You may have missed this April 6 email from the Copyright Office which conveys another huge benefit on Big Tech while potentially destroying songwriters, especially independent songwriters. Note also the HFA appears to have been in on it from the beginning. If you got a notice on this from HFA or from MLC, please leave a comment. The much vaunted CARE Act authorizes the Copyright Office to unilaterally make these rulings in the same section (the new 17 U.S.C. Section 710) that allows them the power to change the “license availability date” when the MLC is to start operating.
Just in time for both the the March and the first quarter mechanical royalty distribution, the goal posts are moving. A service that sends paper statements can essentially opt out of paying royalties as long as they certify they are “unable” to pay royalties. Just like songwriters can opt out of paying for groceries, utilities or rent by certifying they are unable to pay.
Note that it’s not clear if the service has to use the pure statutory license or if this new rule applies to paper statements for direct licenses that render NOIs, statements of account or royalty payments on a quarterly basis instead of the statutory monthly payments. Just that the statements be on paper. The notice says it doesn’t apply to direct licenses, but it isn’t clear if those direct licenses require paper statements. The fact that the new rule may not apply to direct licenses is hardly something to be proud of–direct licenses are always the major publishers who sign the biggest songwriters.
It’s unclear just how many paper statements are involved, but there must be quite a few or the Copyright Office would not have adopted this obscene rule. All you need to do is check with HFA to see if your songs are on the “no pay” list.
While the royalty payment is still required, the actual payment is tolled for paper statements essentially for as long as the emergency continues. So good news, songwriters, in the long run you get paid. But as John Maynard Keynes said, in the long run we’re all dead, too.
They do say that the nonpaying service is supposed to arrange for an opt in for electronic payment. Oh, that will go just smooth as glass.
This reeks. It sounds like HFA decided they didn’t want to pay the long tail. And if they don’t have to send you a statement, how will you ever know what you should have been paid.
So if they can’t pay royalties and then go bankrupt, then what happens? We’re sure that someone has a nice crisp answer for that obvious eventuality.
UPDATES 4/15/20: The link to the HFA signup page for publishing administration was deleted from the Copyright Office COVID19 page and replaced with an email address for HFA Customer Service.
And the Copyright Office also has a complaint page here so you can let them know if you are having any problems with the implementation of this emergency rule. This is important because the emergency rule allows the Copyright Office to dispense with the usual comments from the public on proposed regulations.
April 6, 2020
Emergency Relief for Section 115 Paper Processes During COVID-19 Pandemic
The U.S. Copyright Office has become aware that some entities may not be able to provide paper Notices of Inquiry (NOIs), Statements of Account (SOAs), and, potentially, associated royalty payments under section 115 of the Copyright Act because the COVID-19 pandemic has prevented them from physical processing. To address this issue, subject to section 710 of the Copyright Act [the new Section 710 under the CARES Act], the Office is temporarily adjusting certain timing provisions so the requirement to provide NOIs, SOAs, and royalty payments is tolled during the period of disruption caused by the pandemic. This timing adjustment also requires entities to provide copyright owners with certain information, including a certification that the entity is unable to process paper materials and contact information on how to temporarily opt in to electronic delivery of materials. This adjustment is available only during the period of disruption caused by the COVID-19 pandemic. For details of the temporary adjustment, including specific instructions on how to use it, please see the Office’s Coronavirus page.
The Copyright Office Public Information Office is available for questions through our website at copyright.gov/help/ or at (202) 707-3000 or 1-877-476-0778 (toll free).
This is the linked explanatory text:
Timing Requirements for Serving Section 115 Notices of Intention and Statements of Account
Under section 115 of the Copyright Act, a compulsory license to make and distribute phonorecords of a musical work is currently available under certain conditions, including service of a notice of intention (NOI) upon the copyright owner and delivering a monthly statement of account (SOA) and royalty payment to that owner. The Orrin G. Hatch—Bob Goodlatte Music Modernization Act (MMA) made significant changes to the section 115 license. This includes distinguishing obligations for serving an NOI depending upon whether or not the use involves a digital phonorecord delivery (e.g., whether the use is related to a physical product such as a vinyl record or CD, or whether it relates to use on a digital music service). But for both types of uses, users must currently: (1) serve NOIs before, or not later than thirty calendar days after, making a phonorecord of the musical work; (2) provide SOAs and related royalty payments on or before the twentieth day of each month, which shall include all royalties for the month next preceding; and (3) also provide an annual SOA.
