IP Law Daily Senate passes major copyright reform bill; updates music licensing system
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Wednesday, September 19, 2018

Senate passes major copyright reform bill; updates music licensing system

By Thomas Long, J.D.

On September 18, the Senate passed by unanimous consent major copyright reform legislation that would create a new compulsory blanket licensing system for mechanical works; update the rate standards applicable to music licensing; modify the rate setting process in the Southern District of New York; provide copyright royalties to pre-1972 artists; and ensure that producers, mixers, and sound engineers are able to receive compensation for their creative efforts, according to a media release issued by the office of bill sponsor Sen. Orrin Hatch (R-Utah). The Senate cleared the proposed "Music Modernization Act" (S. 2823)—renamed the "Orrin G. Hatch Music Modernization Act," at the request of co-sponsor Sen. Lamar Alexander (R-Tenn), to honor Sen. Hatch, who will retire at the close of the current Congress—after changes were made to the bill on September 17, reportedly to address objections by Internet radio service prover SiriusXM. The legislation will now go to the House of Representatives for reconciliation with a substantially similar package (H.R. 5447) that was unanimously approved on April 25 by a vote of 415-0. The bipartisan legislation attracted support from 82 Senate co-sponsors. Text of the bill as passed by the Senate is not yet publicly available.

The most sweeping and closely watched portion of the multifaceted legislation is Title I of the bill—named "Music Licensing Modernization." This title would create a Mechanical Licensing Collective (MLC) to administer royalties covering the right to reproduce musical compositions via interactive digital streaming and downloading services. The MLC would manage a blanket licensing scheme for interactive streaming services (similar to SoundExchange’s function for performance rights licensing for non-interactive Internet radio services, such as Pandora). It also would eliminates the Copyright Office’s bulk "Notice of Intent" system, which now essentially allow interactive streaming services to stream songs without paying any royalty to the owners of compositions when they are unable to find the rights owners. Importantly, the measure proposes changing the royalty rate setting standard to a "willing buyer/willing seller" for mechanical licenses, which is likely to mean that rights owners can expect to see mechanical royalties paid on more compositions and at higher rates. This title also changes the judge assignment system for ASCAP/BMI performance royalty rate proceedings in the Southern District of New York to a random, rotating "wheel" of judges.

Title II—the "CLASSICS Act" (or "Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act")—would provide owners of sound recordings made prior to February 1, 1972 (which currently are excluded from the digital performance right created in 1995) an exclusive right to digital performances).

Title III—the "AMP Act" (or "Allocation for Music Producers Act")—would create procedures to facilitate collection of digital performance royalties by sound engineers and record producers, when they have negotiated agreements with artists to receive a share of such royalties.

"I’m so pleased we’re one step closer to historic reform for our badly outdated music laws," Sen. Hatch said. "The Music Modernization Act provides a solution, and it does so in a way that brings together competing sides of the music industry and both sides of the political spectrum. As a songwriter myself, I know firsthand how inefficient the current music marketplace is. The MMA will help all the songwriters and other music creators who make music such a rich, vibrant, and essential part of American culture."

According to Sen. Alexander, "Not only have laws governing songwriter royalties not kept up with the arrival of the internet, they have not been modernized since the days of the player piano a century ago. As a result, it has become impossible for most songwriters to make a decent living." Alexander added, "Our legislation will help make sure songwriters are paid when their songs are played, and that they are paid a fair market value for their work. Our success in Congress is the result of most parts of the music industry—songwriters, publishers, digital music companies and broadcasters—working together on what they agree on instead of fighting over what they disagree about. It has taken several years to do this but I believe the results will be well worth the effort."

National Music Publishers’ Association President and CEO David Israelite praised the Senate action. "Today is a momentous day for songwriters, artists, composers, producers, engineers and the entire industry that revolves around them," Israelite said. "The Senate vote marks a true step forward towards fairness for the people at the heart of music who have long been undervalued due to outdated laws. This was a long and complex process but ultimately the music industry has come out stronger and more united than ever."

Regarding the reported compromise with SiriusXM—which had objected to details in the bill regarding certain aspects of the royalty-setting process as well as the creation of performance rights for pre-1972 recordings—Greg Maffei, President and CEO of SiriusXM parent company Liberty Media, stated, "We are pleased to join with the music community in sponsoring amendments that protect artists in this legislation. It is important that the music industry move forward so that artists can showcase their work throughout the United States." According to Sirius, the final changes to the measure confirm that artists will receive 50% of performance royalties from SiriusXM for pre-1972 sound recordings, and confirm that the existing sound recording royalty rate for satellite radio will remain in place unchanged until 2027, an additional five year period.

The Senate vote also received praise from Irving Azoff, founder of Azoff Music Management, and Mitch Glazier, president of the RIAA, among other industry stakeholders.

MainStory: TopStory Copyright TechnologyInternet

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