Tag: Copyright Office

Copyright Office Authorized a Star Chamber at the MLC to Hold Your Money

We knew this would happen. The Copyright Office has empowered the Mechanical Licensing Collective to decide whether a song (or a sound recording) can be copyrighted all under the guise of AI. If the MLC–not the Copyright Office–decides that your song is not capable of being registered for copyright, the MLC can hold your money essentially forever.

Where’s the regulation on this important subject? Did you get a chance to comment on these crucial regulations and precedent?

Ah…no. You didn’t miss any notices in the Federal Register. No, we know this because of this cozy “guidance letter” to MLC CEO Kris Ahrend from the general counsel of the Copyright Office. That’s right, a letter that we just happened to run across. That letter states:

More specifically, the Office advises that a work that appears to lack sufficient human authorship is appropriately treated by The MLC as an “anomal[y],” consistent with its Guidelines for Adjustments, and The MLC should “place [associated] Royalties in Suspense while it researches and analyzes the issue.” Such research could include corresponding with the individual or entity claiming ownership of the work or [could include] inquiring whether the Office has registered the work and whether there are any disclaimers or notes in the registration record.

If The MLC subsequently concludes that the work qualifies for copyright protection and the section 115 license, it should distribute any royalties and interest in suspense to the copyright owner. Alternatively, if The MLC believes that the work does not qualify for copyright protection following its research and analysis, it should notify the individual or entity claiming ownership of the work of its determination and that associated royalties will be subject to an adjustment. This conclusion and adjustment may be challenged by initiating an “Adjustment Dispute” consistent with The MLC’s policies. If legal proceedings are initiated to challenge The MLC’s actions, the disputed royalties and interest should remain suspended until those proceedings are resolved.

So just in one paragraph, the Copyright Office has effectively delegated its role in the U.S. government to a private corporation controlled by the largest music publishers and financed by the largest tech companies in the world (actually the largest corporations in the history of commerce). If the MLC decides that your song “appears to lack sufficient human authorship” The MLC can hold your money while they research the issue.

Note this doesn’t say who makes that decision, it doesn’t say when they have to notify you, it doesn’t say they have to give you an opportunity to be heard, it places no timeline on how long all this may take. “The MLC” (whoever that is) could sit on your money for years without ever telling you they are doing it and also keep invoicing the DSPs for your royalties while they “research and analyze the issue”.

The only time they have to give you notice if they “believe” (whatever that means) “that the work does not qualify for copyright protection” then “it should” (not the mandatory “shall”, but the permissive “should”) notify you of that determination. You can then file an “adjustment dispute” based on the MLC’s own guidelines which you will not be surprised to learn places no disclosure obligations on them, imposes no timeline and cannot be appealed.

Note that this guidance from the Copyright Office pretty expressly contemplates that the MLC may dispute a work that has already been registered for copyright without qualification–which raises the question of what a copyright registration actually means, and where is it written that the MLC has the authority to challenge a conformed Copyright Office registration.

It also places the MLC in a superior position to the Copyright Office because it allows the MLC to initiate a dispute resolution system outside of the Copyright Office channels. Is this written somewhere besides a burning bush on Mount Horeb?

The letter does seem to suggest that you can always sue the MLC or that the MLC could be prosecuted for state law crimes, perhaps, like conversion, but it would help to know who at the MLC is actually responsible.

This also raises the question of why the MLC is invoicing the DSPs in the first place and what happens to the money every step along the path. Because of the idiotic streaming mechanical royalty calculation, it seems inevitable that the royalty pool will be overstated or understated if the MLC is claiming works that are not subject to copyright (like it would for public domain works it invoiced).

Ever wonder what prompts letters like this to get written?

Play your part, dude. Go back to sleep.

by Trichordist Editor

@northmusicgroup Calls Out The MLC’s Ability to Make “Law” Through Business Rules that Hurt Songwriters and Skew the Black Box to Benefit Majors — Artist Rights Watch/Music Technology Policy

In this comment to the Copyright Office, Abby North (independent publisher and Artist Rights Symposium III Moderator) calls on the Copyright Office to stop the MLC quango from unilaterally establishing “business rules” that hurt songwriters and their heirs and protect working families from these arbitrary actions of The MLC. The passing of Jeff Beck reminds us once again that we must take care to protect the heirs of creators.

Read the original comment here on Regulations.gov

January 5, 2023

Via Electronic Delivery

Comments of Abby North

Docket No. 2022-5

Re: Termination Rights and the Music Modernization Act’s Blanket License

To the United States Copyright Office:

My name is Abby North. I am a music publishing administrator based in Los Angeles. My views expressed in this letter are solely my own. 

