneider-class-action-gov.uscourts.cand_.361906.1.0.pdf

by Dr. David C Lowery

Developing… HFA added as Defendant in Amended 8 Mile Spotify Complaint

Developing….

Amended 8 Mile v Spotify complaint adds Harry Fox Agency as a defendant.  The complaint states:

“HFA’s material contributions to and enablement of Spotify’s infringement through a joint conspiracy with Spotify to distribute fraudulent documents and misrepresentations designed to conceal and enable Spotify’s infringement of the Eight Mile Compositions.”

It continues

“2. As noted, this is, in part, an action for vicarious and contributory infringement brought by Plaintiff against HFA in connection with a scheme to conceal and materially enable Spotify’s copyright infringement by circulating knowingly fraudulent documents (e.g., untimely, and otherwise ineffective Notices of Intention to obtain compulsory mechanical licenses (“NOI’s”) that were intentionally and knowingly backdated to appear as though they were issued on a timely basis, and the fraudulent rendering of purported “royalty” statements) with knowingly false representations to Kobalt Music Services America Inc. (“Kobalt”), the entity authorized to collect royalties from licenses validly made for the Eight Mile Compositions, and to Eight Mile. As discussed herein, Kobalt is not authorized to enter into such licenses for the Eight Mile Compositions for the United States and Canada.”

You can read the entire complaint here.

97. Amended Complaint

At this time it is not known if this will affect the MLC designation of HFA as a service provider.

by Dr. David C Lowery

Guest Post: #FairTradeofMusic Initiative Goes After $330 million in the New Reciprocity Campaign for Artist Rights (#irespectmusic)–Artist Rights Watch

Guest Post by Chris Castle (cross posted from Artist Rights Watch)

I cannot tell you the number of times U.S. artists have said to me, “I don’t need to join SoundExchange, I’m already a member of BMI.”  (Or ASCAP.)  Then I have to explain to them why SoundExchange collects an entirely different royalty–for the performance of the sound recording not the song.  It’s SoundExchange for recordings, PROs for songs.  Say it like a mantra.  It is a testament to the decades of propaganda from the National Association of Broadcasters and especially SiriusXM that has kept U.S. artists in the dark.

Strangely–and I’m being sarcastic–I never get this question from artists who are not Americans.  They are very aware of the performance royalty for sound recordings.

What neither the US nor the UK artists know very often is that when an American artist is played in the UK, the US artist receives no royalty due to decades-old trade rules.  But when a UK artist is played in the US, the UK artist receives their full royalty from SoundExchange as a matter of law.  A new organization called the Fair Trade of Music campaign  wants to change that so that artists are treated the same in the UK regardless of where they call home.

Why do we care?

We care because Fair Trade of Music estimates that U.S. artists lose about $330,000,000 each year due to this lack of fairness and reciprocal treatment.

FTOM Logo
Fair Trade of Music

We care because due to COVID-19, live music income has collapsed to zero or near zero.  Public performance income from SoundExchange is one of the few income streams left that American artists can count on.  And this is not a Yank thing.  The idea that American artists are generating income that is denied to them because of ancient trade laws is just as maddening to their sisters and brothers among artists in the UK as it is to the Americans.

We care because fixing this inequity is not a zero sum game.  UK artists should not make a penny less if US artists get their rightful share.  The money is already being paid and the rates are already determined–it’s just that the payment of the money for US artists must be redirected.

We care because we have a chance to fix the ancient trade rules that perpetuate this inequity.  There are a lot of trade rules about many different products and services including the rules for these payments to American artists.  Those rules can be changed by vehicles like the upcoming UK/US trade agreement.

Right now the focus is on the UK because we have a vehicle to take a big step toward fixing this treatment (which is true in many other countries, too).  That vehicle takes the form of the upcoming UK/US trade agreement which may be signed in the next few months.  Even if it isn’t actually signed it will be negotiated, and the outlines of the UK/US deal will likely be much better defined before the end of the year. (This “bilateral” trade agreement with the UK must be put in place due to the UK leaving the European Union.)

We need to be at that table.  Now is the time to take action.

If you want to sound off to the powers that be about fixing this loophole, you can sign a petition to support fair treatment at the Fair Trade of Music site.  I don’t often ask you guys to do something like this, but I really think you should sign up.

