The Music Modernization Act updates the music licensing landscape to better facilitate legal licensing of music by digital services. It also provides certain protections (and exceptions to those protections) to pre-1972 sound recordings, and addresses distribution of producer royalties.
What does the Music Modernization Act do?
The Music Modernization Act has three main sections:
What is the mechanical licensing collective?
The mechanical licensing collective (“MLC”) is a nonprofit entity that will administer the new blanket licensing system established by the Music Modernization Act beginning on the “license availability date”—that is, January 1, 2021. The MLC will receive notices and reports from digital music providers, collect and distribute royalties, and identify musical works and their owners for payment. It will establish and maintain a publicly accessible database containing information relating to musical works (and shares of such works) and, to the extent known, the identity and location of the copyright owners of such works and the sound recordings in which the musical works are embodied. In cases where the MLC is not able to match musical works to copyright owners, it is authorized to distribute the unclaimed royalties to copyright owners identified in the MLC records, based on the relative market shares of such copyright owners as reflected in reports of usage provided by digital music providers for the periods in question.
What is the digital licensee coordinator?
The digital licensee coordinator (“DLC”) is a nonprofit entity that coordinates the activities of the licensees and designates a representative to serve as a non-voting member on the board of the MLC. The DLC is authorized to participate in proceedings before the Copyright Royalty Judges to establish the administrative assessment to be paid by digital music providers to operate the MLC.
What entities have been designated as the MLC and the DLC?
Mechanical Licensing Collective, Inc. (“MLCI”) is designated as the MLC. Digital Licensee Coordinator, Inc. (“DLCI”) is designated as the DLC. Before making these selections, the Copyright Office conducted a public proceeding in which it received proposals from entities seeking to be designated, as well as more than 600 comments from stakeholders throughout the music industry. Information about the designation process is available here. Contact information for the MLC and DLC is available here.
Why did the Register designate MLCI and DCLI?
The Register designated MLCI as the MLC because it demonstrated that it meets each of the statutory criteria, and it was only candidate that satisfied the statute’s endorsement requirement. MLCI also demonstrated that it is well positioned to carry out the MLC’s administrative and technological functions, including receiving notices and reports from digital music providers, collecting and distributing royalties, matching copyright owners to sound recordings, and maintaining a publicly accessible database. The Register also determined that each of MLCI’s proposed board members is well qualified to serve on the board in accordance with the statutory criteria.
Similarly, the Register determined that DLCI fulfills each of the statutory criteria for designation. It was endorsed by service providers and licensees representing the greatest percentage of the relevant market, and it demonstrated the administrative and technological capabilities to perform its required duties. The Register found each of its individual board members to be well qualified.
Who pays for the operational costs of the MLC?
The operational costs of the MLC will be paid for by digital music providers through voluntary contributions and an administrative assessment set by the Copyright Royalty Judges. The MLC and the DLC will be authorized to participate in proceedings before the Copyright Royalty Judges’ proceedings to establish the administrative assessment paid for by digital music providers to operate the MLC.
Will the MMA change the rates for the compulsory license under section 115?
The new legislation does not change the rates for the compulsory license under section 115. However, the legislation does establish a new rate setting standard to be applied by the Copyright Royalty Judges. The new market-based willing buyer / willing seller rate setting replaces the policy-oriented 801(b)(1) rate-setting standard. The Copyright Royalty Judges will apply the new standard to rate determination proceedings that commence on or after October 11, 2018.
Can I still file a NOI with the Copyright Office?
The existing system for filing notices of intention to obtain a compulsory license for making and distributing phonorecords of nondramatic musical works (NOIs) with the Copyright Office on a song-by-song basis will remain in place for non-digital uses (e.g. CDs, vinyl).
However, the Copyright Office will no longer accept NOIs to obtain a compulsory license for making a digital phonorecord delivery of a musical work, such as in the form of a permanent download, limited download, or interactive stream. Instead, after a transition period, during which the Register will issue relevant regulations and designate key entities to carry out administration of the license, the new license becomes available on a blanket basis (covering all musical works available for compulsory licensing). Digital phonorecord deliveries are obtained under the new blanket license by submitting a notice of license to the mechanical licensing collective (MLC). In the interim before the blanket license is available from the MLC, the liability for digital music providers will be limited so long as they comply with certain requirements, including engaging in good-faith, commercially reasonable efforts to identify and locate each copyright owner of a musical work they use on their service. See the below FAQ on what happens during the transition period for more details.
What happens during the transition period?
Prior to the availability of a blanket license from the MLC, a digital music provider can enjoy a limitation of copyright infringement liability for use of a musical work for which the digital music provider was unable to identify or locate the musical work copyright owner, so long as the digital music provider engages in good-faith, commercially reasonable efforts to identify and locate musical work copyright owners. The digital music provider must also be prepared to pay accrued royalties to the musical work copyright owner once they are located. As part of engaging in good-faith, commercially reasonable efforts to identify musical work copyright owners, the digital music provider is required to use one or more bulk electronic matching processes, and must continue using these processes on a monthly basis for so long as the musical work rights owner is unidentified. If the musical work copyright owner is identified or located during this search process, then the digital music provider is required to report and pay that copyright owner any royalties owed. If the musical work copyright owner remains unidentified between the date of enactment and the date the blanket license is available, then the digital music provider is required to provide a cumulative usage report and accrued royalties to the mechanical licensing collective.
How will I claim my royalties from the MLC?