The Copyright Office has issued regulations related to the format and service of NOIs, SOAs and related royalty payments. By regulation, SOAs and payments may be sent together or separately, but if sent separately, the payments must include information reasonably sufficient to allow the payee to match them to the corresponding statements. Copyright owners may elect to receive NOIs, SOAs, or payments in paper or electronic format (e.g., by email or electronic account, and direct deposit), but the default rule is paper delivery. In practice, the Office understands that a majority of copyright owners have generally elected electronic delivery, but a minority receive NOIs, SOAs and payments by paper, either because they simply have not opted into electronic delivery, or, for a smaller minority, because they have affirmatively expressed a preference for paper.
While the MMA’s most significant change is to establish a new, blanket license for digital music providers (DMPs) to be administered by a mechanical licensing collective (MLC), this blanket license is not yet available. DMPs and other licensees must continue to comply with section 115’s conditions on a song-by-song basis during the current transition period. The emergency relief outlined below is directed at obligations accruing during this transition period and is unrelated to activities of the MLC. This relief is also necessarily limited to obligations related to the statutory section 115 license and is unrelated to obligations that stem from direct licensing agreements between private parties.
The Copyright Office has become aware that, as a result of the COVID-19 national emergency, some entities, including at least one DMP and its licensing administrator [HFA], may be prevented from serving NOIs and SOAs in a timely manner due to an inability to physically process paper notices and statements resulting from a shutdown of corporate offices [by HFA]. In the instance that has come to the Office’s attention, the Office also understands that processing of paper checks originates from a different location and remains unaffected. [So why toll payment obligations?]
To mitigate the effect of disruption upon all stakeholders of the section 115 license [but really to help HFA alone], including licensees, music publishers, and songwriters, the Acting Register is temporarily adjusting the application of certain timing provisions. Recognizing that the section 115 license reflects a complex balancing of interests most recently addressed by Congress through passage of the MMA and the existing reliance upon the current structure by various stakeholders, the Office is providing a reasonable framework for relief [and giving HFA exactly what they wanted] that minimizes disruption to longstanding expectations [and legal obligations], including with respect to royalty payments, and promotes transparency in compulsory licensing. [How?] These adjustments will apply as follows:
Notices of Intention: The requirement that a NOI be served will be tolled during the period of disruption if the affected entity (1) has sent an alert to the copyright owner (directly or through respective administrators) that it is unable to serve the NOI by paper and provided clear instructions and contact information for the owner to temporarily opt-into electronic delivery during the period of disruptions in the alert and on a website of the licensee or its licensing administrator; (2) serves the notice within thirty days after the date the disruption has ended, as stated in a public announcement by the Acting Register, along with a clear statement indicating the date or expected date of distribution; and (3) complies with the general conditions outlined below. The alert in subpart (1) of this paragraph may be made by a licensing administrator and will be considered satisfied if the related certifications include a description explaining that an alert was attempted but unsuccessful due to lack of electronic contact information or a lack of ability to deliver an alert stemming from the disruption.
Statements of Account and Royalty Payments: The requirement that a monthly or annual SOA be served or royalty payment made will be tolled during the period of disruption if the affected entity (1) has sent an alert to the copyright owner (directly or through respective administrators) that it is unable to serve the SOA by paper and provided clear instructions and contact information for the owner to temporarily opt into electronic delivery during the period of disruptions in the alert and on a website of the licensee or its licensing administrator; (2) serves the SOA within thirty days after the date the disruption has ended, along with a clear statement indicating the period (month and year) covered by the applicable statement; (3) complies with the general conditions outlined below; and (4) continues to make timely payment of royalties to payees, whether electronically or by paper check, unless the certification includes a statement and supporting evidence describing the inability to make the required royalty payments [like HFA doesn’t have the money or is insolvent? What kind of “inability”?]. The alert in subpart (1) of this paragraph may be made by a licensing administrator and will be considered satisfied if the related certifications includes a description explaining that an alert was attempted but unsuccessful due to lack of electronic contact information or a lack of ability to deliver an alert stemming from the disruption.
