3
Modifying the
Noninteractive Webcast
Royalty System
8
9
BOOK REVIEW:
The Little Book
of Golf Law
Licensing for
On-Demand
Digital Media
14
Permissible Changes
under Section 115
Licenses
A Publication of
the ABA Forum on
the Entertainment
and Sports Industries
Volume 31, Number 2
Summer 2014
Lyrical
Restraint
Lyrics Sites
and Copyright
Infringement
BY SAM GUTHRIE
I
o-One but You (Only the Good Die Young),2 is a tribute to Freddie Mercury’s life
and talent, and a melody too often sung in the music industry—an industry
that is no stranger to early and tragic loss. Death also has a paradoxical relationship with the music industry, though, because death can beget great success. For
instance, Michael Jackson,3 Janis Joplin,4 Jimi Hendrix,5 and many others have reached
new heights after their untimely demise.
Death has a paradoxical relationship with consumers, too. Record collections
are common staples of estates. Record collections are also time capsules—they offer
glimpses of the tastes, interests, and experiences of their owners.6 They can have
n October 2012, a federal district
court ordered the owners and operators of www.lyricsdownload.com
and other websites that publish unlicensed song lyrics to pay $6.6 million in
damages to Peermusic and other music
publishers for willful copyright violations.1 In a nearly identical case, the
owners of www.lyricwiki.org agreed to
pay Peermusic $150,000 in damages to
settle copyright infringement claims
for hundreds of thousands of songs.2
Most recently, in November 2013, the
National Music Publishers Association
(NMPA) sent take-down notices to 50
lyrics sites, demanding that the owners either obtain licenses or remove the
infringing lyrics from their sites.3 The
landmark cases filed by Peermusic bolster
the NMPA’s warning salvo with a volley
of legal precedent. That is to say, lyrics
site owners who do not obtain licenses
for the song lyrics they publish may find
themselves embattled against the NMPA
in courts unsympathetic to their cause.
The battle over publication rights to
continued on page 20
continued on page 25
The Day the Music Died
Digital Inheritance and the Music Industry
By Matthew c. Borden
“I can still remember how that music used to make me smile.”1
N
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Message from the Chair
Dear Colleagues:
Entertainment and Sports Lawyer (ISSN: 0732-1880)
is published quarterly by the Forum on the Entertainment
and Sports Industries of the American Bar Association,
321 N. Clark Street, Chicago, Illinois 60654-7598. Address
corrections should be sent to the American Bar Association,
c/o Central Records Department.
For permission to reproduce or republish any
material from Entertainment and Sports Lawyer, visit
www.americanbar.org/utility/reprint.html.
The opinions expressed in the articles are those of
the authors and should not be construed to represent the
policies of the American Bar Association, the Forum
on the Entertainment and Sports Industries, or the
employers of the authors.
Subscriptions: For institutions such as libraries or
for individuals not eligible for membership in the Forum,
subscriptions are available for $60 in the United States ($75
foreign). Single copies may be obtained for $15 each. To order,
please call 800/285-2221.
Copyright © 2014 American Bar Association. Produced
by ABA Publishing. Nameplate by Jay Vigon.
Editor-in-Chief
Stephen Weizenecker
Barnes & Thornburg LLP
Prominence in Buckhead
Suite 1700
3475 Piedmont Rd., N.E.
Atlanta, GA 30305
Tel: 404/846-1693
[email protected]
Editorial Board
Alexandra Darraby, [email protected]
Richard Greenstone, [email protected]
Maidie Oliveau, [email protected]
Robert G. Pimm, [email protected]
Miriam Stern, [email protected]
Vered N. Yakovee, [email protected]
Student Editors
Lyndsay Kinstler, [email protected]
Kristian Smith, [email protected]
Greg McMillan, [email protected]
Forum Chair
Richard Idell
Idell and Seitel, LLP
Suite 300
465 California St.
San Francisco, CA 94104
Tel: 415.986.2400
[email protected]
Managing Editor
Erin Remotigue
Designer
Amanda Fry
Web sites
Forum:
www.americanbar.org/groups/entertainment_sports.html
E&SL:
www.americanbar.org/publications/entertainment_
sports_lawyer_home.html
Forum Manager
Teresa Ucok, 312/988-5658
Welcome to this edition of Entertainment and Sports Lawyer. As I begin the second year of my two-year term as Chair of the American Bar Association Forum on the
Entertainment and Sports Industries, I am looking forward to our action packed fall
2015 programs.
First upcoming is the Nashville Program in conjunction with the Americana Music
Conference (September 17, 18, and 19). Over the last several years, the Forum has
been building relationships with and among entertainment lawyers in the Nashville
region. The Americana Music Conference is a premier music conference, and the
Forum now provides a continuing legal education segment to the overall conference.