With my husband, I am a copyright owner of the classic song “Unchained Melody,” among other copyrights. I also administer musical works and sound recordings on behalf of songwriters, their families and heirs. In many instances, I assist my clients in identifying their termination windows, assist in the research required, and interface with the attorneys who process termination filings.

Abby North, Helienne Lindvall, Erin McAnaly, Melanie Santa Rosa speaking at UGA Artist Rights Symposium III (Nov. 15, 2022 in Athens, GA)

I’m thankful for the opportunity to submit comments in support of the Copyright Office’s proposed rule.

The ability to recapture rights via the United States copyright termination system truly provides composers, songwriters and recording artists and their heirs, a “second bite of the apple.” Many of my clients exercise this right, and in doing so grow their family’s revenue, which, given today’s inflation and very high interest rates, coupled with a depleted stock market, is absolutely necessary.

Allyn Ferguson was a successful composer of film/television scores including “Little Lord Fauntleroy,” “Les Miserables,” “Charlie’s Angels,” and “Barney Miller.” According to Variety in its June 27, 2010 obituary, Ferguson was “among the most prolific composers of TV in the past 40 years.” My company North Music Group administers works controlled by Ferguson’s family.

In addition to his scores, Ferguson wrote songs performed by artists including Johnny Mathis, Count Basie Band and Freddie Hubbard. While the bulk of his film and television scores were created on a work for hire basis, and therefore are not eligible for termination under US copyright law, Ferguson’s commercial compositions and songs were not created as works for hire. Ferguson’s family has been able to exercise its termination rights in various musical works,

thereby increasing its earnings as it now collects the publisher share of United States royalties generated by the terminated works. Individual songwriters and composers and their heirs are not copyright aggregators. Every musical work, and every penny generated is very necessary to these families.

The Music Modernization Act created the blanket digital mechanical license. This move from one-off copyright licenses to a blanket license was a dramatic improvement in US mechanical licensing. However, the suggestion that rights held at the inception of this blanket license might remain, in perpetuity, with the original copyright grantee was frightening. I concur with the Office’s proposed rule and legal analysis of the relevant statutes and authorities.

I appreciate the Office requesting comments on the mechanics of solving the payment issues, because for the independent publishers I speak with and for me personally, many operational questions arise regularly regarding The MLC’s uncharted territories.

As one of The MLC’s statutory goals is to provide transparency to songwriters and copyrightowners, I would ask that the Office require The MLC to notify copyright owners (1) if The MLC’s unilateral termination policy has already been imposed on payments previously paid or that are being held in the historical or current black box, and (2) when the adjusting payment required by the proposed rule had been made.

To be clear, this rule must absolutely be retroactive to inception date of The MLC. Beyond the simple, clarifying amendment to the MMA, I believe there are additional, related issues that must be resolved:

1) What is The MLC’s “business rule” regarding the MLC/HFA Song Code for the terminated work? Prior to the inception of The MLC, the Harry Fox Agency would assign one HFA Song Code fr the work and its pre-termination parties, and a different HFA Song Code for the work with the post-termination parties.

What happens now? Do these multiple HFA Song Codes remain in The MLC’s database? Will there continue to be two separate MLC/HFA Song Codes, particularly given the Harry Fox Agency continues to license physical and download mechanicals on behalf of many publishers? Is it reasonable for the HFA Song Code to be the same as The MLC Song Code, when there is no derivative works exception in Section 115?

2) Which party is entitled to the Unmatched (Black Box) royalties, the related interest fees and to The MLC’s investment proceeds for a terminated work?

Finally, it should be noted that the initial concept proposed by The MLC Board (that the server fixation date should impact termination dates) most likely would have served large publishers, not songwriters.

It is crucial that the Copyright Office exercise vigilant oversight and governance of The MLC’s reporting regarding any payment obligations to copyright owners. Specifically, composers, songwriters and their heirs must have as significant a voice as the largest publishers and copyright aggregators.

Additionally, in the spirit of full transparency, I request full disclosure of board or committee votes, minutes of meetings or other documentation of process. For me and others like me, this would tremendously enhance our understanding of The MLC.

Decisions are being made by The MLC’s board and committee members, while the general MLC member or songwriters have no mechanism to gain information regarding the discussions, the decisions and the implementations thereof. Access to minutes and notes would provide valuable insights to the general membership.

I applaud the Copyright Office for moving swiftly to create this rule and clarify and codify how The MLC must treat copyright terminations. It is important that this rule be dictated by the Office as it is absolutely not The MLC’s job todecide who controls rights and is entitled to collect royalties. 

That said, a “business rule” established by The MLC could have the effect of law absent vigilance by the Copyright Office.

On behalf of my family and clients, I wholeheartedly support this proposed regulation, and I truly appreciate the Copyright Office’s consideration of my comments.

