On October 11, 2018, President Trump signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (“MMA”) into regulation. The MMA is meant to “modernize copyright law” as utilized to songwriters, music publishers, digital music suppliers, document labels, and others concerned within the creation and distribution of music. The MMA consists of three elements:
Title I establishes a licensing collective to grant blanket mechanical licenses to digital music service suppliers and acquire and distribute royalties to music composition rights house owners;
Title II creates a royalty construction to compensate house owners of pre-1972 sound recordings; and
Title III supplies a statutory proper for producers, mixers, and sound engineers to gather royalties for digital transmissions of sound recordings.
The MMA resulted from unprecedented alignment amongst Republicans and Democrats, the U.S. Home and Senate, and music business stakeholders. Nonetheless, this main replace to copyright licensing regulation within the music business might trigger upheaval inside the complicated music market construction, which encompasses songwriters, studio professionals, artists, document labels, and digital streaming providers.
Title I — Modernizing Music Licensing for Digital Streaming Providers
Title I of the MMA modifications the best way certified digital music suppliers, resembling on-line digital music streaming providers, pay royalties to songwriters (by way of their music writer brokers) for the copy and distribution of musical compositions. This centralized and streamlined cost course of might be a welcome change for many songwriters, digital music suppliers, and others concerned within the creation and distribution of music.
By means of background, most recorded music is topic to 2 copyrights, one within the underlying musical composition, which protects the music and lyrics of a piece, and one within the sound recording, which protects the precise recorded efficiency of a piece. A lot of Title I of the MMA makes an attempt to modernize the gathering and cost of royalties for the general public efficiency of musical compositions when performed by way of a digital streaming service.
At present, Part 115 of the U.S. Copyright Act units forth a course of by way of which just about anybody can get hold of an automated proper to breed and distribute one other’s beforehand recorded musical composition. To acquire this proper, or “compulsory license,” the service should present discover to the copyright proprietor of the composition (or, if the copyright proprietor can’t be situated, to the Copyright Workplace), and comply with pay to the proprietor a statutory price set by the Copyright Royalty Board. The MMA amends this course of because it applies to digital music suppliers, theoretically making it easier for digital music suppliers to safe the rights to play songs and for composers to obtain the corresponding royalty funds.
The MMA creates a centralized “Mechanical Licensing Collective” (the “Collective”) funded by digital music suppliers and administered by a board composed of songwriters and music publishers, with in depth governance, accounting and audit provisions. The Collective may have a board of administrators composed of fourteen voting members (and three nonvoting members) that meet a minimum of twice a yr. Ten voting members can be representatives of music publishers, and 4 voting members shall be representatives of professional songwriters. The Copyright Workplace can also be allowed to re-designate an entity to function the Collective each 5 years. The MMA additionally specifies that an unbiased audit is to be carried out each 4–5 years.
A digital music supplier will not be capable of file notices with the Copyright Workplace if the copyright proprietor can’t be recognized or situated. As an alternative, it’s going to file a discover with the Collective, which can handle these notices and gather and distribute royalty funds, in addition to implement a course of for dealing with unclaimed royalty funds.
The Collective will keep a database of eligible works. In trade for offering discover to the Collective and agreeing to pay the statutory fee to songwriters, the digital music supplier will obtain a “blanket license” that covers use of all the works within the database. Beforehand, digital music suppliers sometimes acquired licenses to those works on a person foundation. By acquiring and complying with the phrases of the license, the digital music supplier additionally will immunize itself from sure copyright infringement actions. Extra particularly, a “digital music provider that obtains and complies with the terms of a valid blanket license under this subsection shall not be subject to action for infringement of the [right of reproduction and distribution] arising from use of a musical work . . . to engage in covered activities authorized by such license.” The MMA additionally limits the legal responsibility of digital music suppliers after January 1, 2018, as long as they undertake sure cost and matching obligations. Moreover, as a part of the compromises that led to last passage of the MMA, the Collective is allowed to manage solely the brand new blanket license, leaving licensing of synch rights, lyrics, and efficiency rights, for instance, to be dealt with by present entities such because the Harry Fox Company.
To help licensees in figuring out copyright house owners and copyright house owners in recovering unclaimed accrued royalties, the MMA offers for the designation of a “digital licensee coordinator.”
Title I of the MMA additionally modifies the usual the Copyright Royalty Board (“CRB”) should use when figuring out charges digital streaming providers pay songwriters for the mechanical licenses mentioned above. This has the potential to extend royalty funds to songwriters from most digital streaming providers. Beforehand, the CRB used a special authorized commonplace to find out the quantity streaming providers pay, which was based mostly on a collection of public curiosity directives, in comparison with the charges digital radio providers pay, which was based mostly on a prepared purchaser/prepared vendor commonplace. The MMA harmonizes these variations and creates a constant “willing buyer” and “willing seller” normal that requires the CRB to think about free market circumstances. A final-minute compromise within the Senate resulted in language confirming that for satellite tv for pc digital audio radio providers, royalty charges will stay unchanged via 2027 (as an alternative of 2022), in return for SiriusXM foregoing its proper to attraction the current CRB ruling that elevated the speed from 11.5 % of income to 15.5 % of income. This compromise primarily cleared the best way for passage of the MMA.
