A friend that has long been involved in the technology startup world refers to any and all cryptocurrencies as “LaunderCoin.” The point being that some significant portion of cryptocurrency activity is simply money laundering. So it was no surprise when I saw the headline above come across my newsfeed. Yawn.
A few paragraphs in though I nearly spit out my coffee. This isn’t any old cryptocurrency expert this is the Ethereum Foundation’s “research scientist” Virgil Griffith. Griffith is a well-known internet radical. The NY Times called once called him a “cult hacker.” “Internet zealot” might be a better description.
From the press release accompanying the complaint:
“As alleged, Virgil Griffith provided highly technical information to North Korea, knowing that this information could be used to help North Korea launder money and evade sanctions. In allegedly doing so, Griffith jeopardized the sanctions that both Congress and the president have enacted to place maximum pressure on North Korea’s dangerous regime.”
Assistant Attorney General John Demers said: “Despite receiving warnings not to go, Griffith allegedly traveled to one of the United States’ foremost adversaries, North Korea, where he taught his audience how to use blockchain technology to evade sanctions. By this complaint, we begin the process of seeking justice for such conduct.
So what does this have to do with the new Music Licensing Collective? Well one of the two digital vendors announced by the MLC is ConsenSys. ConsenSys is headed by Joseph Lublin who is the co-founder of Ethereum and COO of Ethereum Foundation.
[Editor Charlie sez: This week in MMA drama….just in time for turkey.]
The newly-minted — and funded — Mechanical Licensing Collective has just awarded a plum contract to the Harry Fox Agency, owned by private equity firm the Blackstone Group. Critics are quickly pointing to a ‘no-bid contract’ based on political horse-trading, with HFA assailed for serious licensing problems in the past.
For context, the DMN reference to “crooked” may refer to an apparent “snag” to passage of the Music Modernization Act reported on July 23, 2018 by Shirley Halperin at Variety (our emphasis):
[O]n July 17, private equity firm Blackstone, which purchased performance rights organization SESAC in January 2017, submitted a proposal that MMA proponents say would “doom” the legislation by “upsetting the fundamental structure of the bill to benefit its private company at the expense of the entire music industry.”
At the heart of the issue for Blackstone is the nearly 100-year-old Harry Fox Agency (HFA), the rights management and collection entity which was bought by SESAC in 2015 for a reported $20 million. The HFA has acted as a hub for administrating and distributing mechanical license fees on behalf of music publishers. The MMA in establishing its proposed Mechanical Licensing Collective (MLC), to be overseen by a Board of publishers which includes four self-published songwriters, allows the HFA to compete as a vendor in an open market but it could also devalue SESAC’s investment.
Says attorney Dina LaPolt, a key figure in drafting and shepherding the MMA through the halls of Congress: “We worked very hard to get songwriters on the governing board of the Music Licensing Collective so they can be involved in the oversight of properly matching the mechanical royalty income. We cannot have a competing entity. We are in this problem because of HFA’s inability to effectively license. HFA should just shut their doors, fire everyone, and sell off all their furniture.”
Variety also reported a few weeks later that the “roadblock” was quickly resolved apparently by eliminating the complained of competition.
The picture above shows dozens of backdated “NOIs” for compulsory mechanical licenses sent to me by HFA in 2016. By purporting to be valid NOIs for licenses when they were not, HFA committed mail fraud.
Music Row is reporting the music licensing collective board of directors has selected HFA as a digital service provider:
Technology company ConsenSys and mechanical licensing administrator Harry Fox Agency(HFA) received unanimous approval from the MLC Board to become the primary vendors responsible for managing the matching of digital uses to musical works, distributing mechanical royalties, and onboarding songwriters, composers, lyricists, and music publishers and their catalogs to the database.
The problem is that HFA was the 3rd party licensing contractor hired by Spotify and other streaming services to obtain licenses from songwriters and publishers. HFA did not properly do their job leaving streaming services exposed to massive copyright infringement lawsuits (from people like me). They created the problem that led to the creation of the Music Licensing Collective so now they are rewarded with the contract to run the matching of musical works and paying artists?!?!
There’s a case shaping up in the U.S. Supreme Court that I haven’t paid too much attention to–but suddenly realized it’s something we should all care about because it could set precedent for fair use cases for decades to come: Google v. Oracle.
[ARW readers will remember the Oracle case because Judge William Alsop required the parties (provoked by Google shills) to file with the Court a list of the then-current “advocacy” groups Google paid that were also engaged in commentary about the case to affect public opinion. We styled this filing the “Google Shill List” and it has been a useful resource that includes many of the same amici in the current SCOTUS appeal such as EFF, Jonathan Band, Public Knowledge, Engine Advocacy, CCIA, and so on to include the cozy and dedicated group of likeminded people.]