Sincerely,

Abby North

North Music Group LLC

@northmusicgroup Calls Out The MLC’s Ability to Make “Law” Through Business Rules that Hurt Songwriters and Skew the Black Box to Benefit Majors — Artist Rights Watch–News for the Artist Rights Advocacy Community — Music Technology Policy
by Trichordist

Clowns to the Left of Me, Jokers To the Right: When Will the MLC Show Us the Money?

If you’ve received one of these emails from the MLC about having to recast their monthly statement inside of a single month, when you’re eying that $500,000,000 of supposedly unmatched money that’s sitting in the MLC, Inc.’s bank account (maybe?), or if you’re trying to figure out when they are launching the vastly overdue claiming portal, you’re probably wondering–who’s in the clown car today? Bozo or Pennywise?

But maybe they’re smarter than they look. Because all they have to do to distribute that $500,000,000 on a market share basis is keep you looking at the bright and shiny object while they run out the clock.

And if you’re waiting for the Copyright Office to save you because they have “oversight”, you’re going to be waiting for a long time. Here’s the reality–nobody is minding the store. There’s a difference between “oversight” and “overwatch.” In Washington, “oversight” means finding someone else to blame and from the very beginning it has been clear who the MLC intends to blame–you. Because you didn’t “play your part” or sufficiently “connect to collect”.

The Copyright Office has done a couple things while under the supervision of the current head lobbyist for Spotify. They’re good at studies, terrible at oversight, so let’s give credit where it’s due. But also realize that’s where it stops because they have about as much moxie as a starfish. (And if you think the NMPA is going to save you, take a look at the frozen mechanicals debacle and ask yourself if a rational person could really take that seriously.)

At the core of the MLC’s business model is the ability to match. Matching is kind of a “See Spot run” building block. If you can’t match, it’s very close to saying you can’t count. Because it depends on what the definition of “match” is.

So what is a match? Or as the Bard might say, how can I screw thee? Let me count the ways. The Copyright Office produced the Unclaimed Royalties Best Practices study partly on this very topic. Notice the difference between “best practices” and “rules.” “Best practices” is not the same as “rule”. If you violate a best practice, nothing happens to you, so therefore perfect for Washington. If you violate a rule, bad things happen to you. The connective tissue is enforcement. If you violate a rule at the Securities and Exchange Commission, you wear stripes. If you violate a rule at the Environmental Protection Agency, you will pay a fine, for sure. If you violate a rule at the MLC? There really aren’t any so it can’t happen. In other words, it’s just like the Harry Fox Agency.

But that’s what we have so let’s look at one passage in particular from the Best Practice Study because that’s the closest we have to a rule book.

The Office recommends that the MLC make all [matching] metrics publicly available, except to the extent it would cause confidential or business sensitive information to be improperly disclosed. [God forbid.] Specifically regarding match rates, the Office acknowledges the MLC’s point that “vendors can easily increase their claimed ‘match percentage’ by simply dropping the confidence level at which they call something a match.” For that reason, the Office recommends that the MLC provide appropriate context for its metrics, including information surrounding how it defines a match, relevant confidence levels, and how confidence levels are tuned. Additionally, so that they are clear and precise, and to avoid possible confusion, the Office recommends that all royalty figures be provided both with and without accrued interest. [How about a best practice of how they are practicing complying with best practices best?

The Office recommends that in addition to providing annual statistics in its annual report, the MLC also have a dedicated public webpage displaying all of these metrics in a clear, well-organized, user-friendly, and accessible manner. The webpage should be interactive and allow users to search, sort, and break down the data so it may be more easily reviewed and analyzed. The webpage should also have an export or download feature, including bulk exporting/downloading, to aid public consumption and dissemination. The Office recommends that the webpage be updated monthly after each batch of new reports of usage arrive and go through initial matching processes. All metrics should be retained and made available online indefinitely (though the MLC could distinguish between current and historic metrics in the future) so long-term trends can be assessed and to ensure the public and the Office have access to them in connection with the review of the MLC’s designation every five years. The MLC should also be very clear about how applicable metrics may change in response to DMP reporting adjustments and the reconciliation of any related royalty underpayments or overpayments permitted by the Office’s regulations. Relatedly, the Office also recommends that the MLC make publicly available relevant metrics about DMP reported usage that the MLC determines is not subject to blanket licenses (e.g., where it is subject to a voluntary license instead, public domain musical works, etc.), such that any related paid royalties have been credited or refunded back to the DMP.

What would also be nice is to tell you how much of your money they are holding and how you get it back. Maybe they could practice the best out of that.

There’s nothing particularly insightful about any of that, right? It’s the kind of thing that any songwriter giving the subject a moment or two of thought could have figured out at any point in the last 100 years. It’s also the kind of thing that you would have expected to have been built into the MLC’s system–which is essentially the HFA system–from the beginning.