Come on down and enjoy the Nashville music scene with the Forum!
Then we have the Forum’s annual meeting in Los Angeles, October 9, 10, and 11. As
usual, the division leadership and planning committee have designed a program of topics
and mentoring workshops that provide high level discussion and discourse on hot topics in entertainment and sports, as well as seminars on basic principles and mentoring for
younger lawyers or lawyers new to these industries. The annual meeting is another opportunity to present excellent speakers to the membership on cutting-edge issues—you will
not be disappointed. We have a number of plenaries on topics that run across all platforms including: “What is Television Anyway?”; “Litigation Updates”; and “The Internet
of Things.” In addition, panels will explore issues such as morals clauses in celebrity
endorsement agreements; copyright legislation and global copyright issues; windowing
of content in the film and television industry; sex and violence in music and film; from
book to Broadway to big screen; what to do when your client calls; the evolving world of
college football; the intersection of video games, social media, and gambling; contractually obligated income agreements in the sports industry; issues in live touring; amateur
sports law update; and a panel on digital rights entitled “Repairing the Broken System of
Music Licensing”; as well as resources for litigators, including mediation/alternative dispute resolution and a litigation update. Further, ethics credits will be available. There
will also be speed mentoring and networking sessions for lawyers and law students to
meet. In addition to an excellent programming, you will have an opportunity to network
with other practitioners in the entertainment and sports industries from around the U.S.
and abroad at various receptions, breakfasts, and the annual luncheon and business meeting. Our planning committee has put together an exciting list of activities for attendees.
Then in November, we will inaugurate the Forum’s new affiliation with the Annual
North American Entertainment, Sports, and Intellectual Property Law Conference on
November 13-16 in Costa Rica.
In addition to these robust live programs, the Forum produces one or more entertainment or sports law webinars per month on cutting edge topics. And if that were
not enough, we offer two great publishing opportunities to our membership, Entertainment & Sports Lawyer , which is always reviewing member articles for publication, and
our robust book publishing program for those of you who are interested in publishing a
book on an entertainment or sports topic.
It is my honor and privilege to lead this group and have the opportunity to work
with so many outstanding lawyers around the country and the world. The Forum continues to broaden our membership base both in the U.S. and internationally. Please
join us for the Nashville program, the annual meeting, in Costa Rica, and/or one of
our other great live programs, webinars, or publishing opportunities. The experiences
at these events create a professional sharing of ideas and business and professional relationships that last a lifetime. Please take advantage of our great programming, and join
today as a member if you are not already part of the family.
I look forward to seeing you at upcoming events.
Richard J. Idell
Chair, Forum on the Entertainment and Sports Industries, 2013-2015
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
2
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
Last Call at the Oasis
Modifying the Noninteractive Webcast Royalty System to
Support Sustainability
By Mihajlo Babovic
I
have never paid for a song in my life. Internet users now
expect access to any song that comes to mind, when it comes
to mind—in some sense equivocating the concept of ownership to that of access. In 2013, one third of Americans used
online radio on a weekly basis, an 11 percent rise since 2011.1
Further, the average amount of time spent per week listening
to online radio has nearly doubled since 2008.2 Classified as a
noninteractive service under the Digital Millennium Copyright
Act, Internet radio has found itself in the middle of a music
industry conflict for profits.3 However, consumer trends indicate that Internet radio is here to stay, and a fair compromise
needs to be reached with sound recording copyright holders.
This article proposes a tiered system of royalty payments for
noninteractive digital music services that allows for both small
webcaster growth and an increase in artist royalty payments.