Title II — “Let’s Stay Together” — CLASSICS Act Creates Royalty Stream for pre-1972 Sound Recordings
In distinction to the forward-looking Title I, Title II permits artists and document labels to acquire compensation for sound recordings created earlier than 1972, the yr that federal copyright safety was first prolonged to music sound recordings. Claims for compensation for using these legacy sound recordings by digital music providers have been considerably stymied by an incomplete patchwork of state legal guidelines and ongoing litigation over the scope of these state legal guidelines. Digital music providers should now monitor, present discover, and pay royalties for his or her use of pre-1972 music sound recordings equal to the royalties paid for post-1972 sound recordings.
Extra particularly, Title II, generally known as the Classics Protections and Entry Act (the CLASSICS Act), creates a digital efficiency proper in favor of rights house owners of sound recordings recorded earlier than February 15, 1972 (and after January 1, 1923). Absent a separate voluntary license between the sound recording rights proprietor and digital transmitting entity, the royalties due will probably be calculated and paid underneath the identical charges and system (SoundExchange) at present relevant to post-1972 works. Whereas the CLASSICS Act makes clear that this royalty extension doesn’t render copyrightable these pre-1972 recordings, it does present a “special federal sui generis form of protection” for digital music performances.
The CLASSICS Act additional mandates safety for pre-1972 sound recordings for a base time period of 95 years from first publication, with a further interval of three–15 years, relying on how just lately the music was revealed.
Maybe probably the most distinctive element of the CLASSICS Act is that it partially addresses orphan works — recordings for which the proprietor can’t be recognized or contacted. For these sound recording orphan works, the CLASSICS Act permits “certain noncommercial uses of [pre-1972] sound recordings that are not being commercially exploited,” offered that good faith-efforts are undertaken to determine whether or not the recording is being business exploited and additional discover is offered to the Copyright Workplace.
Title III — AMP Act: Acknowledging the Number of Trendy Artistic Contributors
Producers, mixers, and sound engineers contributing to the creation of a sound recording now have a statutory proper to royalties from digital efficiency providers via the SoundExchange Collective as results of Title III of the MMA, the Allocation for Music Merchandise (“AMP”) Act, amending Part 114(g) of the U.S. Copyright Act. The AMP Act acknowledges and updates the U.S. Copyright Act to incorporate and codify studio professionals amongst these contributors counted for royalty receipt. Beneath the AMP Act, producers, mixers, and sound engineers will not have to depend upon contractual obligations to be compensated for digital transmissions.
In line with the Senate Report, this statutory proper codifies the requested royalty allocations from artists to studio professionals that SoundExchange has honored since 2004. Whereas the Senate Report acknowledges that these allocations are already commercially in place for a lot of sound recordings fastened after 1995, the AMP Act authorizes SoundExchange to simply accept a letter of course from a featured artist to “distribute, to a producer, mixer, or sound engineer who was part of the creative process that created a sound recording, a portion of the payments to which the payee would otherwise be entitled from the licensing of transmissions of the sound recording.”
For sound recordings fastened earlier than November 1, 1995 (enactment of the Digital Efficiency Proper in Sound Recordings Act), producers, mixers, and sound engineers who can exhibit a failed try and solicit a letter of course from the artist, nonetheless, might obtain a distribution of two% of collected receipts from licensing transmissions of the sound recorded; such proportion can be deducted from the quantities payable to the artist after an objection interval. AMP Act Sections 114(g)(5)(B) (pre-1995 recordings) and 114(g)(6)(E) (proper to obtain funds) don’t take impact till January 1, 2020, giving SoundExchange time to organize inner processes.