It doesn’t matter what they say they aspire to do. Naturally they have to say they aspire to get it 100% correct–because otherwise that raises some interesting questions about intent, right?

Will they ever be called to account for their failures? Doubtful. The only business in the world where you can get the government to let you hold $500,000,000 of other people’s money and then keep it because paying it out was just too hard for you.

Do you think this mess is what Congress had in mind after they were fed a bunch of crap by the know-nothing lobbyists?

So let’s ask again–Bozo or Pennywise?

by Trichordist Editor

Curiouser and Curiouser: Strange Loose Ends with Apple Music and The MLC

[Guest post by Chris Castle. This post first appeared on MusicTechPolicy. This is interesting because songwriters don’t often see shenanigans from Apple Music but it is probably due to the overpowering litigation magnet of the MMA. Put this in The MLC redesignation file]

Here’s an update on the bizarre saga of Apple Music and The MLC. Remember that HFA sent to its publishers this termination notice from Apple Music on Apple’s lyric and cloud services licenses (and assume for the moment it was also sent to other non-HFA publishers):

Apple Termination

This is remarkable because the Music Modernization Act limits the kind of licenses that the MLC can administer because the blanket license only applies to a limited number of activities (on demand streaming, limited downloads and permanent downloads). It does not apply to lyric licenses or cloud services because the blanket license is not available for those rights. Those rights would still need to be licensed under the very type of agreements that Apple is terminating.

This question came up during a recent MLC webinar moderated by MLC executives Kris Ahrend (CEO) and Serona Elton (Head of Educational Partnerships). These two executives were asked the obvious question, how can The MLC do lyric licensing for Apple. An eagle eyed MTP reader sent this screen capture from the chat:

MLC Apple Answer

So you have to ask, if The MLC can’t license lyrics, why did Apple terminate their lyric licenses and transfer to The MLC?  And what does “separately from us” mean?  The answer is not really responsive to the question.

Separately from us could easily mean that while The MLC is not licensing lyrics, some other entity is. (Presumably the lyrics are from songs that are subject to the blanket license so the MLC would play a role.)   Remember that the termination notice came from HFA.  Could it be that “separately from us” means HFA would be issuing a side by side lyric license on behalf of its publishers?

And remember that the notice from Apple includes this language:

[W]e intend to move our licensing and royalty administration for Apple Music to the MLC starting from January 1, 2021.

Congress did not intend that The MLC offer licensing and royalty administration for DMPs like Apple.  That would mean that The MLC would be paying itself for Apple’s blanket activities.  That is what HFA does through a rather porous ethical wall (and for which they have been at the center of two class actions and numerous copyright infringement lawsuits and are currently a co-defendant with Spotify in another post-MMA lawsuit).

It has long been assumed that somehow some way The MLC intends to offer bundled licensing which is currently prohibited.  Bundled licensing could take the form of performances, ex-US rights, sync, even general licensing.

It seems like that effort is quietly underway.  What is an alternative explanation for Apple terminating a large number of agreements and transferring its licensing and royalty administration functions to The MLC?  Is the plan that The MLC gets the business and HFA does the work that The MLC is prohibited by statute from performing (at least until they move the goalposts again)?

This does help to explain why there is no MLC database and all The MLC’s “data quality initiative” corrections and improvements are being performed on the HFA database (which HFA owns and will use for work not limited to the blanket license).

Curiouser and curiouser.

by thetrichordist

Black Box Hunting: The Songwriters Guild/Society of Composers & Lyricists/Music Creators North America’s Ex Parte Letter Stands Up for Transparency

[Editor T says: Remember when songwriters were promised that the Music Modernization Act was going to solve all your problems—AND give you a set of steak knives? Remember? Never needs ironing? And doubles on sax? One big feature was digital music services paying up to the Mechanical Licensing Collective for matching the entire black box from “inception” meaning all the money a service ever held that their data vendors couldn’t match and weren’t paid to try very hard, especially Spotify aka “defendant”. Who was that data vendor who couldn’t match? HFA. And who is the MLC’s data vendor? HFA. So the last couple weeks the insiders have been back-tracking behind closed doors at the Copyright Office on how–or if–that black box will be paid to songwriters. The only way you’d ever know this was happening is if you were paying very close attention to the Copyright Office “ex parte” letters. (sign up for email alerts there.) The Songwriters Guild/SCL/MCNA group is the songwriter’s junkyard dog with their teeth sunk in the tuchus of the insiders. We’ll be posting a selection of these recent “ex parte” letters which publicly document private conferences held by the Copyright Office with “stakeholders”. “Everyone’s a winner, bargains galore….the large print giveth and the small print taketh away” as Tom Waits said.]