On the surface, the case is about the Java software code and certain Java libraries developed by Sun Microsystems, later acquired by Oracle. But digging a little deeper it is also about Google’s obsession with “permissionless innovation”, Newspeak for “theft.” And when I say “Google”, I don’t really mean Google as a company. I mean the insiders. This because of Google’s governance and dual class structure that gives Larry Page, Sergei Brin and Eric Schmidt control over the company and the ability to waste the shareholders money settling claims for their bad behavior and terrible management (such as $500 million for violating the Controlled Substances Act and billions in fines for competition law violations around the world)–and now this Oracle case.
So we will refer to “Google” but really we’re talking about the Google ruling class with 10:1 voting power: Larry, Sergei and Eric.
How did Google get sued by Oracle and not Sun? According to Google’s SCOTUS brief (at 3):
Sun originally applauded Google for using the Java language. But after Oracle acquired Sun, it sued Google for copyright infringement.
Let’s not just blow past that statement. That one sounds like Google would like to cut back the ability of a copyright owner to decide when and where to enforce their rights, including a subsequent purchaser of copyrights. Because Sun, you see, were behaving like right thinking boys and girls, and then the evil ones came along to challenge Google the Sun God…or something like that. Or said another way, 2+2=5. And don’t you forget it.
You can see that Google would like to push that angle.
If, for example, a music publisher lacking the means to sue Google for infringing their catalog was later acquired by someone with the means to do. That buyer then sues Google for those pre-acquisition infringements. A ruling for Google in the current SCOTUS appeal could easily send a message that protects Google’s massive infringement through search, YouTube and God knows what else.
But at the heart of the Google infringement of Oracle’s copyrights is the “verbatim” copying of certain Java code into the Java-based Android systems. As the amicus brief by the United States tells us, one of the questions presented to SCOTUS is:
Whether the court of appeals correctly held that no reasonable jury could find that petitioner’s verbatim copying of respondent’s original computer code into a competing commercial product was fair use….
[Google] created much of the Android library from scratch. For 37 of the 168 packages included in the Android library, however, [Google] copied the Java declaring code verbatim, while writing its own implementing code.
As we have joked for years, Google thinks a fair use is when a YouTube user makes a verbatim copy of a television program or concert and posts it on YouTube in a different file format–you know, transformative. Which is, of course, fair use. Or was it a parody, I forget.
The brief by the United States disagrees, and so do I.
So let’s be clear: This case is about Google getting away with verbatim copying that they then commercially exploit as only Google can. And then scream fair use.
You have to wonder why SCOTUS took this case. I suspect it has something to do with this absurd “transformative use” theme we have seen Google use again and again and again.
[Editor Charlie sez: We were going to give you some quotes from this filing at the Copyright Office by the newly formed Music Artists Coalition but it was all so important we couldn’t decide what to leave out! We bolded some of the parts we thought were important.]
Before the Library of Congress
United States Copyright Office
101 Independence Ave. S.E.
Washington, D.C. 20559-6000
Music Modernization Act Implementing Regulations for the Blanket License for Digital Uses and Mechanical Licensing
37 CFR Part 210
Docket No. 2019–5
Notice of Inquiry, September 24, 2019
Comments of Music Artists Coalition
Beginning in the summer of 2019, a group of music creators and talent representatives have joined forces to form the Music Artists Coalition (MAC). MAC’s mission is to be a voice for music artists on legal and policy issues that impact them. While technology has significantly expanded the way we experience music, the rewards still need to be shared fairly with those who create it. With the music business at an inflection point, decisions are being made now that will impact music creators’ intellectual property rights and livelihoods for decades to come.
MAC has a strong board of directors and robust membership, ranging from iconic musicians and songwriters, to those just getting their start. MAC members include Diplo, the Doobie Brothers, Don Henley, Def Leppard, Lizzo, Dave Matthews, John Mayer, Shane McAnally, Maren Morris, Anderson .Paak, Linda Perry, Spoon, Bernie Taupin, Meghan Trainor, and Verdine White. MAC has already engaged on issues important to music artists including working with industry groups on an exemption to the recently passed California Assembly Bill 5 and advocating on behalf of songwriters in the Department of Justice’s review of ASCAP and BMI’s consent decrees.
As the Copyright Office works to fully implement the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (P.L. 115-264), MAC is interested in ensuring that there is increased transparency in the establishment of the Mechanical Licensing Collective (MLC) and that the MLC, once fully operational in 2021, will treat small, independent publishers and songwriters as equals to large publishers.
Mechanical Licensing Collective
In accordance with Title I of the MMA, the Register designated the Mechanical Licensing Collective, Inc. (MLCI) as the mechanical licensing collective and Digital Licensee Coordinator, Inc. as the digital licensee coordinator. While MAC acknowledges that these groups, supported by the National Music Publishers’ Association (NMPA), the Nashville Songwriters Association International (NSAI), and the Songwriters of North America (SONA), most nearly fit the criteria laid out in MMA, namely the that designee be “endorsed by, and enjoy substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years,” many creators have expressed concern regarding the specifics of the selection process and would like to see increased transparency.