A History of Transmission Based Royalties
Copyright in Musical Compositions
The Copyright Clause of the Constitution grants Congress the
right to “promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”4 In
1897, Congress extended copyright protection to written musical compositions incentivizing authors to create such works for
the public benefit.5 The Copyright Act of 1909 granted authors
a number of exclusive rights in their musical works, including the right of public performance.6 It was not until 1971 that
Congress granted copyright protection to sound recordings of
musical compositions.7 Notably, the Copyright Act does not
include an exclusive right to the public performance of sound
recordings.8 Thus, while radio broadcasters have to pay performance royalties to songwriters as owners of musical composition
copyrights, these broadcasters have never had to pay royalties
for use of the actual sound recording.9
The Digital Audio Transmission Right
The first instances of Internet radio occurred when terrestrial
radio stations began to stream content online in 1994.10 Only
a year later, Congress passed the Digital Performance Right in
Sound Recordings Act (DPRSRA),11 granting copyright holders
the exclusive right “to perform the copyrighted work publicly by
means of a digital audio transmission.”12 The Senate Committee
on the Judiciary enacted these changes in order to protect those
who “depend upon revenues derived from traditional record
sales,” expressing a distinct concern with the development
of services that allow a listener to request and hear a specific
song at any time.13 This goal was achieved by the creation of
a three-tier system14 dividing streaming services based on the
determination that they are: (1) interactive,15 subscription
services, (2) noninteractive services, or (3) nonsubscription,
noninteractive transmissions.16 Depending on the classification a particular service receives, a different mechanism applies
for determining royalties.17 Under this framework, copyright
holders were given protection for the use of their work on interactive and digital subscription services but not when their work
was transmitted by terrestrial or Internet radio stations that
were non-interactive and available without a subscription.18
Recognizing the inadequacy of protection provided by the
DPRSRA, Congress further amended these licensing regulations with the passage of the Digital Millennium Copyright Act
(DMCA) in 1998.19 Further limiting royalty payment exceptions to only “nonsubscription broadcast transmission[s],”20
these changes meant that webcasts now had to pay performance
royalties21—including transmissions by terrestrial radio stations
via the Internet.22 Thus, while interactive services must negotiate royalty rates with the sound recording copyright holders,
noninteractive services simply owe a congressionally established
compulsory license provided that they adhere to a number of
requirements.23
An important determination to be made for an Internet
radio service, then, is whether or not it is “interactive”—
a central issue in Arista Records, LLC v. Launch Media, Inc.24
LAUNCHcast was an Internet radio website that allowed users
to create “stations” that play music within a particular genre
or similar to a particular artist or song that the user selects.25
It was alleged that that this use was “interactive” and thus an
infringement because Launch Media paid the statutory royalties
available to noninteractive services.26 In making its determination, the court focused on whether the webcast provided
users with such predictability or control that it “offered listeners the ability to select music in such a way that they would
forego purchasing records.”27 Ultimately, it was concluded that
LAUNCHcast was not an interactive service,28 meaning that it
and similar services were subject to statutory royalties instead of
having to negotiate royalties with copyright holders directly.29
Compulsory Licensing for Noninteractive Services
More recently, however, the primary conflict between webcasters and copyright holders has not been whether a compulsory
license applies, but rather what the congressionally prescribed
royalty rate should be.30 Both the DPRSRA and DMCA
included a voluntary negotiation period between copyright
holders and webcasters to determine the compulsory license,
and granted arbitration power to a Copyright Arbitration Royalty Panel (CARP) in the event that an agreement could not
be reached.31 After the parties were unable to settle on a statutory license the CARP released royalty rate determinations
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
3
requiring webcasters to pay royalties on a per-performance
basis.32 This royalty rate, however, was necessarily unsustainable
by smaller webcasters as it was based solely on the voluntary
transaction between Yahoo! and the RIAA.33 Realizing the dramatic affect such rates could have on their livelihood, small
webcasters appealed to Congress for help. Assistance came
in the form of the Small Webcaster Settlement Act of 2002,
allowing for additional negotiation time, and ultimately resulting in the short-term establishment of royalty rates based on the
webcasters’ gross revenue.34
This revenue based royalty payment system expired in 2005,
and as these negotiated terms came to an end, “the brawl began
anew.”35 Once again the Copyright Royalty Board (the CARP’s
successor) set per-performance royalty rates that threatened
the existence of webcasters both large and small.36 Congress, as
before, increased the negotiation time for webcasters and copyright owners by passing the Small Webcaster Settlement Act of
2008.37 A settlement was reached, establishing the royalty rates
that apply through 2015.38
The Internet Radio Fairness Act
Under the tripartite structure of the DMCA, it would seem
advantageous for an Internet radio provider to qualify for the
noninteractive compulsory license and thus avoid the high costs
of negotiating directly with sound recording copyright owners.39
However, even Pandora, one of the most successful Internet
radio services to date, has paid over 50 percent of its revenue to
royalties for the past three years.40 This seemingly unsustainable
business model led to the introduction of the Internet Radio
Fairness Act (IRFA) into the House of Representatives in September 2012. The IRFA aimed to change how noninteractive
services pay royalties, moving from the “willing buyer, willing
seller” model to a percentage of the company’s income.41 Opponents of the bill (comprised mostly of artists and labels) argued
that the royalty rates are already too low and that Pandora
is simply employing an ineffective business model.42 Unsurprisingly, no agreement was reached by the end of the 112th
Congress; in the words of the Recording Academy President
and CEO Neil Portnow, the “IRFA is officially defeated.”43
Free Market Royalty Act
Introduced to the House of Representatives last September, the
Free Market Royalty Act44 (FMRA) seeks to eliminate the distinction between digital and terrestrial transmissions of sound
recordings and remove the compulsory licensing system currently in place for royalties.45 The passage of this bill would end
the longstanding agreement between agreement between terrestrial radio and the record industry.46 Supporters of the bill
claim that the terrestrial radio exception to the sound recording royalty is unfair while broadcasters claim that many stations
could not pay the royalties, or would switch to a spoken-word
format in order to avoid the increased costs.47 Clear Channel,
a large terrestrial radio conglomerate, has made private agreements to pay a performance royalty payment with several record
labels.48 However, given the size of Clear Channel this willingness is likely not representative of terrestrial broadcasters
generally. While this method would certainly provide sound
recording copyright holders a short-term stream of income—as
82 percent of Americans listen to terrestrial radio weekly49—the
sustainability of such royalties seems questionable at best. This
act also assumes that webcasters will successfully negotiate with
the copyright owners, an assumption that has generally proven
untrue for the past decade. Given the history of limited compromise between the radio industry and sound recording copyright
owners, the conclusion that a fair settlement will take place
seems speculative at best.