EX PARTE MEETING SUMMARY WITH

THE UNITED STATES COPYIGHT OFFICE

Docket Number 2020-12

November 18, 2020

Re: Summary of the November 13, 2020 Ex-Parte Meeting Between the United States Copyright Office on behalf of the following independent, US-based music creator organizations: the Songwriters Guild of America, Inc. (SGA), the Society of Composers & Lyricists (SCL), and Music Creators North America, Inc. (MCNA)

On Friday, November 13, 2020, an ex-parte video-conference meeting was conducted by the United States Copyright Office (USCO) with multiple interested parties concerning rulemakings in connection with Doc. No. 2020-12. This summary is submitted on behalf of SGA, SCL and MCNA (together, the “Independent Music Creator Organizations” or “IMCOs”), all of which were represented at the meeting. Attending for SGA were President Rick Carnes, outside counsel Charles Sanders, and outside legislative consultant Marla Grossman of the American Continental Group (ACG). Attending for SCL was President Ashley Irwin. Attending for MCNA was President Eddie Schwartz. The meeting was chaired on behalf of the USCO delegation by its General Counsel, Regan Smith.

Individuals representing the IMCOs began by respectfully stressing, as they had in their ex parte tele-conference with the USCO on September 11, 2020, the bedrock principle that independent music creators speak for themselves on all issues related to their rights and interests, and that no other music community groups have the right or authority to claim otherwise. Specifically, the IMCOs rejected the assertion by some music publisher representatives (backed by at least one of their affiliated songwriter groups) that the USCO’s oversight and rulemaking authority concerning matters related to 2020-12 should be viewed as being narrowly limited.

The IMCOs have stressed on multiple occasions through their USCO Comments a strong belief that Congress, by its very construction of the Music Modernization Act (MMA), intends the Office to have broad and expansive authority to oversee and guide the implementation of the MMA by the Mechanical Licensing Collective (MLC). That is especially so in regard to ensuring transparency, reliability and fairness regarding the safeguarding of music creator rights, the class of persons for whom the MMA was most clearly enacted to protect pursuant to Article I Section 8 of the US Constitution.

The main issue of concern addressed at the November 13, 2020 meeting was the oversight and disposition of accrued, unmatched royalties collected and held by Digital Music Providers and subsequently distributed pursuant to private negotiated agreements with music publishers. It is believed by the IMCOs that as regards those agreements and royalties, some or all of the parties thereto were very likely aware at the time of negotiation and execution, that (i) such confidential agreements and payments concerned royalties accrued from the unauthorized reproduction or distribution of musical works owned by unrelated third parties; (ii) little to no effort had been made to properly identify rightful ownership, and (iii) such accruals might soon be subject to payment rules under the MMA that would require strictly delineated sharing of such “permanently” unmatched royalties with music creators by music publishers (including a minimum floor of 50%) after the conducting by the MLC of bona fide searches for rightful owners.

Further assertions were made by the IMCOs at the meeting that after three years of discussions, still no informed estimate had yet been made by Digital Music Providers of the aggregate amounts of unmatched royalties both still being held and already distributed. Thereafter, one knowledgeable representative of Digital Music Providers estimated that while there remain hundreds of millions of dollars in accrued, unmatched royalties in the possession of the Digital Music Providers, tens of millions of dollars in accrued unmatched royalties were indeed turned over directly to music publishers pursuant to the terms of the confidential, private negotiated agreements.

As was also made clear during the meeting, the IMCOs have no direct information as to the content of such private negotiated agreements, and no direct information as to what became of the unmatched royalties such music publishers received.

Several music publishers have claimed in ex parte letters to the USCO that they indeed shared such unmatched royalties with their affiliated music creators, but no specific information has been provided as to the methodology and details of such sharing, including whether the principles and and guarantees eventually set forth in the MMA as enacted were applied.1 Moreover as the IMCOs reported at the meeting, an informal and ongoing process of canvassing creators currently being conducted by each MCNA member organization have yet to confirm a single instance in which a songwriter or composer received a royalty statement indicating that portions of such accrued, unmatched royalties were included (though they may have been) and on what basis.

As the IMCOs asserted at the meeting, were such unmatched royalties paid to songwriters and composers by music publishers on terms resembling the MMA rules concerning music creator protections (as either drafted or eventually enacted), it seems counter-intuitive that that no line item would appear anywhere in accounting statements indicating the source of such payments, not only as a matter of sound accounting practice, but of earned good will. No other music creator groups present at the meeting challenged or contradicted these ongoing findings or assertions. In any event, as noted, it seems that the burden of demonstrating the details of such payments is more properly placed on the music publishers who claim to have made them, which could be as simple as each publisher disclosing a properly predicated and binding assertion that the payments were made, how many were made, what was the aggregate payment, and how was each songwriter’s share determined.2

Under such circumstances as they currently exist, as SGA President Rick Carnes pointed out at the meeting, asking interested parties to render opinions on the minutiae of proposed rules concerning the disposition of accrued unmatched royalties –with only some parties having an understanding of how the private agreements operated, who got paid, who didn’t, and why– is a difficult position in which to place the IMCOs and other parties with important, related interests.