Additionally, MAC has concerns regarding the selection and makeup of the MLC board of directors and members of the task-specific committees (the Unclaimed Royalties Oversight, Dispute Resolution, and Operations Advisory Committees).
As of yet, the MLC has not published:
1.) Term lengths for each member of the board of directors
2.) The process for electing a member to the board of directors
3.) The process for filling a seat on the board of directors that is vacated before the end of a term
The ongoing makeup of the Unclaimed Royalties Oversight Committee is of particular concern to MAC members. MAC is content with the initial committee proposed by MLCI as “each publisher representative on the… committee is affiliated with an independent music publisher,” providing some assurance that the committee will concern itself with not only the rights of major publishers, but also smaller actors in the space. However, there is little guarantee of such a committee makeup once the terms of the current committee end at some point in the future.
Additionally, there is a question of parity between the ten voting board members appointed as representatives of music publishers and the four board seats allocated to professional songwriters who have retained and exercise exclusive rights of reproduction and distribution for musical works they have authored. These seats reserved for songwriters should be able to be filled by artist representatives as well as the artists themselves. After all, the seats filled by the music publishers are not exclusively filled by the chief executives of those entities or their top officers.
Finally, once fully operational, the new blanket compulsory licensing system for digital music providers should provide other music application program interfaces (APIs) with access to the public database. Allowing these third-party APIs access and ensuring it is easily interoperable with other systems is the best way to make certain the MLC database becomes part of the overall music licensing ecosystem.
In the winning MLCI proposal, the designee had “not yet determined the precise management structure for daily operations or full staffing.” Offered instead is an outline, which “may be materially different, with both additions and removals of roles,” once the MLC becomes fully operational. Nor has the designee determined the compensation for the initially proposed fifty-five employees of the MLC, presumably based in Nashville, although the proposal does estimate that yearly executive compensation will be in the range of $3,330,000 to $3,500,000, aggregate. Beyond these topline numbers, no additional detail is given.
As implementation and startup of MLC continues, MAC would encourage both the Copyright Office and the MLCI to remain committed to maintaining a transparent process in which all stakeholders have access to relevant information.
The need for a fully transparent process is also deeply important in the RFI/RFP process to select a vendor. Pursuant to Section 115(d)(3)(E)(vi) of the MMA, this vendor will be tasked with building and maintaining “end-to-end databases and systems for ownership identification, matching and claiming, and royalty collection and distribution.”
As this process moves to the RFP stage and proposals are received by the seven entities who cleared the RFI stage, MAC hopes that these responses will be published publicly, either in full or lightly redacted to preserve confidential business information.
/s Jack Quinn
Music Artists Coalition
ARW readers will remember the horrific Transparency in Music Licensing and Ownership Act from the last Congress. (See “The Transparency in Music Licensing and Ownership Act: The Domesday Book Meets A Unicorn“.) Well, guess what–it’s not really dead!
The MIC Coalition cartel filed a comment with the Copyright Office that makes one thing clear–this rule making is going to be a scorched earth donnybrook of epic proportions. The big reveal in the MIC Coaltion’s filing is based on this passage in the legislative history for the Music Modernization Act:
Testimony provided by Jim Griffin at the June 10, 2014 Committee hearing highlighted the need for more robust metadata to accompany the payment and distribution of music royalties. With millions of songs now available to subscribers worldwide, technology also has a role to play through digital fingerprinting of a sound recording. However, there is no reliable, public database to link sound recordings with their underlying musical works. Unmatched works routinely occur as a result of different spellings of artist names and song titles….Music metadata has more often been seen as a competitive advantage for the party that controls the database, rather than as a resource for building an industry on.
The entire concept of maintaining a static look up database of not only all songs in the history of recorded music, but also all sound recordings in the history of recorded music that can be queried in real time is really not that different than the Domesday Book–when William the Conquerer made a big list of all property, people and chickens in England in the “Great Survey” in 1086. Like the Domesday Book, the “musical works database” will be full of mistakes due to the dynamic nature of the things it is purporting to count.
But the reveal is the heaping praise on the horrific Transparency in Music Licensing and Ownership Act which was designed to destroy the PRO system (just like the MIC Coalition):
In response to the Copyright Office recommendations, Representative Jim Sensenbrenner introduced the Transparency in Music Licensing and Ownership Act, H.R. 3350, in July of 2017, which was cosponsored by several members of the House Judiciary Committee. The bill would provide for a database, housed at and overseen by the U.S. Copyright Office, to aid businesses and establishments that publicly perform musical works and sound recordings in identifying and compensating the holders of rights in those works.
Fasten your seatbelts, it’s going to be a bumpy night.