Once established, the MLC will establish and administer a process by which copyright owners can claim ownership of musical works (and shares of such works). Once an owner of an unmatched work has been identified and located in accordance with the procedures established by the MLC, the musical works database and the other records of the MLC will be updated accordingly. The MLC dispute resolution committee will implement policies and procedures to address and resolve disputes relating to ownership interests in licensed musical works.
The Copyright Office will update its website with more educational information on claiming works.
If I have already registered my work for copyright, do I need to do anything?
Yes, even if you already have a copyright registration, you will still need to register with the MLC (once it is up and running) to receive certain royalties for your work.
My work has not been registered with the Copyright Office. Can I still register with the MLC?
Yes. Musical works do not need to be registered with the Copyright Office to be eligible for certain statutory royalties paid through the MLC. However, to obtain statutory royalties for certain non-digital uses (e.g. CDs, vinyl), your musical works must be in the Copyright Office’s records, which may be accomplished through registration. Registering a work for copyright, does offer certain additional protections, such as the ability to pursue statutory damages and attorneys’ fees in infringement lawsuits.
My work was used in the past without my permission. Can I seek compensation?
Past infringement liability is limited to royalties due if the digital music provider complies with certain requirements, including good-faith attempts to identify and locate the copyright owners. The U.S. Copyright Office does not offer legal guidance on specific infringement cases.
How does the MMA affect terrestrial broadcast radio?
The MMA does not directly affect terrestrial broadcast radio. The existing section 114(i) provision that prohibits performing rights organization (PRO) rate courts from considering licensing fees paid for digital performances of sound recordings in its rate setting proceedings for the public performance of musical works is partially repealed. However, this repeal does not apply to rate settings for terrestrial broadcast radio.
Title II of the MMA, the Classics Protection and Access Act, expressly preserves the current preemptive effect, or lack thereof, that title 17 may have regarding any cause of action arising from the nonsubscription broadcast transmission of sound recordings under the common law or statutes of any State for activities that do not qualify as covered activities under Chapter 14 of title 17.
How does the MMA affect performing rights organizations or the ASCAP and BMI consent decrees?
The section 114(i) provision that prohibits PRO rate courts from considering licensing fees paid for digital performances of sound recordings in its rate setting proceedings for the public performance of musical works is partially repealed. This repeal does not apply to radio broadcasters. Additionally, the legislation changes how judges in the Southern District of New York are assigned to the rate court proceedings set forth in the consent decrees for ASCAP and BMI, by assigning each new rate dispute on a rotating basis instead of all disputes being handled by the same judge.
What is the term of protection for pre-1972 sound recordings?
The federal remedies for unauthorized use of pre-1972 sound recordings shall be available for 95 years after the year of first publication of the recording, subject to certain additional periods. These periods provide varying additional protection for pre-1972 sound recordings, based on when the sound recording was first published:
Do I need to register pre-1972 sound recordings?
No. There is no obligation to register. However, to be eligible to recover statutory damages and/or attorneys’ fees, the new section 1401(e)(5) typically requires that rights owners file schedules listing their pre-1972 sound recordings with the Copyright Office (a rule recently established the Office’s filing requirements). This requirement takes the place of a formal registration requirement that normally applies to claims involving statutory damages. Rights owners filing these schedules must include the rights owner’s name, the sound recording title, featured artist, and, if known and practicable, the International Standard Recording Code (“ISRC”). The rule also establishes how individuals may request timely notification of when rights owners file such schedules with the Office. Note that in cases where a transmitting entity has filed a valid and timely notice of contact information, a rights owner may be eligible to obtain statutory damages and/or attorneys’ fees only after sending the transmitting entity a notice stating that it is not legally authorized to use the pre-1972 sound recording, and identifying the pre-1972 sound recording in a schedule conforming to the requirements set forth in the rule.
What is the noncommercial use exception for pre-1972 sound recordings?
The legislation establishes a process for lawfully engaging in noncommercial uses of pre-1972 sound recordings that are not being commercially exploited. To qualify for this exemption, a user must submit a notice of noncommercial use after conducting a good faith, reasonable search, and the rights owner of the sound recording must not object to the use with 90 days.
After soliciting three rounds of public comments through a notice of inquiry and a notice of proposed rulemaking, the Office issued a final rule identifying the specific steps that a user should take to demonstrate she has made a good faith, reasonable search.
How long will it take for the Office to index the schedules of pre-1972 sound recordings submitted by rights owners under the interim rule?
The Copyright Office will index a schedule of pre-1972 sound recordings promptly following receipt of the schedule in proper form, and the prescribed fee.
What does the AMP Act mean for producers, mixers, or engineers?
Title III of the MMA, the Allocation for Music Producers Act (“AMP Act”), will allow music producers, mixers, or engineers who were part of the creative process that made a sound recording but who were not by statute receiving royalties under section 114, to receive compensation from royalties collected for uses of sound recordings under the section 114 statutory license. It does this by codifying a process wherein the collective designated to collect and distribute royalties (currently, Sound Exchange) will distribute a portion of royalty payments directly to a producer, mixer, or engineer pursuant to a “letter of direction” from an authorized artists payee. The AMP Act also directs the collective (SoundExchange) to adopt a policy that, in the absence of a letter of direction, allows for statutory royalties for certain pre-1995 sound recordings to be paid to producers, mixers, or engineers from the featured artist’s share if certain requirements are satisfied, including that the artist payee is notified and does not object.