As Mr. Carnes pointed out, the issues of (i) how to protect the rights of those music creators and copyright owners who did not participate in the privately negotiated agreements by ensuring that there is an opportunity to actually match those already-distributed royalties to their proper owners and to effect the prompt payment of such sums, (ii) how to balance accounts once such proper identifications have been made, while also ensuring that affiliated music creators have been properly paid by their music publishers concerning royalties collected under the private negotiated agreements that otherwise would have flowed through the MLC and been explicitly subject to MMA distribution requirements, (iii) how to address demands of Digital Music Providers that they not be made to pay twice for the same unmatched uses, and (iv) how to ensure that such private negotiated agreements are not utilized in the future in attempts to override the provisions of the MMA, all need to be addressed prior to a proper analysis of how most effectively to move forward.3

Thus, as was stated at the meeting, while the IMCOs agree the MMA makes clear that ALL accrued unmatched royalties for unauthorized reproductions and distributions dating back to inception must be turned over to the MLC by Digital Music Providers, and that the term “generally accepted accounting principles” used in the Act in no way provides an exception to that unambiguous provision, the crucial questions enumerated above also need to be immediately addressed as matters of fairness and transparency mandated by the Act.

As to the very important issue of retroactive effect of the MMA provisions concerning guaranteed music creator participation in the distribution of permanently unmatched royalties at or above the fifty percent level, the IMCOs adamantly believe, as stated at the meeting, that it is wholly illogical for any interested party to argue that Congress intended as it did to require that all accrued, unmatched royalties be rendered to the MLC by Digital Music Providers back to each service’s date of inception, but that the songwriter, composer, transparency and good faith protections guaranteed by the Act would not otherwise be applicable in the event of premature disgorgement of unmatched royalties by Digital Music Providers to music publishers pursuant to prior agreements. This is an issue that certainly requires further attention, and calls for more comprehensive discussion than for which there was time at the meeting.

As was noted several times by various speakers, the Chair of the Senate Judiciary has warned that absent a fair and transparent resolution of these complex issues, the MMA may become a magnet for litigation, the very opposite effect that it was intended to achieve. The IMCOs wholeheartedly agree, and stand ready to assist the USCO in taking all reasonable measures to achieve the transparency, fairness and robust oversight that the legislation demands in order to avoid that undesirable result.

To reiterate in closing, as the IMCOs tried to make clear at the meeting, voluntary disclosure of the specific details of the privately negotiated agreements, redacted to protect legitimate privacy and antitrust concerns, is an important prerequisite to achieving those goals. The IMCOs further repeat their stated beliefs that the USCO has the singular ability if not to compel, at least to facilitate such disclosures in a timely manner, and respectfully urge it to do so.

Further comments of SGA, SCL and MCNA will be forthcoming in regard to the proposed rulemaking by next week’s deadline. As stated at the conclusion of the meeting, however, the IMCOs believe that all parties would benefit by a brief extension for the submissions of such comments until the Monday after the Thanksgiving holiday in order to allow for further discussions among the parties. The IMCOs acknowledge a certain lack of unified support for this suggestion at the meeting, and active opposition by at least one music publisher representative, but continue to believe it to be an advisable accommodation. Those parties wishing to abide by the original deadline would always be free to do so, as was explicitly pointed out.

The IMCOs thank the USCO for scheduling the ex parte discussion, and look forward to continuing this constructive dialog.

Respectfully submitted,

Charles J. Sanders
Outside Counsel
Songwriters Guild of America, Inc.

cc: Regan Smith, General Counsel, The United States Copyright Office
Rick Carnes, SGA President
Ashley Irwin, SCL President
Eddie Schwartz, MCNA President

  1. At least one publisher has indicated an alleged willingness to share details of such payments with any writer who makes inquiry as to his or her own works, an unlikely scenario considering that a huge percentage of writers have no knowledge of the private negotiated agreements in the first place, and –to the knowledge of the IMCOs based on informal canvassing– have not been directly informed about them by their publishers. See, e.g., Ex Parte letter from Sony/ATV dated October 28, 2020: “It has been SATV’s practice to explain to our writers who inquire how these royalties are distributed and reflected on their statements.”

2. Likewise, it seems that the burden of demonstrating how much each Digital Music Provider paid to music publishers is more properly placed on the services who claim to have made the payments, which in turn could be as simple as disclosing a properly predicated and binding assertion that the payments were made, how many were made, what was the aggregate payment, and how was each publisher’s share determined. It is anticipated that such details may be forthcoming from Digital Music Providers in their reporting under the MMA, but that remains uncertain.