Current Trends of Internet Radio
As is evident, the compulsory licensing rates currently in place
for noninteractive Internet radio services are not satisfactory for
any party involved. Further, the application of a per-play royalty
payment has received heavy criticism for being prohibitively
expensive.50 While revenue based models have been proposed as
a solution to this issue, such royalty payments allow small webcasters with little revenue to use a disproportionate amount of
intellectual property in regard to the compensation offered.51 A
compromise, then, must lie in the balancing of recording industry interests and Internet radio service interests.
The music industry’s resistance to lowering royalty rates for
Internet radio is somewhat surprising considering the effect
such services have on music piracy. According to the NPD
Group’s 2012 study, nearly half of the 40 percent of consumers
who had stopped pirating music in the last year cited free, legal
music streaming services as their reason for doing so.52 Looking to other markets, studies have linked Spotify (an interactive
streaming music service) to a 25 percent decrease in music
piracy since 2009.53 Similarly, in the film industry it has been
suggested that increasing Netflix (a television/movie streaming service) subscriptions corresponds with lowered film piracy
rates.54 While little data is available to show a direct link to the
emergence of free or inexpensive legal media and lowered piracy
rates, it seems abundantly clear that access to inexpensive alternatives has led to fewer incidents of online piracy.55
Apart from the subsidiary benefit of curbing music piracy,
music streaming is beginning to show itself as a viable long-term
income stream for the music industry.56 SoundExchange, the
nonprofit organization responsible for collecting and distributing digital performance royalties, has posted increased annual
payouts for the past decade, and shows no signs of slowing.57
Late in 2013, Apple and Google launched new clients for noninteractive music streaming, quickly followed by Beats, which
plans to release a similar service early next year.58 With so many
new services hopping on the streaming audio train, it is of little
surprise that one study predicts that digital content will comprise more than 80 percent of the growth in consumer spending
on entertainment and media in the next four years.59 With the
rapid shift from ownership to streaming, the music industry
needs to adapt to new methods of reaching consumers in order
to stay profitable.
A Solution to the Internet Radio Royalties Issue: The
Five-Tier Noninteractive Service Licensing Scheme
It remains unclear whether a per-performance royalty rate can
be set that will allow for sustainable noninteractive webcasting (particularly small webcasters) while appeasing copyright
holders. Dating back to the CARP rate setting, high royalty
payments were viewed as favorable based on the theory that
market consolidation would allow a few webcasters to operate at
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
4
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
sustainable levels.60 Particularly illustrative is the fact that Congress has had to allow for additional negotiation time following
each declaration of CARP/CRB royalty rates.61 Given that webcasting has managed to survive this rate setting process a number
of times, it seems logical that copyright law should build on the
per-performance royalty rate that has defined Internet radio.
The model that this essay proposes is a digital sound recording per-performance royalty rate for noninteractive services that
rises with listener hours for each particular webcast. A review of
the rate-setting negotiations and congressional acts surrounding
them that small webcasters face the most difficulty in coping with the established royalty rates.62 Along the same vein,
these same webcasters lack the bargaining power necessary to
negotiate fairly with sound recording copyright holders.63 An
alternative would be to offer these small webcasters a revenue
based model until they reach some threshold of listenership;
by requiring an eventual shift to the per-performance royalty
payout, the system can avoid the disparate property usage to
compensation ratio contemplated when avoiding such models.64
As a webcaster grows in size, it must adopt a per-performance
royalty system (if it did not opt into using such royalty payouts
when at smallest tier). Envisioned by this article is a five-tier
system consisting of small, medium-small, medium, mediumlarge, and large noninteractive webcasters. As a particular
webcaster gains (or loses) the listener hours to move from one
statutorily set tier to another, the per-performance royalty due
would change accordingly. Thus, both copyright holders and the
webcasters themselves are incentivized to increase listenership.
