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The Orrin G. Hatch-Bob Goodlatte Music Modernization Act

 The following is a guest post by Regan A. Smith, General Counsel and Associate Register of Copyrights.

“When modes of music change, the fundamental laws of the state always change with them.” Plato, the Republic Book IV (Jowett tr.)

Music Modernization Act, signed into law Oct. 11, 2018

Following unanimous votes in the House of Representatives and the Senate, today the President signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (H.R. 1551) into law. The Act is one of the most significant legislative reforms to United States copyright law in two decades and promises to substantially reshape the music licensing landscape.

Congressman Jerry Nadler at podium

Congressman Jerry Nadler

The need to reform music copyright law had been widely acknowledged. As Ranking Member Nadler observed in 2015, “From the development of player pianos and phonograph records to the advent of radio and the internet, the law is a patchwork of reactions to changing technologies.” The path forward, however, was not so clear. The rapid pace of digital innovation brings the proverbial celestial jukebox within a click of a button—or voice command to Alexa or Siri—of the average consumer. But the legal structure to facilitate music licensing had not been updated to keep pace. The result was a situation frustrating the needs of many stakeholders, including songwriters, publishers, recording artists, labels, digital music services, libraries, and individual listeners.

“Where words fail, music speaks.” Hans Christian Andersen

The Copyright Office has been focused on music copyright reform for a long time. To a beginner in copyright law—let alone a casual observer—it is surprising to learn that the business of music is so heavily and complexly regulated. The section 115 or “mechanical” license for the making and distribution of phonorecords is the oldest compulsory license in United States copyright law, and candidly, it had been showing its age. A creature from the age of player pianos, the song-by-song licensing structure proved challenging at best in an age where digital music providers seek licenses for millions of works.

Copyright and the Music Marketplace report cover

Copyright and the Music Marketplace report

As the Office said in its 2015 report, Copyright and the Music Marketplace, from a copyright perspective, “we are trying to deliver bits and bytes through a Victrola.” This project was complicated by a lack of comprehensive and transparent data, making it difficult for rightsholders and licensees alike to obtain reliable usage, ownership, and payment information. As a result, the Office had long advocated for a blanket licensing system that would promote efficiency and encourage the sharing of authoritative data, and multiple Registers of Copyright have testified before Congress about the need to modernize our music licensing laws. (Read testimony by Register Marybeth Peters and Register Maria Pallante.)

Meanwhile, other areas of the music landscape were also ripe for reform. On February 15, 1972, the Sound Recording Amendment became effective under U.S. law, which, for the first time, made sound recordings fixed on or after that date eligible for federal copyright. This date was later incorporated into the 1976 Copyright Act. Recordings created prior to that date were left subject to the common law or state statutes, with any protections enduring through February 15, 2067. But this patchwork of state laws proved difficult to navigate, particularly as methods of music delivery evolved, resulting in a lack of harmony in the payment schemes for pre- and post-1972 recordings, disproportionately impacting legacy artists. Meanwhile, archives and other heritage institutions expressed frustration that the lack of clarity was impeding the preservation and public availability of some of America’s oldest cultural sonic treasures. For these reasons, the Copyright Office’s 2011 policy study, Federal Copyright Protection for Pre-1972 Sound Recordings, recommended moving these older recordings into a federal scheme for protection and use.

Other salient concerns arose. For example, the highly reticulated rate-setting frameworks regarding mechanical licensing, the section 114/112 licenses for sound recordings, and the rates for the public performance of musical works resulted in disparate ratesetting standards depending upon the right and use at issue. These rates are set in separate bodies (the courts responsible for overseeing the ASCAP and BMI consent decrees or the Copyright Royalty Judges) and under separate standards (ranging from the section 801(b)(1) policy-oriented approach to the section 114(f) “willing buyer/willing seller” approach to the “fair market value” analysis performed by the rate courts). In addition, producers, mixers, and engineers who are integral to the creative process were left unrecognized in the federal copyright law. Meanwhile, the United States has not adopted a terrestrial performance right for sound recordings, in contrast to virtually all industrialized nations.

“Music changes, and I’m gonna change right along with it.” Aretha Franklin

While the Music Modernization Act does not tackle all of the potential issues raised in the context of comprehensive reform, it enacts a number of significant changes aimed at benefiting the overall music ecosystem. Most notably:

  • The per work, song-by-song licensing system for the reproduction and distribution of phonorecords of musical works in the digital context will be converted to a blanket statutory license administered by a nonprofit mechanical licensing collective. This collective will collect and distribute royalties, work to identify songs and their owners for payment, and maintain a comprehensive, publicly accessible database for music ownership information.
  • Pre-1972 sound recordings are brought more in line with the treatment of works within the federal copyright system. Owners of these sound recordings can receive the same remedies as copyright owners of post-1972 sound recordings, and users can make use of limitations and exceptions to these remedies. The term of protection for these recordings varies depending upon the date of publication for the recording—resulting in certainty that many works have entered the public domain at an earlier point in time than under the prior state-law regime.
  • The more market-oriented “willing buyer/willing seller” standard will apply to the Copyright Royalty Judges’ ratesetting proceedings for the section 115 license.
  • The process for selecting federal district court judges to adjudicate rate-setting disputes regarding performance rights organizations is modified.
  • The revised statute codifies a process for music producers to receive compensation from royalties collected from use of sound recordings directly from SoundExchange.
“I wanted to prove the sustaining power of music.” David Bowie

Now that the bill has become law, the Copyright Office will be focused on implementing its new duties required by the Music Modernization Act and on outreach activities to help interested members of the public understand the changes that result from this new legislation. In particular, these activities will include educating songwriters and others with respect to the new process by which a copyright owner may claim ownership of musical works and royalties for works.

In the coming days, the Office will commence rulemakings regarding pre-1972 sound recordings. The Office will set up mechanisms for rights owners to file schedules of their recordings and for transmitting entities using those works to file their contact information with the Office. The Office will also solicit comment regarding a new exception for noncommercial use of recordings that are not being commercially exploited.

Next, the Office will solicit information regarding the designation of the entities to serve as the mechanical licensing collective (MLC) and the digital licensee coordinator (DLC), which represents interests of digital music providers with respect to the section 115 license. The Office will engage in additional rulemaking activities as directed by the new law, such as establishing requirements for a notice of license and reports of usage submitted by digital music providers to the MLC, or prescribing requirements to ensure the usability and interoperability of the forthcoming musical works database.

So stay tuned! You can find out more about our activities by following our website, Twitter @Copyright Office, this blog, or subscribing to the Copyright Office’s NewsNet newsletter.

“If music be the food of love, play on. Give me excess of it that, surfeiting, The appetite may sicken, and so die.” William Shakespeare, Twelfth Night”