As Ann Richards said, if you’re not at the table, you’re on the menu.

by thetrichordist

Guest Post: MLC Black Box Invasion: Transparency for the “Interim Application of Accrued Royalties”

This post is a version of Chris Castle’s comment in the current Copyright Office rulemaking on the transparency of the MLC

By Chris Castle

Just when you think you understand Title I of the Music Modernization Act, another toad runs out from under a rock.  My nickname for the toad we’re going to talk about today is the “Hoffa Clause,” in honor of the Teamster leader and well-known pension fund raider (played by Al Pacino in The Irishman).

Here it is:

INTERIM APPLICATION OF ACCRUED ROYALTIES.—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.[1]

The Office has a serious public education issue about the hygienically titled “Interim Application” clause.  I have yet to meet a songwriter who is aware of this clause in Title I and it was never publicized in the run up to passing MMA. Many publishers have been so taken aback[2] that they deny the clause is there.  Despite the provision’s rather metaphysical properties, it is there and it says what it says.  How it came to be there is only known to the insiders.  But it’s very specific, so must have been placed there for a reason.

Title I gives The MLC tremendous power over affording itself the benefit of administering other people’s money.[5]  The plain language of this clause essentially says that The MLC can invade the black box and make interest free, nonrecourse loans to itself to apply against certain shortfalls in “collective total costs” when the administrative assessment approved by the Copyright Royalty Judges is “inadequate to cover total collective costs.” Under Title I as drafted, The MLC is solely in a position to control that shortfall and to invade the black box.

Anytime anointed people handle other people’s money, stringent rules apply to that duty.  Or ought to.  Strangely enough, this “Interim Application” provision is not addressed at all in the legislative history or the Conference Report.   So we can only look at the words and try to divine the intention of the lobbyists who wrote the bill.

Plain Meaning

The new rule announces itself as relating to the “application” of “accrued royalties” on an “interim” basis.  The Cambridge Dictionary tells us that “interim” means temporary, such as a temporary solution:  “temporary and intended to be used or accepted until something permanent exists”.  That “something permanent” is the “administrative assessment”–which of course will already exist at the moment of “application”.  So there is a chicken and egg issue with this entire concept from the beginning.

(Remember that the “administrative assessment” is the operating budget and startup costs paid for by the users of the Title I blanket license who may also be the beneficiaries of the Title I safe harbor.  The administrative assessment always exists once it has been set in motion by the Copyright Royalty Judges, which is now in place for the foreseeable future.  The CRJs essentially recently rubber stamped the agreement between The MLC (the biggest publishers, having single-mindedly gotten rid of the independents through legal maneuvering) and the DLC (i.e., the biggest services).)

So what money is available to be tapped through this “interim application”?  “Unclaimed accrued royalties”, which sounds like the black box.  Which is why I call it a “black box invasion.”

It is worth noting that Title I uses the terms “unmatched” and “unclaimed” somewhat interchangeably.  I would point out that it is possible for royalties to be both matched and unclaimed, matched and disputed and unilaterally held by The MLC, as well as unmatched and therefore unclaimed. And remember that just because money is unclaimed does not mean that there was any method in place for it to be claimed.

Realize that the entire Hoffa clause is based on an assumption–that there was a meaningful process in place for songwriters (1) to know that The MLC had decided that their money should be held as accrued but unclaimed and (2) to claim their money.  There is neither present today and there is unlikely to be either available any time soon based on public statements of executives of The MLC.  Without both these processes in place, it seems that it should be important, if not crucial, to preserve the status quo until they are and that the public interest would be served by doing so.

Holding Periods Maketh the Black Box

I suggest that the common interpretation of black box is that it includes a series of royalty payments that may be disputed, matched, unmatched and unclaimed and has been so for a holding period of at least a few years, in this case three years.[3]  That suggests that no invasion may occur under this clause before the passing of three years, and the holding period should run on an item-by-item contributory share basis for each rolling accrual.

But that isn’t really the whole story on the holding periods in the first black box distribution from the DLC to The MLC.  The first distribution is going to be all the black box money ever held by all the DLC members (and any other users of the blanket).  Because the security surrounding this amount is tighter than the nuclear football, it is impossible to say how much will be in the black box.  The Songwriters Guild and Society of Composers and Lyricists (the ones who were maneuvered out of the assessment hearing) have been asking this question for months and no one has responded.

The relevant holding period for the black box is not only the three years that The MLC can hold the money, but the entire holding period from when the black box first “accrued”.  That could be many years longer than the Title I holding period.  There’s a question as to the three-year rule should apply or whether the DLC should be allowed to ignore all those holding periods on top of the three years.  You can see this is a story for another post, but keep that in mind for this post.  I don’t think that sentient beings with the ability to think sequentially can just accept that the relevant holding period is three years–after the black box is transferred to The MLC as though the money had been there all the time.  I don’t think songwriters need a court to tell them that’s just wrong.