Copyright holders receive higher royalty payments as webcasters
develop audiences, while webcasters benefit from increased ad
revenue coming from more web traffic.65
For the system proposed here to be effective, the royalty
rates need to be carefully set to avoid crippling Internet radio
providers while compensating copyright holders fairly. While
per-performance royalty rates have yet to find this equilibrium,
it seems likely that this is a result of inexperience in this new
business enterprise.66 With nearly half of America being regular monthly listeners to Internet radio,67 there seems to be an
adequate sample size from which to establish preliminary royalty
rates by 2015.
Converting free listeners to subscribing members is also
instrumental to a healthy symbiosis between Internet radio and
the music industry. Another tiered system based on the percentage of total unique users is conceivable here. Under such a
scheme, a webcaster could incrementally increase its per-stream
royalty payments when 25 percent of its users are paying subscribers. In return for the increased royalty payments, copyright
holders (or SoundExchange) could be required to cover an
equal portion (25%) of the webcaster’s bandwidth costs which
increase with website traffic. Thus, as subscriber percentage rises
webcasters pay more in royalties but less operating expenses.
Such compensation would not only incentivize webcasters
to convert more free listeners to subscribers, but might also
encourage copyright holders to offer exclusive benefits to subscribers of a particular webcast.
Conclusion
A new age of music consumption has come, and the average listener has more songs at his disposal than ever thought
imaginable. As the speed of access increases and overall Internet radio usage multiplies, both labels artists will begin to
reap substantial benefits from their sound recording copyrights. By lowering royalty payments for small webcasters,
Internet radio can reach a larger and more diversified audience, creating huge opportunities for artists who might have
been overshadowed in a record industry dominated by physical album sales. A royalty payment model that incrementally
increases per-stream royalties will generate substantial
income—particularly as such services continue to grow in
popularity—securing the financial future of the modern
recording industry.
Endnotes
1. Edison Research, The Infinite Dial 2013 – Navigating Digital Platforms
(2013), available at http://www.edisonresearch.com/wp-content/uploads/2013/04/
Edison_Research_Arbitron_Infinite_Dial_2013.pdf. This research shows a relatively continuous increase in online radio listenership since 2007; it is worth
noting that this data considers both online streams of terrestrial radio and audio
content available only online.
2. Id.
3. Austin Carr, Pandora and Sound Exchange Spar Over Royalty Fees,
Fast Company, Jan. 10, 2012, http://www.fastcompany.com/1806776/
pandora-and-soundexchange-spar-over-royalty-fees.
4. U.S. CONST. art. I, §8, cl. 8.
5. See 17 U.S.C. §102(a)(2) (2013).
6. See id. §106(4).
7. See Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391
(1971) (establishing the right “[t]o reproduce and distribute to the public…
sound recording[s]”).
8. Id.
9. Kaitlin M. Pals, Facing the Music: Webcasting, Interactivity, and a Sensible
Statutory Royalty Scheme for Sound Recording Transmissions, 36 J. Corp. L. 677,
679 (2011).
10. Tyler Hardman, Webcasting and Interactivity: Problems and Solutions, 17
B.U. J. Sci. & Tech. L. 290, 303 (2011).
11. Digital Performance Right in Sound Recording Act of 1995, Pub. L. No.
104-39, 109 Stat. 336. (codified as amended in scattered sections of 17).
12. 17 U.S.C. §106(6) (2013); Digital Performance Right in Sound Recordings Act, §2.
13. S. Rep. No. 104-128, at 14 (1995).
14. Bonneville Intern. Corp. v. Peters, 153 F. Supp. 2d 763, 767 (E.D. Penn.
2001) (explaining that the categorization of digital transmissions was based “on
their likelihood to affect record sales”).
15. 17 U.S.C. §114(e)(1); Digital Performance Right in Sound Recordings
Act, §3. According to the DPRSRA, an “interactive” service is one that enables
a member of the public to receive, on request, a transmission of a particular
sound recording chosen by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the
public at large does not make a service interactive.
16. See H.R. Rep. No. 104-274, at 14 (1995). Services within this tier were
altogether exempt from the DPRSRA, and included radio broadcasts that were
available free of charge.
