Public Performance Royalties Could Define Congress’s Music Licensing Debate in 2015

Because federal copyright law doesn’t extend to pre-1972 sound recordings, those recordings aren’t protected by the Digital Millennium Copyright Act’s safe harbor requirements. The Respect Act doesn’t place pre-1972 sound recordings under federal copyright law, which could create serious complications for Internet intermediaries that rely on safe harbor requirements for notice and takedown requests. If sound recordings continue to be governed under state laws, without the benefit of the DMCA, Internet intermediaries like Pandora and Spotify could face substantial uncertainty for failing to remove infringing recordings.

Fixing the DMCA should involve Congress re-examining the related piracy issues stemming from the controversial debate over Protect IP Act (PIPA) and Stop Online Piracy Act (SOPA), said David Lowery, a songwriter and business lecturer at the University of Georgia.

The Respect Act won’t create full federalization for pre-1972 sound recordings, said Mitch Stoltz, Electronic Frontier Foundation (EFF) staff attorney. The act says if a service is using a “statutory license for digital streaming, then it must also pay royalties for pre-72 works at the same rate,” but it doesn’t put pre-1972 sound recordings under federal copyright law, he said. Keeping pre-1972 sound recordings under state law could mean the DMCA doesn’t apply to those recordings, which is what the Respect Act’s supporters desperately want, said Stoltz. “They want to have their cake and eat it, too,” he said. Stoltz said full federalization would be preferable to the outcome of the SiriusXM ruling in California.

The Copyright Office told Congress in 2011 that pre-1972 sound recordings should be brought under federal copyright protection (http://xrl.us/bmm8zc).

Decisions Expected From Congress, Courts

"Everyone should pay” public performance royalties, said House Commerce Committee Vice Chairwoman Marsha Blackburn, R-Tenn., in a statement. “There will clearly be a continued interest in ending the current [public performance right] exemption in the law next Congress,” she said. Blackburn and House Communications Subcommittee ranking member Anna Eshoo, D-Calif., are the only House members signed on to the Protecting the Rights of Musicians Act (http://1.usa.gov/1ndFLr7) (CD May 8 p24). That bill, HR-4588, would deny the right to retransmission consent to a radio or TV station unless it agrees to provide compensation for transmitting a sound recording. Blackburn is also a co-sponsor of the Respect Act.

Expect terrestrial radio’s exemption from public performance royalties to be addressed in House Judiciary IP Subcommittee ranking member Jerrold Nadler’s, D-N.Y., forthcoming MusicBus bill (CD June 19 p11), said Casey Rae, Future of Music Coalition (FMC) vice president-policy and education. He said “2015 is going to be the year of radio” on Capitol Hill.

The California court ruling against SiriusXM has highlighted the “extremely irrational patchwork” laws on public performance royalties, said Ted Kalo, musicFIRST executive director. The ruling “creates an incentive for digital services to seek some parity” with terrestrial broadcasters, he said. It’s “manifestly unfair” that digital broadcasters pay post-1972 performance royalties, while terrestrial doesn’t, said Kalo. Digital services like SiriusXM are likely looking to Congress to create “uniformity and certainty,” he said.

The musicFIRST coalition is targeting selected supporters of the NAB-backed Local Radio Freedom Act in a bid to chip away at H. Con. Res. 16’s 232 House co-sponsors (CD July 11 p13). H. Con. Res. 16 would prohibit the passage of new taxes or royalties for terrestrial radio. The coalition began targeting Reps. Earl Blumenauer, D-Ore., and David Price, D-N.C., in July, running full-page ads in their districts’ newspapers, and launched a social media campaign. NAB says there’s a correlation between free radio exposure and record sales, as well as highlighting the $330 million broadcasters pay annually to songwriters.

Pandora remains “confident” in its “legal position” on pre-1972 public performance royalties, said Public Affairs Director Dave Grimaldi. The party involved in the SiriusXM lawsuit filed a suit seeking class-action status against Pandora in the U.S. District Court in Los Angeles on such royalties last week (CD Oct 6 p5). Capitol Records v. Pandora, also related to pre-1972 sound recordings, is pending in New York. Pandora is “open to supporting the full federalization of Pre-72 sound recordings under a technology-neutral approach that affords libraries, music services and consumers the same rights and responsibilities that are enjoyed with respect to all other sound recordings,” said Grimaldi. Four days after the SiriusXM ruling, Pandora created a political action committee to make financial contributions to political campaigns and candidates (http://1.usa.gov/1sfLrb4).

Fix DMCA?

Lowery agrees terrestrial radio shouldn’t be exempted from public performance royalties, but said the debate over full federalization of pre-1972’s could be a distraction and potentially harmful to the core problem facing music licensing: piracy. That means Congress should reexamine the issues involved in the PIPA and SOPA debate to “get the DMCA right,” he said.

During the SOPA and PIPA debate, technology groups said the bills’ most onerous provisions were those that would compel ISPs to block the resolution of domains owned by alleged infringing sites (CD Jan 25/12 p6). Tech groups also feared that bills could have potentially weakened the DMCA’s safe harbor provisions. Opponents of the bills included Facebook, Google and Wikipedia. The bills’ major sponsors, MPAA and RIAA, dropped SOPA and PIPA support after massive public outcry (CD Jan 23 p/23 p9).

Google’s fight against SOPA and PIPA was the “most brilliant AstroTurf campaign of all-time,” said Lowery. Similar remedies have already been enacted in the U.K., and they didn’t “'break the Internet’ as the hysterical opponents of SOPA falsely claimed,” he said. Such laws wouldn’t stop “hardcore piracy proponents,” but they would “discourage a significant amount of casual file-sharing,” said Lowery. “A little law and order would help the entire digital ecosystem.” How are Pandora and Spotify expected to stay in business when a “bootlegger” can “mimic” their services at no cost to the consumer, he asked. “Enforcement would drive users to the legitimate streaming and webcasting services,” said Lowery. Instead, “webcasters and streamers think the rightsholders and artists are the enemies,” he said: They're “either idiots or just looking for an IPO exit strategy.”

Congress isn’t going to touch SOPA and PIPA with a “ten-foot gavel,” said EFF’s Stoltz. Support of the bills is an “electoral liability,” and RIAA and MPAA have maintained that they're not pursuing the legislation, he said. Copyright holders have “all the tools -- and then some -- on the books” to adequately address piracy, said Stoltz. Certain copyright holders need to quit “asking for what amounts to government subsidies for particular business models,” he said. After the “beatdown” of SOPA and PIPA, there’s “no way” the copyright community is going to re-engage that debate, said an entertainment industry source.

There’s a “clear benefit” to having safe harbor protections for online intermediaries, said FMC’s Rae. The problem is determining whether artists or Internet intermediaries bear the “burden for notice and takedown,” he said. “I don’t know if anyone is excited about redrawing the lines on the DMCA,” said Rae. “That’s when people start losing their status quo.”