Copyright Office Regulates @MLC_US: Selected Public Comments on MLC Transparency: @MusicReportsInc

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!

This comment from Music Reports gives some interesting insights into how The MLC is favoring the NMPA’s formerly wholly-owned Harry Fox Agency (HFA) which has been on the wrong side of most of the licensing debacles.  Chris posted some analysis on MediaNet’s comment and criticisms of the HFA-The MLC contract as well as its rather odd timeline as revealed at The Copyright Office roundtables on the next cluster jam, the unclaimed royalties.  At least that has the entertainment value of watching them steal in plain site with the Copyright Office drinking game of who will make the excuses for them this time like we don’t notice.  We’re not big MRI fans (or MediaNet fans for that matter), but when they’re right, they’re right.

The sad truth is that this entire MLC exercise has become about the rich getting richer from a data land grab for independent songwriters and publishers who have been duped into thinking it’s all for their benefit.  It was all so predictable, but nobody listened.  This is what they wanted, and now they’ve got it.  How about a rule that says if you had your fingerprints on any part of the debacle of the last 20 years, you are immediately disqualified?  Bye bye HFA, NMPA, MRI, MediaNet.  Unfortunately that is not and never will be the rule because these are the same people who make the rules and are the same people who gave songwriters frozen mechanicals from 1909-1978 and are still freezing the 9.1¢ statutory royalty for fourteen years.

MRI could have done with some editing, but stick with it, they make a lot of sense.]

Read Music Reports entire comment here.

Music Reports generally agrees with, endorses, and echoes the views of MediaNet as stated in the response to the NOI it filed today. 

Music Reports also takes note of the MLC’s selection of HFA as a major provider of the capabilities required for its core operations. While the MLC is narrowly limited by the MMA to the principal purpose of administering the blanket license for Section 115-compliant audio-only streaming music services in the United States, and specifically prohibited from storing data about or administering public performance licenses, HFA/SESAC is not so constrained. 

On the contrary, HFA/SESAC is free, as a non-regulated, for profit commercial music rights administration service, to administer any type of mechanical licenses. Moreover, SESAC, administers performance rights on a for-profit basis in competition with other PROs. Being hired by the MLC does not change the fact that HFA/SESAC is in competition with other commercial music rights administration services that are not the beneficiaries of a long term, highly-paid contract with the MLC. This is fair enough, so far is it goes. 

But as noted above, the boundaries between HFA/SESAC’s database and that which the MLC must build and make publicly available are completely unknown [want to bet that’s because they don’t exist?], as is the timeframe during which the former will substitute for the latter, and whether a proprietary MLC database built independently of HFA’s data will ever be the basis on which the MLC renders royalty distributions.

What is known, however, is that the MLC will enjoy publicity generated by its own statutory mandates (subsidized by the DLC), by the DLC itself, and by the Office, all of whom are authorized and required to devote budgetary allocations to direct publishers’ attention to registering their rights data with the MLC (the database of which is, for the foreseeable future, that of HFA/SESAC). Notwithstanding that the primary purpose of these provisions may be to publicize the existence of the database and of available unclaimed royalties, the consequence will be the direction of resources toward the focus of copyright owners’ attention on just one of several important, pre-existing music rights registries. This is in effect a set of reinforcing government subsidies of which one private enterprise, in competition with other marketplace actors, is the beneficiary. 

To the extent HFA/SESAC directly benefits unfairly from a privileged place in the data ecosystem by virtue of this arrangement, the goal of the MMA to create a healthier music rights administration ecosystem will be perversely harmed by the creation of an uneven playing field that penalizes the investments in data made by other services. To be sure, other commercial services are free to compete with HFA to offer services to the MLC and others in the marketplace. But over time, a privileged place in the market’s information flow may distort competition to the determent of copyright owners and their administrators, DMPs, and the public. 

Luckily, the Office can prevent this result quite simply by requiring that the MLC provide access to its public database on a competition-neutral basis. 

As was noted above, there is an important temporal aspect to the management of music rights data. In order for two administrators to efficiently interoperate, they must be able to have a more or less shared contemporary view of the data about the works they are administering, even if they don’t always agree on every detail. 

Therefore, the specific prescription called for here is a combination of the points made in the previous sections above: (a) the Office should use its authority under the MMA to adopt such regulations as it deems necessary to clarify that the public database which the MLC must establish and maintain will be identical to or at least contain the same data as the database on which the MLC will distribute royalties; (b) the MLC should make its public database available contemporaneously with the commencement of its royalty distribution efforts; and (c) the MLC must offer eligible parties bulk, machine-readable access to such data “on a basis that is both comprehensive and as frequent as necessary to efficiently manage the licensing and royalty distribution activities of the mechanical licensing collective itself, and not less than daily access to changed information within a day of any change to such information.” 

Why So Secretive? Copyright Office’s Public Consultation on Setting Rules for MLC’s Operation: Future of Music Coalition

From the editors at The Trichordist

[The Copyright Office is bravely trying to regulate The MLC to keep the MMA from becoming a feeding frenzy for the data lords.  As Chris Castle said in his comment on what should be stamped “Confidential” and kept away from songwriters: “The premise of confidential information under Title I is that there is in rock and roll certain information deserving of government-mandated secrecy.”  Or as Otis said, too hot to handle.  Keep that in mind–when they say “confidential information” they mean information they can keep away from you.

We are going to excerpt some of the good comments that support independents in the other Copyright Office “rulemaking” consultation that just closed devoted to confidential treatment of data by The MLC and the DLC.  You can read them all here.]