What Does Accrued but Unclaimed Even Mean?

The fact that royalties are “accrued but unclaimed” for all or part of a song does not tell the whole story, because “unclaimed” standing alone doesn’t tell the whole story.  The “Interim Application” clause applies to “unclaimed accrued royalties” which could be royalties payable for unmatched contributory shares of songs that The MLC doesn’t know who to pay (therefore unclaimed) as well as matched royalties that have yet to be claimed but for which a payee might be identified with subsequent research.

Which contributory shares of a song that are or are not claimed is a fact determined by a snapshot in a moment of time that could easily change in the next moment.  In fact, accrued royalties being held on disputed songs may also find their way into the black box.[4]  Unfortunately, Title I has yet another drafting glitch because it does not identify that moment in time for purposes of the black box invasion.

Borrowing from Frankie to Pay Big Paulie

There could easily be a situation where the black box is invaded but the future assessment is not made for a year or more, or the future assessment is insufficient to repay Peter for the loan to Paul.  Because an expenditure may be an item of “collective total cost” but may not be reimbursed by “future collections of the assessment” rather than the next collection of the assessment occurring after the interest-free nonrecourse black box invasion, the statutory drafting is glitchy.

Plus, while the CRJs approve the administrative assessments, they have no direct approval right over a black box invasion—although approval over one does imply approval over both to the extent the invasion takes money from an assessment in a proceeding before the CRJs (which would be all assessments).  I’ve almost talked myself into believing that the CRJs actually were intended to approve any black box invasions, at least to the extent the sums are to be included in future assessments or offset prior assessments.  I think we all would be grateful if the Copyright Office could clarify this point.

In any event, it is clear that The MLC is allowed to write itself what amount to limitless[6] interest-free nonrecourse loans against the black box that can only be repaid from the assessment if the DLC approves (or perhaps the CRJs could be persuaded to approve).

The DLC would then be put in a position of declining to approve an increase to cover a black box invasion in the assessment that the DLC had nothing to do with incurring and will not have been informed of based on the plain language of Title I.  Since the current assessment seems to be on a fixed trajectory based on the last assessment settlement, it is likely that any invasion amount might exceed the stipulated assessment.  What happens if the assessment is not available to repay the invasion amount is unclear, even though The MLC is allowed to make the decision before knowing how the loan will be treated?

Required Transparency

The first issue in this cluster must be transparency on the board vote at a minimum.  Because the statute refers to approval by The MLC’s  “board of directors” and because the nonvoting members are part of the board, I have always assumed that such a board vote requires both voting board members and at least the assent of nonvoting members.  Neither does the glitchy language require any particular majority, so the new regulations may be an opportunity for the Copyright Office to require a majority, supermajority or unanimous board vote in regulations.

My preference would be for unanimous because I think taking other people’s money is a controversial act and they should lock arms and all go together.  Unanimity would also require both publishers and songwriters to vote for the loan (as publishers already have a supermajority representation written into the law).  As far as I can tell, we can only go by the plain language of the statute as I have found no legislative history on this provision.

Notice to Songwriters

I also think that regulations should provide that there be some written public statement by The MLC’s chief financial officer to the Copyright Office (or the CRJs) that these funds are being approved by the board for disbursement before the taking.  The CFO should also provide a justification statement.  The MLC board should have to sign up to that statement with full transparency of (1) why there is this compelling need and (2) why that need can only be met this way.  Frankly, it would be best if the funds could not be disbursed until the Register or the Librarian approved the disbursement in all respects.  One would think that the board members would want this sharing of responsibility.

Another option, if possible, would be to require The MLC and the DLC to return to the CRJs and request an increase in the applicable assessment or amendment to The MLC’s budget to cover the black box invasion.

What’s in Your Wallet?  Explain Why There is a Shortfall

There yet another drafting glitch in this section.  The statute fails to ask why a quango like The MLC is in a position that the millions in the Administrative Assessment doesn’t cover the relevant costs in the first place.  The assumption seems to be that there was a spike in the defined “collective total costs”.  As The MLC is in control of how the Administrative Assessment is spent, there may need to be some true up between the authorized budget approved by the CRJs and what was actual spent on a line item basis.