3 That is especially so in light of the apparent assertions of one or more Digital Music Providers that they may forego the limited safe harbor provisions provided by the MMA by not turning over to the MLC the full amount of accrued, unmatched royalties dating back to inception of use, probably under the assumption that the potential running of applicable statutes of limitations will provide the same protections as the safe harbor without payment of the royalties due. The IMCO raised this statute of limitations issue at the meeting, and was gratified that at least one Digital Music Provider representative felt that this was an issue worthy of further discussion, hopefully with the important input of the USCO. See also, related comment of DLC that “…a DMP could make the rational choice to forego the payment of accrued royalties entirely, and save that money to use in defending itself against any infringement suits.” Comments Of Digital Licensee Coordinator, Inc. In Response To Notice Of Proposed Rulemaking , Docket 2020-12, Document COLC 2020-0011-0008 (Aug. 17, 2020) at 4.

by Trichordist Editor

Guest Post: The False Double Payment Bottom of the MMA Black Box

By Chris Castle

[T-Editor says: This post first appeared on MusicTechPolicy]

The Dog Who Didn’t Bark On the Mirror

There seems to be some concern about pre-Music Modernization Act confidential lump sum payments of accrued black box monies under direct licenses or settlement agreements.  Services are promoting the idea that these payments must be deducted from the cumulative black box payments required for services to get the benefit of the limitation on liability and reach back safe harbor. 

That limitation on liability, of course, comes with a condition that the services use “good faith, commercially reasonable efforts” to match works to copyright owners.  Uses that remain unmatched are then turned over to the Mechanical Licensing Collective for matching and distribution.

The Digital Music Providers [“DMPs”] are now promoting the payment of black box as an option for which they can elect to take the limitation on liability.   The Digital Licensee Coordinator [representing the DMPs] tells us “If the regulations make it less likely that a DMP will be able to rely on that liability protection when it needs it—i.e., if it increases the risk that a court would deem a DMP to not have complied with the requirements in section 115(d)(10)—a DMP could make the rational choice to forego the payment of accrued royalties entirely, and save that money to use in defending itself against any infringement suits.”

The SOCAN company MediaNet tells us that absent some aggressive concessions by the Congress to essentially re-write the Copyright Act in their favor, “MediaNet may decline to take advantage of the limitation on liability, which may deprive copyright owners of additional accrued royalties.”  

The DMPs have somehow managed to convince themselves that payments of unallocated sums under settlement agreements (which they weren’t required to match before the MMA) and payments of unallocated sums under the MMA’s black box (which they are required to match under the MMA) are a “double payment.”  While easy to say, “double payment” makes it sound like someone paid twice for the same thing.  That would be bad if it were true.  

But it’s not.

Betting and Strangers

Certain DMPs and certain publishers made settlement agreements of prior unpaid royalties.  We don’t know exactly what gave rise to those agreements but we do know that they covered unmatched (and therefore unallocated) black box payments.  Because the payments were unmatched, they were necessarily a lump sum payment to the participating publisher (although the amounts may have been reduced by commissions for administering the lump sum distributions under so-far confidential settlements).  

At the time of the settlement, nobody did the work to match the unallocated.  This is important for at least two reasons:  Because the works were not matched, the lump sum couldn’t have been allocated to specific works owned by strangers to the settlement.   Therefore there was no initial payment to those strangers, the strangers were not represented in the transaction, the strangers did not authorize the settlement of their claims, and there was no legal basis for the parties to settle ripe but inchoate claims the strangers could have made had they been asked.

The lump sum settlement was evidently based on market share of the then-unallocated black box.  Market share payments would be a typical way to avoid doing the work of matching.  It’s like a DMP saying to a publisher “I’ll make you a bet—if you have 10% market share of the known knowns, I’ll bet that the most I owe you for then known unknowns is 10% of the cash value of the unallocated black box.  Particularly if you are the first payment.”

Why not do the matching at the time?  We’ll come back to that.  

Betting Secrecy

The settling publisher feels they made a good bet and accepts the terms.  The DSP adds one additional post closing condition—the bet must be secret.  The settling publisher will likely voluntarily distribute the monies to their own songwriters on a ratio of earnings (similar to market share), so it can’t be entirely secret.  And there are no secrets in the music business.  But given these realities, why must the bet be secret?  

To keep the strangers to the bet in the dark.

If the bet is announced, strangers to the bet may decide they need to look into how much they are owed.  They may not be willing to take a bet.  They may want what the statute contemplates—good faith commercially reasonable efforts to actually match.