17. See Neil S. Tyler, Music Piracy and Diminishing Revenues: How Compulsory Licensing for Interactive Webcasters Can Lead the Recording Industry Back to
Prominence, 161 U. Pa. L. Rev. 2101, 2120 (2013). The first category requires
authorization from and payment to the copyright owner for each offered sound
recording. The second category subjects services to a compulsory license, and
the third category is exempted from paying sound recording copyright owner for
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
5
use of the sound recording.
18. Mary Ann Lane, “Interactive Services” and the Future of Internet Radio
Broadcasts, 62 Ala. L. Rev. 459, 464 (2011). “This arrangement reflected the
idea that traditional radio broadcasting promotes interest in individual music
artists and helps record sales, but failed to address the rapidly growing area of
Internet radio and webcasting.”
19. Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860
(1998) (codified in scattered sections of 17 U.S.C.).
20. 17 U.S.C. 114(d)(1)(A) (2013); Digital Millennium Copyright Act,
§405.
21. Emily D. Harwood, Staying Afloat in the Internet Stream: How to Keep
Web Radio from Drowning in Digital Copyright Royalties, 56 Fed. Comm. L.J.
673, 681 (2004) (“nonbroadcast transmissions previously exempted from the
DPRSRA were now subject to royalty requirements”).
22. See generally Bonneville, supra note 14, at 490.
23. See generally Martha F. Phelps, Complying with Requirements for a Statutory License in Sound Recordings Under the Digital Millennium Act of 1998, Boston
B.J., Mar.-Apr. 2001, at 6, 20-22. (outlining the various requirements listed in
17 U.S.C. §114(d)(2)).
24. Arista Records, LLC. v. Launch Media, Inc., 578 F.3d 148 (2d Cir.
2009).
25. Id. at 150.
26. Id.
27. Id. at 157.
28. Id. at 164.
29. Id. The court noted that the interactivity determination for internet
audio services is a fact intensive determination to be made on a case-by-case
basis.
30. See Tyler, supra note 17, at 2127. “[T]he establishment of the current
compulsory license for noninteractive webcasters may have been the longest
and most bitterly battled of all the compulsory licenses established under the
Copyright Act.”
31. Brian Day, The Super Brawl: The History and Future of the Sound Recording Performance Right, 16 Mich. Telecomm. & Tech. L. Rev. 179, 188 (2009).
32. Id.
33. See Tyler, supra note 17, at 2129. Smaller webcasters did not have the
same business structure, resources, or capabilities as Yahoo! and thus could not
pay the same royalty rates while turning a profit.
34. Notification of Agreement under the Small Webcaster Settlement Act
of 2002, 67 Fed. Reg. 78,510 78,511 (Dec. 24, 2002) (stating “the royalty rate
shall be 10 percent of the eligible small webcaster’s first $250,000 in gross revenues and 12 percent of any gross revenues in excess of $250,000 during the
applicable year, or 7 percent of the webcaster’s expenses during the applicable
year, whichever is greater”).
35. See Day, supra note 31, at 189.
36. Amy Duvall, Royalty Rate Setting for Webcasters: A Royal(ty) Mess, 15
Mich. Telecomm. & Tech. L. Rev. 267, 280 (2008).
37. The Webcaster Settlement Act of 2009, Pub. L. No. 111-36, 123 Stat.
1926 (codified as amended in scattered sections of 17 U.S.C.).
38. See Notification of Agreements under the Webcaster Settlement Act of
2009, 74 Fed. Reg. 34, 796 (July 17, 2009) (settlement between SoundExchange
and the commercial webcasters).
39. See Tyler, supra note 17, at 2122.
40. Jasmine A. Braxton, Lost in Translation: The Obstacles of Streaming Digital
Media and the Future of Transnational Licensing, 36 Hastings Comm. & Ent. L.J.
193, 200 (2014). Pandora paid out royalties of 60 percent, 50 percent, and 54
percent of its revenue in fiscal years 2010, 2011, and 2012 respectively.
41. Steve Knopper, Pandora Clashes With Musicians Over Song Payments,
Rolling Stone, Dec. 3, 2012, http://www.rollingstone.com/music/news/
pandora-clashes-with-musicians-over-song-payments-20121203 (noting that
satellite radio companies pay 7.5 percent of their revenue in royalties, and
cable-television music channels pay 15 percent).
42. Carr, supra note 3.
43. Glenn Peoples, Internet Radio Fairness Act Slips into Hibernation, Billboard, Jan. 3, 2013, http://www.billboard.com/biz/articles/news/1510514/
internet-radio-fairness-act-slips-into-hibernation.