This raises, of course, the question of what kind of items should never be covered by the Administrative Assessment (which, if violated, could cause a shortfall requiring the black box invasion).  Such items might include loans to executives, performance bonuses, excessive travel reimbursements (such as first-class travel or reimbursement for tips in transit), expensive restaurant tabs and alcohol bills, but also items like settlements of harassment claims or related court costs.  Since harassment claims often are subject to nondisclosure agreements, it does not seem appropriate for The MLC to be able to recover such payments from black box invasion.  None of those items should be deductible from the Administrative Assessment and should never be the cause of a black box invasion.

It must also be said that “collective total costs” includes “bad debt.”  This caught my eye.  “Bad debt” is generally defined as a contingency or credit extended (such as to a customer) that is determined to be uncollectable.  Why would a pass-through quango like The MLC which has all of its costs covered by a third party need to be extending credit or loaning money to anyone, certainly not to any employee, board member, or vendor?  Under these circumstances, how would the bad debt be matched according to GAAP?  What controls are there within The MLC to disclose bad debt?  And why should bad debt be able to cause a black box invasion?

A corollary to bad debt is the indebtedness of The MLC itself as a borrower.  Again, given that the collective total costs are underwritten by a third party, why would The MLC need to borrow any money at all?  One could imagine that The MLC might properly have a modest bank credit line for cash flow purposes, but servicing any credit line should not result in a black box invasion, nor should the black box be used as collateral for any loan.

Paying Songwriters Who Claim or Are Matched After the Loan

The other drafting glitch I spotted that I would recommend needs closing up has to do with subsequent matching and paymenting.  What happens if there is a call on the black box invasion funds loaned to The MLC after the loan is made but before it is repaid.  These black box invasion loans should not delay matching and should also not delay payment of royalties matched after the loan is disbursed.

The easiest solution for a call on these loaned funds is to require the board members (or their companies) to cover the required funds, but I really think the Copyright Office needs to address the potential to abuse this tempting power.  Abuse of this power is exactly the kind of thing that could give rise to the very “waste, fraud and abuse” Congress wants the Copyright Office to take into account in the quinquennial review and potential redesignation (discussed above).

Yield Not Unto Temptation:  Detection Leads to Correction

This comment is not intended to be a knock on The MLC.  I am simply noting that any MLC may face the temptations that have certainly been irresistible for many smart people similarly situated in other contexts.  This kind of loan might well be a breach of a fiduciary duty by board members, and certainly would be in other similar situations.

It also must be said anecdotally that there are many songwriters who, perhaps unfairly, think that publishers use black box payments as a slush fund to run their operations with interest-free loans as the hygienically named “interim applications” would be.

The problem is that without the disinfectant of sunlight, there may be no detection to lead to correction.  Who would not prefer to avoid that problem who was able to avoid it?

* * * * * * * * * * * * *

[1] 17 U.S.C. § 115 (d)(7)(C).

[2] I have also discussed this clause off the record in the context of the Dispute Resolution Committee and Unmatched liability safe harbor for The MLC with friends at CMOs outside of the U.S.  When the laughter subsided, they all said that if they did anything like this they’d be fired long before they hit the gross negligence threshold.  “Heads on pikes” was the description.  We must then wonder what the CMOs think of this clause and what in the world they think the Americans are up to.  The Office might want to ask them.

[3] 17 U.S.C. §115 (d)(3)(H)(i).

[4] It appears that royalties held by the Dispute Resolution Committee for disputed works will also be kept in the black box account and presumably would be subject to invasion.  “The dispute resolution committee established under subparagraph (D)(vi) shall establish policies and procedures…that shall include a mechanism to hold disputed funds in accordance with the requirements described in subparagraph (H)(ii) pending resolution of the dispute.”  17 U.S.C. § 115 (d)(3)(K)(ii).  Subparagraph (H)(ii) provides for an “Interest-bearing account.—Accrued royalties for unmatched works (and shares thereof) shall be maintained by the mechanical licensing collective in an interest-bearing account that earns monthly interest….”

[5] Presumably this issue will be addressed in the Copyright Office Unclaimed Royalties Study of best practices on both matched but unclaimed and unmatched royalties.  Even so, this may be a good place to insert a true escrow account for the mandated interest-bearing account for the black box so that the account is held by a third-party bank unrelated to The MLC, the DLC, their board members or their vendors.  There should be specific withdrawal instructions to that third-party bank.  I find it difficult to understand why anyone would oppose such an ethical separation.

[6] The loans are limitless because there is no limitation on the amount in Title I.  The loan could theoretically even exceed the amount of the then-existing black box and be taken from a future accrual.

by trichordist

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.”

by thetrichordist

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.

by thetrichordist