Certification: An entity making use of this adjustment must include a declaration or similar statement on each applicable NOI or SOA certifying, under penalty of perjury, that the entity would have served the NOI or SOA, or made the royalty payment, within the statutorily prescribed time but for the national emergency, and setting forth satisfactory evidence in support of that statement. Satisfactory evidence would include, but not be limited to, a statement that the licensee and, if applicable, its vendor was prevented from mailing the required physical materials or payment, alerted or attempted to alert the copyright owner of the ability to opt into electronic delivery, and were unable to obtain consent from the copyright owner to receive materials or payment electronically. [Note: That “penalty of perjury” thing sounds all legal, but it has to be enforced by someone. The Copyright Office will not enforce false statements as we saw with the address unknown disaster where they allowed millions of address unknown statements to be filed with certifications that were clearly suspect if not blatant perjury.]
Limitation to Paper-Based Delivery: As of April 6, 2020, this adjustment applies only to NOIs and SOAs sent to persons or entities who had previously received them in paper format prior to the national emergency. An entity with a demonstrated need to extend this adjustment to electronic delivery methods should contact the Copyright Office using the information provided below. [So the tolling could apply to both paper and electronic delivery.]
Contact Information: Entities making use of this adjustment must make contact information and customer service accessible for persons, including copyright owners, who wish to understand how this tolling may affect them, including to opt into a temporary offer of electronic delivery or determine whether their interests are included in the list of affected works and licenses described below. Although the Copyright Office typically does not link to third parties, in light of this emergency relief and the importance of copyright owners obtaining reliable information, the Office is sharing the following contact information: ClientServices@harryfox.com; http://www.harryfox.com/#/hfa-account/register [UPDATE: This link to register with HFA for publishers has been deleted from Copyright Office page, not surprising as it was essentially a sign up that drove business to HFA which we are sure was not the Copyright Office’s intention. If you do not get satisfaction from HFA Client Services, you can complain to the Copyright Office here.]. Affected entities who wish to be added to this list should contact the Office using the information provided below.
Temporary Offer of Electronic Delivery: Entities making use of this adjustment must promptly provide a method for copyright owners who were receiving paper NOIs or SOAs prior to the national emergency to opt in, on a temporary basis, to electronic delivery and, separately, to direct deposit of payments. Such deliveries and deposits must automatically revert to a paper format within thirty days after the date the disruption ends, unless the copyright owner has agreed to continued electronic delivery. [Note this is confusing because HFA is on both sides of statutory licensing representing Spotify’s interest against HFA publishers and processing payments to HFA publishers who authorize HFA to license to Spotify (i.e., HFA is “on the wall”). This new rule is created for HFA’s benefit so Spotify does not need to send paper NOIs and HFA does not need to send payments for paper statements–regardless of whether HFA has been paid those royalties by Spotify.]
List of Affected Works and Licenses: Entities making use of this adjustment [mostly HFA for whose benefit the rule is created] must track how they use it and must maintain a record of licenses by copyright owner for which they have made use of the adjusted timing provisions. They must also keep a list of the affected musical works. Over time, the Office expects the list of licenses with respect to the number of copyright owners to remain the same, or decrease, as copyright owners opt-into electronic delivery, while the list of affected works may increase as new sound recordings continue to be released [with no paper NOIs sent on the songs].
Licensee-Vendor Royalty Delivery: As applicable, an affected DMP or other user must continue to deliver royalty payments to its chosen administrator, so that the administrator may promptly make royalty payments when and where possible. [This confirms that Spotify will pay HFA the royalties that HFA is to pay to its publishers as the publisher’s agent OR that HFA as Spotify’s agent is to pay to non-HFA publishers on Spotify’s behalf. Spotify would continue to pay royalties to HFA knowing that HFA is not paying the publishers. In theory, this means that the money paid under licenses is not in the black box, and should be segregated so that HFA cannot co-mingle the funds for operations. So this is all just for the benefit of HFA in the end.]
Due Diligence: Except for the adjustments provided under this emergency authority, the due diligence requirements of section 115(d)(10) remain unaltered. [But even if the service locates the copyright owner for matching purposes to retain their MMA safe harbor, it will not change the tolling.]