Music Licensing Transformed by the Passage of the Music Modernization Act BY STEVEN R. ENGLUND, ALISON I. STEIN AND AVA U. MCALPIN n October 11, 2018, the for public performance licenses products such as CDs and perma- president signed into administered by ASCAP and nent downloads and toward Internet law the Orrin G. Hatch– BMI, including randomized streaming. Digital music providers Bob Goodlatte Music assignment of judges to hear found it difficult and expensive to OModernization Act (MMA).1 This those proceedings and permit- obtain and administer mechanical major piece of bipartisan legisla- ting those judges to consider licenses for all the compositions in tion touches on nearly every aspect royalty rates for sound record- their vast libraries, while music pub- of U.S. copyright law that relates ings; and lishers and songwriters believed that to licensing of either musical com- providers often did not obtain valid positions or sound recordings. The (5) Provision of statutory licenses or pay required royalties legislation is the result of many procedures for producers, mix- and began filing litigation against years of examination of reform ers, and sound engineers to streaming services on that basis.2 proposals by Congress and the receive royalties for the use of The goal of the MMA’s blan- Copyright Office and many years of sound recordings under a stat- ket license is to make compulsory negotiations among industry stake- utory license. mechanical license administra- holders. The lengthy MMA makes tion for digital uses simpler and five principal sets of changes to the Blanket License for Digital more efficient and to ensure that a Copyright Act: Reproduction and Distribution of higher proportion of usage results Musical Compositions in payment of statutory royal- (1) Creation of a blanket The MMA’s centerpiece is a major ties to the proper music publishers statutory mechanical license rewrite of the “mechanical” com- and songwriters. To do so, the for digital music providers, pulsory license provisions in section MMA establishes the Mechanical which will be administered by 115 of the Copyright Act. That Licensing Collective, a nonprofit a new “Mechanical Licensing license was originally created as organization that will administer the Collective”; part of the Copyright Act of 1909 blanket license industrywide at the to provide a mechanism for licens- expense of digital music providers.3 (2) Substantial federaliza- ing reproduction and distribution of Among other things, the Mechani- tion of protection for pre-1972 musical compositions embodied in cal Licensing Collective will develop sound recordings, which gen- piano rolls. Even as recording tech- and provide a publicly accessible erally had been protected only nology progressed to vinyl records, database of current ownership infor- under state law; compact discs, and eventually down- mation for musical compositions.4 loaded digital files, the licensing The database will address a long-felt (3) Adoption of a “willing procedures remained substantially need for more accurate and timely buyer, willing seller” rate stan- the same. Under section 115, a com- ownership information for musical dard to be used when setting pulsory mechanical license was compositions, which should sim- rates for musical compositions available by serving on a copyright plify licensing of musical works for and sound recordings under owner a notice of intent (NOI) that all uses. statutory licenses; listed the individual musical com- Because it will take some time positions that the licensee intended to get the Collective up and run- (4) Changes to procedures to use, and then paying statutory ning, the blanket license will not be for “rate court” proceedings royalties on those individual compo- available until January 1, 2021.5 To sitions. In some cases, an NOI could obtain a blanket license once they be filed with the Copyright Office become available, a digital music Steven R. Englund, Alison I. Stein, instead. provider will need only submit a and Ava U. McAlpin are attorneys with However, after more than a notice to the Collective.6 During Jenner & Block. Jenner & Block advised century since the 1909 Act, the the transition period (i.e., prior to various clients in the industry negotiations mechanical license system was the availability of blanket licenses in connection with enactment of the under strain, as ownership of musi- on January 1, 2021), a digital music MMA. This article is based on an article cal composition copyrights became provider’s potential exposure to lia- that originally appeared in the MLRC increasingly fractured and the music bility for copyright infringement is MediaLawLetter. market migrated from the sale of limited, so long as the digital music Winter 2019 n Communications Lawyer n 17 provider engages in good-faith, in pre-1972 sound recordings. How- protection for these works will pro- commercially reasonable efforts to ever, a last-minute compromise vide uniform legal treatment that identify, locate, and