The Future of Music Coalition made some great points in their filing, read the whole thing here.

Restrictions on use by MLC and DLC Vendors and Consultants FMC shares concerns expressed by other commenters about the possibility of vendors using confidential data for competitive advantage or purposes beyond what the MLC was created to do. There should be no provision for HFA to use confidential data for “general use”, even on an opt-in basis. The risk of anti-competitive harm is too great.

Copyright Office Regulates the MLC: Selected Public Comments on MLC Transparency: @zoecello

[Editor Charlie sez: The U.S. Copyright Office is proposing many different ways to regulate The MLC, which is the government approved mechanical licensing collective under MMA authorized to collect and pay out “all streaming mechanicals for every song ever written or that ever may be written by any songwriter in the world that is exploited in the United States under the blanket license.”  The Copyright Office is submitting these regulations to the public to comment on.  The way it works is that the Copyright Office publishes a notice on the copyright.gov website that describes the rule they propose making and then they ask for public comments on that proposed rule.  They then redraft that proposed rule into a final rule and tell you if they took your comments into account. They do read them all!

The Copyright Office has a boatload of new rules to make in order to regulate The MLC.  (That’s not a typo by the way, the MLC styles itself as The MLC.)  The comments are starting to be posted by the Copyright Office on the Regulations.gov website.  “Comments” in this world are just your suggestions to the Copyright Office about how to make the rule better.  We’re going to post a selection of the more interesting comments.

There is still an opportunity to comment on how the Copyright Office is to regulate The MLC’s handling of the “black box” or the “unclaimed” revenue.  You can read about it here and also the description of the Copyright Office Unclaimed Royalties Study here.  It’s a great thing that the Copyright Office is doing about the black box, but they need your participation!]

Comment by Zoë Keating:

Some version of the usage data that the DSPs report to the MLC should be easily accessible to the public so that songwriters do not need to hire a legal team in order to independently verify if their statements from the MLC are correct. Major publishers can and will continue to get usage reports directly from music services. Self-published songwriters must rely on the MLC to collect and administer royalties on their behalf. Given that the major publishers of the NMPA are directing the design of the MLC, transparency of the reported data from DSPs will help eliminate any conflicts of interest.

Related to this, given the past occurrence of and future likelihood of metadata reporting errors*, usage data for compositions that are unmatched to any owner should be publicly searchable. Songwriters and other entities should be able to search for likely misspellings and errors, thereby offering crowd-sourced assistance to the persistent problem of unmatched royalties. (*Anecdotally I have heard of metadata errors preventing the collection of mechanicals and it happened to me. The mechanical royalties for my songs went unclaimed for 10 years until 2019 until I was able to raise an employee of HFA via twitter who then “found” $5000 that had been unmatched due to an unspecified metadata error.)

 

@CopyrightOffice Suspends Statutory Royalty Payments and Creates a @HarryFoxAgency “No Pay” List

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.

NOT.

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.

Right.

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).

For more information on COVID-19 generally, please visit: coronavirus.govCDC.gov/coronavirus, and USA.gov/coronavirus.

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.

  • General Conditions:

    • 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.]

Where’s the Money? What’s My Name? @CopyrightOffice Unclaimed Royalties Symposium Update from @SGAWrites

[Editor Charlie sez:  Here’s an update from Songwriters Guild of America counsel Charles Sanders on last week’s Copyright Office Unclaimed Royalties Symposium in Washington, DC.  The Copyright Office is supposed to post a video of the event at some point.]

WASHINGTON, DC: I had the opportunity yesterday to attend and participate in, on behalf of the Songwriters Guild of America (SGA), the US Copyright Office “Kickoff” symposium on the eventual disposition of unmatched mechanical royalties that will soon be turned over to the Mechanical Licensing Collective under the new Music Modernization Act.

It was a good start to a healthy music community discussion, provided that next time around we delve into the more difficult issues that have been pointed out by the US and global music creator community, as voiced yesterday by SGA. These include the fact that the creator community –despite dozens of requests over the past several years by SGA (and other attendees such as indie publisher Monica Corton and MLC Chair Alissa Coleman)– still does not know how much money in unmatched royalties is actually being held by the digital delivery services. The amount is suspected to be in the hundreds of millions. SGA was the only participant to raise this issue yesterday, and received no response.

SGA also noted for the record from the podium that the data points identified in the legislation for mandatory inclusion in the Musical Works Database still do not include the NAMES OF COMPOSERS AND SONGWRITERS, a serious omission (to say the least) that SGA has respectfully asked the US Copyright Office to address as soon as possible. It was further noted that SGA President and hit songwriter Rick Carnes, and the SGA board of directors, support strong Copyright Office oversight regarding the activities of the MLC, especially concerning identification of unmatched royalties, an issue fraught with potential conflicts of interest within the MLC board.

Society of Composers and Lyricist (SCL) president and composer/arranger /condutor Ashley Irwin, and Songwriter/Recording Artist Michelle Shocked, joined SGA in making very powerful points concerning the need to ensure the voice of the individual, independent music creator is heard on all MLC issues. They also noted for the record that the abrupt decision of independent Songwriter/Artist/Activist David Lowery to leave his position as an MLC committee member was not addressed at the meeting, nor was the process by which he will be replaced a topic of discussion. “The independent music creator community wants and should have a voice in that process,” said Irwin. “Creators have suffered grievous harm at the hands of the digital distributors,” added Shocked, “and we deserve to be heard.” She received an ovation following those very pertinent remarks at the very end of the program.

STAY TUNED.