44. Free Market Royalty Act, H.R. 3219, 113th Cong. (2013).
45. Chris Castle, Guest Post: Meet the Free Market Royalty Act, an Elegant Solution to Some Complex Issues, Billboard, Oct. 1, 2013, http://
www.billboard.com/biz/articles/news/legal-and-management/5740706/
guest-post-meet-the-free-market-royalty-act-an.
46. See Braxton, supra note 40, at 196. “The recording industry recognized
a mutual benefit in radio broadcasts; their music would receive free advertising
and lead consumers to purchase music, while radio broadcasters would gain a listening audience.”
47. Nate Rau, Congress to Consider Radio Royalties for Artists, The Leaf
Chronicle, Sept. 17, 2013, http://www.theleafchronicle.com/usatoday/
article/2829099.
48. Id.
49. See Edison Research, supra note 1.
50. Ira Hoffman, Pseudo-Interactivity: An Appropriate Rate Scheme for Customizable Internet Radio Services, 32 Cardozo L. Rev. 1515, 1522 (2011).
51. Duvall, supra note 36, at 273. A revenue based model would allow for
extensive use of intellectual property with little or no compensation is contrary
to Congress’s intention in enacting the DMCA.
52. Press Release, The NPD Group: Music File Sharing Declined Significantly
in 2012, NPD Group, Feb. 26, 2012, https://www.npd.com/wps/portal/npd/us/
news/press-releases/the-npd-group-music-file-sharing-declined-significantlyin-2012/ (noting that the increased use of legal and licensed streaming services
has proven to be an alternative to consumers who previously used music piracy
to obtain music).
53. Rebecca Guerrero, Internet Radio Decreases Amount of Illegal Music
Downloads, The Prospector, May 17, 2013, http://www.utepprospector.com/
news/internet-radio-decreases-amount-of-illegal-music-downloads-1.2957417#.
UseydmRDt43.
54. George Wong, Netflix is Doing Its Job to Reduce Piracy in North America,
Ubergizmo, May 17, 2011, http://www.ubergizmo.com/2011/05/netflix-reducepiracy-north-america/. It is worth noting that this data is correlative at best, as
tracking piracy rates with Netflix membership seems near impossible.
55. See Guerrero, supra note 53.
56. Ari Herstand, Streaming Will Soon Be More Profitable Than Sales,
Digital Music News, Dec. 30, 2013, http://www.digitalmusicnews.com/permalink/2013/12/30/streaming-more-profitable-than-sales. Sweden’s music market
has grown 13.8% in the past year as compared to a global 0.2% increase since
1999 – the shift is being attributed to the 91% figure of digital music sales coming from streaming in the country.
57. Glenn Peoples, SoundExchange Distributes Record $153 Million in Q3,
Celebrates 10-Year Anniversary, Billboard, Oct. 4, 2013, http://www.billboard.
com/biz/articles/news/5748060/soundexchange-distributes-record-153-millionin-q3-celebrates-10-year. The organization collected only $3 million in 2003,
compared to an estimated $500 million in 2013.
58. Joan E. Solsman, Will Streaming Music Services Ever Make Money? 2014
May Tell, Cnet, Dec. 30, 2013, http://news.cnet.com/8301-1023_3-5761582293/will-streaming-music-services-ever-make-money-2014-may-tell/.
59. Id. PricewaterhouseCoopers estimates that between 2013 and 2017, digital content will account for 40 percent of the music market and 87 percent of
the growth in consumer spending on entertainment and media.
60. Duvall, supra note 36. The CARP believed that there were too many
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
6
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
marginal webcasting entities and set a high royalty rate in hopes of decreasing
the variety of music available on the Internet and consolidating the market.
61. See Day, supra note 31, at 187-91 (outlining Webcaster I and Webcaster II).
62. Id.
63. Tyler, supra note 17, at 2125 (explaining that small webcasters suffer
when forced to negotiate with copyright holders, with the gap in bargaining
power making successful negotiation nearly impossible.).
64. See Duvall, supra note 36.
65. Ciara Byrne, Internet Advertising Worth a Record $7.3 Billion in Q1, 2011,
Venture Beat, May 26, 2011, http://venturebeat.com/2011/05/26/internetadvertising-worth-a-record-7-3-billion-in-q1-2011/. Recent developments in
tablet and mobile advertising have led to a startling increase in demand for and
revenue from digital advertising in the past year.
66. See Harwood, supra note 21, at 684-88 (original CARP rate based on a
single transaction, and further negotiations being based on the negotiated settlement of only a few parties).
67. Edison Research, supra note 1 (estimating that 45% of American’s listen
to Internet radio on a monthly basis, up from 27% in 2010).