 The U.S. Home of Representatives and U.S. Senate every unanimously handed considerably separate variations of the MMA (on September 25, 2018, the Home concurred in Senate amendments and despatched the MMA to the President), and the laws was launched and superior underneath numerous invoice numbers through the course of its progress. The entire listing of associated payments is as follows:
https://www.congress.gov/bill/115th-congress/senate-concurrent-resolution/48/text (provided remaining identify for the MMA)
https://www.congress.gov/bill/115th-congress/house-bill/5447 (full MMA as reported by Home Judiciary Committee)
https://www.congress.gov/bill/115th-congress/senate-bill/2334 (Music Modernization Act, turned Title I of MMA)
https://www.congress.gov/bill/115th-congress/senate-bill/2393 (CLASSICS Act, turned Title II of MMA)
https://www.congress.gov/bill/115th-congress/senate-bill/2625 (AMP Act, turned Title III of MMA)
https://www.congress.gov/bill/115th-congress/senate-bill/2823 (full MMA as reported out of the Senate Judiciary Committee)
https://www.congress.gov/bill/115th-congress/house-bill/1551 (full MMA, as handed by Senate; unique Home Invoice 1551 was unrelated)
https://www.congress.gov/bill/115th-congress/house-bill/881 (AMP Act, turned Title III of MMA)
https://www.congress.gov/bill/115th-congress/house-bill/4706 (Music Modernization Act, turned Title I of MMA)
https://www.congress.gov/bill/115th-congress/house-bill/3301 (CLASSICS Act, turned Title II of MMA)
 As said by MMA sponsor and namesake, Rep. Goodlatte: “The reasons for such widespread support are clear. This legislation boosts payments for copyright owners and artists while reducing litigation costs for all parties; streamlines rights clearance for music delivery services; allows songwriters to help determine how their royalties are collected and allocated; protects the works of recording artists who created pre-1972 recordings; ensures sound engineers, mixers, and producers get paid; and gives the public more access to more music. This legislation will truly usher in a new era for music creators, distributors and consumers.” 164 CONG. REC. E1319-20 (day by day ed. Sept. 27, 2018) (assertion of Hon. Bob Goodlatte of Virginia), https://www.govinfo.gov/content/pkg/CREC-2018-09-27/html/CREC-2018-09-27-pt1-PgE1319-3.htm.
 The MMA as enacted doesn’t influence efficiency royalties for conventional, over the airwaves, broadcast radio providers (primarily AM and FM stations, additionally termed terrestrial radio), however might influence the web providers provided by conventional radio stations.
 “Digital music provider” as outlined underneath the MMA refers to a service engaged in coated actions that “has a direct contractual, subscription, or other economic relationship with end users of the service; … is able to fully report on any revenues and consideration generated by the service; [and] is able to fully report on usage of sound recordings of musical works by the service.” “Covered activities” embrace everlasting downloads, restricted downloads, or interactive streams that qualify for obligatory licenses.
 Songwriters typically grant their rights within the musical composition to a music writer, which handles licensing and royalty assortment and accounting for the songwriter for a share of the songwriter’s income.
 For restrictions on the supply and scope of obligatory licenses, see usually 17 U.S.C. § 115(a).
 Paragraph 1 of the brand new Part 115(d) defines how the obligatory license for digital music suppliers interacts with different present licenses, comparable to a voluntary license.
 The Collective may have a board of administrators composed of fourteen voting members (and three nonvoting members) that meet no less than twice a yr. The ten voting members shall be representatives of music publishers, and the 4 voting members shall be representatives of professional songwriters. The Copyright Workplace can also be allowed to re-designate an entity to function the Collective each 5 years. The MMA additionally specifies sure audit rights ….
 The MMA defines a “blanket license” as a obligatory license described in Part 115(d)(1)(A) to interact in coated actions.
 The charges that digital providers pay for sound recordings at present are a lot greater than the charges digital providers pay songwriters for musical compositions, and the free market provision within the MMA was meant to deal with that discrepancy.
 The MMA additionally implements quite a lot of different extra technical modifications. For instance, the MMA modifies the process for choosing price courtroom judges for the consent decree proceedings for ASCAP and BMI, the 2 largest teams that gather efficiency royalties for a lot of the music business. As an alternative of the present assignments of the Southern District of New York judges which have dealt with the administration of these consent decrees (for ASCAP, Decide Cote, and for BMI, Decide Stanton), the district courtroom will use a random “wheel” course of to find out which Southern District of New York decide will hear future consent decree price setting instances.
 The general public efficiency proper in post-1972 sound recordings is restricted to “digital audio transmissions.” 17 U.S.C. 106(6).
 After enactment, music composition rights house owners may have 180 days to file schedules of works topic to claims of statutory damages for final inhabitants of a brand new searchable database established by the Copyright Workplace. Entities that publicly carry out digital sound recordings should present contact info with the Copyright Workplace inside 30 days of enactment.
 All through the legislative course of, Title II was generally known as the “CLASSICS Act,” the acronym for the Compensating Legacy Artists for his or her Songs, Service, & Essential Contributions to Society Act.
 The CLASSICS Act emerged from the Senate as compromise with Sen. Wyden’s now-defunct ACCESS to Recordings Act, which was poised to federalize pre-1972 sound recordings, with all attendant rights and limitations relevant to copyrightable works.
 S. Rept. 115-339 (115th Congress Sept. 17, 2018) (Report of the Committee on the Judiciary to accompany S. 2823, The Music Modernization Act). As to those legacy sound recordings, the CLASSICS Act preempts state property legal guidelines governing infringement claims and in addition clarifies the applicability of sure limitations on the cures afforded to those pre-1972 rights house owners, together with: truthful use, sure makes use of by libraries and archives, part 230 of the Communications Act of 1934, 47 U.S.C. § 230, and sure permissions of instructional establishments.
 S. Rept. 115-339 (115th Congress Sept. 17, 2018) (Report of the Committee on the Judiciary to accompany S. 2823, The Music Modernization Act).