pay royalties to resulted in substantially full feder- should facilitate commerce involv- the owners of musical compositions, alization of protection of pre-1972 ing these recordings and result in and pays any remaining unpayable recordings in the enacted version of consistent payment for the use of royalties to the Collective once it is the MMA. these works. up and running.7 Now, under a new section 1401 Efforts to implement the new of Title 17, owners of pre-1972 Willing Buyer, Willing Seller mechanical licensing procedures sound recordings have federal pro- Rate Standard have begun in earnest. On Novem- tection against unauthorized use of Previously, some users of music ber 5, 2018, the Copyright Royalty their recordings that largely mir- under statutory licenses paid statu- Board published a notice in the Fed- rors the scope of federal copyright tory royalties set under a “willing eral Register soliciting comments on protection. That protection will con- buyer, willing seller” standard, “necessary and appropriate modi- tinue for the following periods: while others paid statutory royal- fications and amendments” to its • For recordings published ties set under an older standard regulations following enactment of before 1923, the term of pro- that had been interpreted to allow the MMA.8 Industry groups also tection ends on December 31, the Copyright Royalty Board to have begun the process of iden- 2021; set below-market rates. The MMA tifying proposed leaders for the • For recordings published establishes a “willing buyer, willing Collective.9 between 1923 and 1946, the seller” standard for setting royalty term of protection continues rates for mechanical licenses under Federal Protection for Pre-1972 until December 31 of the year section 115 of the Copyright Act18 Sound Recordings 100 years after publication; and for all users of sound record- A separate title of the MMA, • For recordings published ings under the statutory license in referred to as the “Classics Pro- between 1947 and 1956, the section 114 of the Copyright Act.19 tection and Access Act,” or the term of protection continues “Classics Act,” extends copyright- until December 31 of the year Changes to ASCAP and BMI Rate like federal protection to sound 110 years after publication; Court Proceedings recordings fixed before February 15, and For many decades, royalty rates 1972, commonly referred to as “pre- • For all other recordings under performance licenses for 1972 recordings.” Previously, such (including unpublished record- musical compositions issued by the recordings were largely excluded ings and ones published after performing rights organizations from the federal copyright system.10 1956), the term of protection ASCAP and BMI have been sub- Instead, prior to the enactment ends on February 15, 2067.14 ject to oversight by federal judges in of the MMA, pre-1972 record- While protection under section the Southern District of New York, ings were potentially protected 1401 largely mirrors federal copy- pursuant to consent decrees between under state statutory and common right protection, there are important those organizations and the Depart- law until February 15, 2067.11 As differences. For example, formali- ment of Justice dating back to a result, the law across the coun- ties such as registration do not 1941. Proceedings to set rates under try lacked uniformity. For example, apply, but there is a special statu- those consent decrees are com- while most states gave the owner tory process for rights owners to monly referred to as “rate court” of a pre-1972 recording the right record claims to works to be eligi- proceedings. Music publishers to control reproduction and dis- ble to recover statutory damages.15 and songwriters have long sought tribution of its recording, and one Additional provisions address set- changes to certain aspects of those federal district court found that a tlements of state law claims.16 The proceedings. The MMA makes two state statute provided a property Classics Act also includes a special such changes. right in the public performance of statutory process for seeking per- First, assignments of judges to a pre-1972 recording,12 the high- mission for noncommercial uses of hear rate-setting proceedings will est courts of two states determined pre-1972 recordings that are not now be made randomly, on a case- that their state law provided no pub- being commercially exploited.17 by-case basis.20 Previously, one lic performance right in pre-1972 The continuation of state protec- judge had retained jurisdiction over sound recordings.13 Some large digi- tion for pre-1972 recordings when each consent decree for many years. tal music services refused to pay the all other works were brought into The aim of this change is to neutral- artists who created those works for the federal system in the Copy- ize any perceived biases and bring a the use of their recordings. right Act of 1976 was a historical fresh perspective to each rate court The Classics Act was originally anomaly.