After the DMPs negotiated their safe harbor in the MMA—remembering that the black box payment was never sold to songwriters as optional—it became apparent that all the strangers were now going to be paid for all the uses that were never matched as a part of the lump sum bet.  All the DMPs efforts to keep the strangers in the dark were going to be exposed.  And exposed all at once.  To what end is this secrecy?  Probably for the same reason the DMPs have never posted the unmatched (unlike Royalties Reunited or the AFM-SAG/AFTRA Trust Funds.

Who’s At Fault?

The settling publishers have done absolutely nothing wrong here.  They could have pressed for matching but chose to take the bet.  Could be high, could be low, but seemed like a good bet at the time.  

Plus, by making the bet, they did not take anything away from strangers.  The DMPs still owed an obligation to the strangers.  The settling publishers did not owe the strangers anything.  

This is why the bet is not a double payment so long as the settling publishers are not claiming any uses that were released and settled, which they are not as far as we can tell.  

If the DMPs made a bad bet, that’s on them.  

The DMPs cannot now reduce a cumulative unmatched black box by the prior bets they made.  And of course, as transactions are matched, the unknown knowns become known knowns and are paid out.  In order to accomplish the purpose of the statute, all the transactions must be reported. 

The MMA “deal” was for cumulative payment of the black box.  If settling publishers end up having matched works in the black box—when the unknown become known—those per-transaction payments can be offset to the extent they were covered by a prior release agreed to by a bettor.

But what they cannot do is simply say I made a bet with these guys, so I’m going to claw that back from what I owe to other people who are strangers to the bet.  That’s not a double payment either to the bettor or the stranger to the bet.

Letter of Misdirection

I also do not understand a conversation about letters of direction in this context.  As known unknowns get matched, the DMP should render a statement.  

If the known unknown becomes a known known, that statement will reflect at a minimum the title, copyright owner and the usage as well as whatever other metadata the regulations require.  The now known knowns will either be payable as matched works or have already been covered by a settlement and release for the corresponding period.

In the former case, the payable royalty will be available.  In the latter case, the royalty will have already been paid as part of the settlement.  If that settlement royalty is included in the corresponding black box, that settled usage would be deducted as already paid, which would have a corresponding reduction in the total amount of accrued but unpaid royalties.  That’s not a letter of direction, that’s an offset against otherwise payable royalties due to matching.  

Alternatively, the settling publisher would not be allowed to make a claim for the periods subject to the release because they have no live claims, assuming a total settlement and release for the corresponding accounting period.

Said another way, whatever transactions are in the pending file stay in the pending file with accrued royalties until claimed.  Prior settlements can only be deducted from the transaction lines in the pending file that are for songs owned or controlled by publishers that fall under a prior settlement.  

Tolling the Statute of Limitations

The way the DMPs have actually harmed the strangers is by keeping quiet on this idea that the reach back safe harbor is optional.  They could have raised this issue during the drafting of MMA and after.  But they waited until they had scared away anyone except Eight Mile Style from suing while in theory statutes of limitations ran out starting on 1/1/18 at a minimum.  They used the MMA as a kind of in terrorem stick.

That is grossly unfair.  This has to be changed so that strangers who didn’t make the bet, who didn’t get the payment, and who were silent with their ripe claims since 1/1/18 are not harmed.  

It’s all fine for the DLC to say they do a cost benefit analysis and elect not to take the safe harbor while allowing strangers to be duped.  They should not be able to fool both Congress and the strangers.  Any statute of limitations running since 1/1/18 should be tolled, perhaps under the Copyright Office emergency powers.

Songwriter Black Box Payments

It is rare for a songwriter to have a royalty claim on unallocated catalog-wide payments such as black box monies absent a specific negotiated deal point.  This is a point of some contention with songwriters, so the Copyright Office should look into it as part of the black box study if nothing else.

This black box issue that keeps coming up may be many things, but a double payment it’s not.  

by Trichordist Editor

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

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

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

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

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

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

The DLC’s Quid Pro Quo Revelation

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

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

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

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

This was the heart of the deal struck by the stakeholders in
crafting the MMA: to provide legal certainty for DMPs, through
a limitation on liability, in exchange for the transfer of accrued
royalties.

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

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

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

[The “deal”] is a crucial point for the Office to keep in mind as it
crafts rules in this space. If the regulations make it less likely
that a DMP will be able to rely on that liability protection when
it needs it—i.e., if it increases the risk that a court would deem a
DMP to not have complied with the requirements in section
115(d)(10)—a DMP could make the rational choice to forego the
payment of accrued royalties entirely, and save that money to
use in defending itself against any infringement suits.

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

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

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

by thetrichordist

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

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

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

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

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

Read the entire post here.

by thetrichordist

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

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

Ownership of the Musical Works Database

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

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

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

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

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

Songwriter and Composer Names in the Public Musical Works Database

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

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

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

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

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

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

Read the whole comment here.

by thetrichordist

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

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

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

Read the entire comment here.

by thetrichordist