A Declaration of Independence for the Copyright Office

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By Marc D. Ostrow

On April 29, the head of the Copyright Office, Register Maria A. Pallante, was the sole witness before the House Judiciary Committee at a hearing entitled The Register’s Perspective on Copyright Review. Both her oral and written statements — the latter consisting of a 32-page memorandum with copious footnotes and an appendix of proposed technical amendments to the Copyright Act — contained an even more urgent call for an independent Copyright Office than was stated in her lengthy March 23 letter to Rep. Conyers, which I discussed here.

The hearing, which was interrupted by the Japanese Prime Minister’s address to Congress, was largely a love fest for the Register, with most of the Committee members effusively praising her work. The only slightly sour note was sounded by Rep. Issa (R-CA), who felt that the Copyright Office was spending too much time on studies without making specific recommendations. But anyone who’s read recent studies from the Copyright Office, such as the music licensing study and the IT report, knows that they contain very specific recommendations, several of which were reiterated in the Register’s testimony.

The big takeaway is that the majority of the Committee seemed sympathetic to the Register’s recommendation that the Copyright Office cease to be a mere department of the Library of Congress and instead, become an independent agency, whose head would be appointed by the President and confirmed by the Senate. So as to retain agency independence and continuing to serve both the Executive and Legislative branches, the agency’s head would serve for a specified term set by Congress and not merely at the pleasure of the President.

The Register’s written statement opens with a statement of six themes, culminating in her declaration for independence:

(6) To properly administer the copyright laws in the digital era, facilitate the marketplace, and serve the Nation, the United States Copyright Office must be positioned for success. As stated by one Member of this Committee, “it is time to enact a restructured, empowered and more autonomous Copyright Office that’s genuinely capable of allowing America to compete and protect our citizen’s property in the global marketplace.”

To support her petition, Register Pallante, in her written statement, singled out IT issues, citing the GAO’s scathing report, detailing myriad IT deficiencies at the Library of Congress but recommending consolidation of IT resources. The Register obviously opposes a single IT team:

The Office’s current organizational structure is under strain because the copyright system has evolved and because digital advancements have changed the expectations of the public….The mission of the Copyright Office is fundamentally different from the mission of the Library, and I believe that the Copyright Office must have its own CIO, technology staff, and management authority, including the ability to implement IT investment and planning practices that focus not on agency-wide goals but on its own specific mission. As noted in my prior testimony, the Copyright Office sits at the center of a dynamic marketplace in which creative content drives a sophisticated chain of business in the information and entertainment sectors. A faster and more nimble Copyright Office must be a priority.

Although the discussion largely centered on the potential independence of the Copyright Office, many of the questions in the latter part of the hearing focused on topics discussed in the Copyright Office’s music licensing study, including pending legislation. With respect to the Fair Play Fair Pay Act, the Register voice her support and was particularly blunt in her view of the current state of the law where labels and artists do not get paid performance royalties on radio, stating the status quo was “indefensible as a matter of law and embarrassing as a matter of policy” as well as being “out of step with the rest of the world.” Take that, NAB!

With respect to the Songwriter Equity Act, the Register stated her support for Congressional action. When asked by Rep. Collins (R-GA), who sponsored the bill, what would happen if Congress doesn’t act, the Register replied in part that the existing legal regime is already “torturing” the music community.

The Register was also asked about the “anticircumvention” provisions of Section 1201 of the Copyright, enacted as part of the DMCA. She stated that as drafted, the fair use defense codified in Section 107 of the Act is not applicable to Section 1201. When questioned about potential problems with Section 1201 and cybersecurity issues, the Register wryly noted that having a potential cybersecurity exemption subject to a three-year Copyright Office review process was not in the best in the best interests of national security.

Given the importance of copyright to the economy, and the reactions sentiments of the Committee members, it’s possible that Congress may actually address copyright issues sometime soon.

 

 

 

 

Will the Fair Play Fair Pay Act Get a Fair Hearing?

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By Marc D. Ostrow

On April 13,  H.R. 1733, The Fair Play Fair Pay Act of 2015 (FPFPA) was introduced by a group led by Reps. Jerrold Nadler (D-NY) and Marsha Blackburn (R-TN). This bill would make several amendments to the Copyright Act, the most noteworthy of which would be to provide a public performing right in sound recordings for terrestrial radio broadcasts. Most of the provisions in this bill are things that were previously proposed in others and many mirror recommendations in the Copyright Office’s recent 202-page music licensing report (the Report), which I summarized here.

For example, right before last fall’s government shut down, Rep. Melvin L. Watt (D-NC), introduced H.R. 3219, the Free Market Royalty Act, which, among other things, would’ve created a public performance right in sound recordings when played on AM or FM radio, something supported in the Report. What’s the big deal about a performing right in a sound recording? As many have pointed out, the US is among the less than handful of nations, including China, Iran and North Korea, that doesn’t have one.

So if you’re groovin’ to a recording of Fly Me To The Moon on AM or FM radio as part of the Sinatra centennial celebrations, the composer, Bart Howard, and his music publisher get paid but Ol’ Blue Eyes and his label get bupkis. However, if you listen to that same recording over Sirius/XM or stream it over the Internet, then everybody gets paid.  How’s that? Well, under amendments to the Copyright law in the 1990s, Congress created a performance right for recordings in digital transmissions but not for traditional radio and TV broadcasts.

The radio industry’s long-time rationale for not paying artists and labels is that airplay promoted the sales of recordings. However, in the current environment where the public is quickly moving from owning (e.g., CDs and downloads) to streaming (e.g., satellite radio, YouTube, Pandora), the “promotional” value of radio isn’t what it used to be. The performance itself is now the value proposition. And it kind of seems kind of unfair that labels and artists get paid for some performances but not others where the user experience is often virtually identical. This bill would provide “platform parity.”

So what else is in this bill? It fixes a loophole where some streaming services wouldn’t pay royalties on pre-1972 sound recordings because they’re not protected by federal copyright laws (although a couple of district court decisions recently told them otherwise). Addressing this situation, the Report recommended full copyright protection for pre-1972 recordings. And last year’s RESPECT Act would’ve provided for royalty payments on performances of these older recordings, but without providing full copyright protection. The FPFPA adopts the RESPECT Act approach and likewise provides for royalty payments without granting full copyright protection.

To make it more likely to pass, the bill has some protections for small broadcasters, capping royalties for stations with less than $1 million in annual revenue at $500 per year and at $100 a year for non-commercial stations, including public and college radio. Religious broadcasters, regardless of size, are exempted altogether.

The FPFPA also provides for royalty payments directly to artists even where the service does a direct deal with the labels if a statutory license were otherwise available. And these payments would be in the same proportion that SoundExchange currently pays on licensed services: 45% to the featured artist, 5% to the backing musicians and 50% to the label. This is a major protection for featured and side artists.

Moreover, there are also technical amendments to the rate-setting provisions for certain statutory licenses that attempt to provide a more uniform, market-based standard more evenly. Again, this issue was addressed in the Report and was handled somewhat differently in last year’s proposed Songwriter Equity Act. However, including statutory considerations like whether streaming is a substitute for sales of recordings or may otherwise interfere with or enhance a label’s revenue as well as the relative roles and value of the labels and streaming services could open a pretty big and murky can of worms.

Will this bill pass? Well, the National Association of Broadcasters (NAB) is vehemently opposing it. And the NAB is a pretty powerful lobby that’s long opposed paying royalties for broadcasting recordings. And while the music industry is largely concentrated in New York, Nashville and Los Angeles, every Congressional district has at least one radio station — and candidates need to advertise during elections.