Mihajlo Babovic is a law student at William Mitchell College of Law
expected to graduate in the spring of 2015. Currently employed as a business
and digitization consultant for Minneapolis artist Brant Kingman, Babovic’s
primary area of interest lies in accommodating media and IP laws to address
the increasing prevalence of Internet usage. He can be reached via email at
[email protected].
Letter from the Editor
I
t is summer time. I hope that everybody is enjoying the
remaining days of their vacations (if any) and the start of
school. The Forum leadership has been working hard on the
programs for the remainder of the year including the CLE Symposium in Nashville, Tennessee September 18 and 19 and the
Annual Meeting in Marina Del Ray at the Ritz Carlton October 9th through the 11th.
I am happy to announce that we are continuing our relationship with the Recording Academy and its Entertainment
Law Initiative (ELI). The ELI’s express purpose is to preserve
and encourage debate and discussion of the issues affecting the
music industry. The ELI includes an annual breakfast meeting
in New York, a national writing competition, and an annual
luncheon in Los Angeles during Grammy week. As part of the
national writing competition, ELI solicits articles from law students aspiring to be entertainment lawyers. The top five writers
get the chance to attend the ELI luncheon during Grammy
week, and the winner receives a scholarship. This year’s winner is Matt Borden with his article "The Day the Music Died:
Digital Inheritance and the Music Industry." We congratulate
Mr. Borden. We have also published the four runner up articles:
"Last Call at the Oasis: Modifying the Noninteractive Webcast
Royalty System to Support Sustainability"; "Lyrical Restraint:
Lyrics Sites And Copyright Infringement"; "Richard Cheese,
Seu Jorge, and the Scope of Permissible Changes under Section
115 Licenses"; and "Create A Compulsory License Scheme For
On-Demand Digital Media Platforms." We encourage all members of the Forum to attend and support ELI. More information
can be found at www.grammy.org.
We have a great book review by Stanley Root, Jr. (father of
ABA Forum Executive Committee Member, Henry Root) on
The Little Book of Golf Law, authored by John Minan (and published by the ABA). Sports and entertainment lawyers will love
this book on the noble game of golf.
We also have a humorous article from Shelly Rosenfeld, "Fifty Ways to Be a Lawyer." I am sure everyone will
be humming the original music as they read this article.
Shelly has previously published a serious article for Entertainment and Sports Lawyer, and we thank her for her continuing
submissions.
As always, we are looking for submissions from members of
the Forum. We are also looking for law students to write interviews and to serve on the student editorial board. Please email
me if you want to be a part of Entertainment and Sports Lawyer. I
hope to see you at a Forum event.
Sincerely,
Stephen Weizenecker
Barnes & Thornburg LLP
[email protected]
Editor-in-chief, Entertainment and Sports Lawyer
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
7
BOOK REVIEW
The Little Book of Golf Law,
Second Edition
Reviewed By Stanley W. Root, Jr.
The Little Book of Golf Law (Second Edition)
by John Minan
American Bar Association Book Publishing
2014 • 416 pgs • Paperback
A
s a long time medium handicap golfer, I found John
Minan’s The Little Book of Golf Law fascinating. The
title really is a bit of a misnomer—it is a BIG book covering untold aspects of how the game is, or should be, played,
why there are certain unfathomable rules, and, most importantly, the consequences of not adhering to them.
Actually, the author goes beyond discussing the rules and
their related problems. He breaks his volume into ten parts, subdivided into 36 chapters. Each covers a different aspect of the
game. Each unit stands on its own. The author succinctly summarizes the aspects he covers in his Preface, as follows:
The cases are grouped by general subject matter, such as
torts, contract, property, and so on. The cases deal with
such subjects as golfer and golf course liability, manufacturer liability for defective golf clubs and training devices,
disputes over hole-in-one contests, golf cart injuries and
insurance claims, sex discrimination disputes, intellectual
property issues, environmental claims, legal immunity and
much more.
Within that concise summary are a wealth of interesting
cases, many of which the average golfer, or reader, would probably never contemplate. One particularly interesting section,
certainly of current interest, covers “discrimination”. Contemplate this: a golf club has a bylaw permitting the spouse of a
member to have “unlimited” access to the club’s facilities. What
about the same sex couple who are “married” under state law,
but not “married” within the contemplation of the bylaw, as
determined by the club’s directors, and thus prohibited “unlimited access.” The author shed some light on this issue, as did a
California appellate court.
So it goes, chapter after chapter. I will never approach
another course without thinking about one or more of the many
facets of the game as discussed in this very readable book.
Stanley W. Root, Jr. is a retired partner of the Philadelphia, Pennsylvania
firm of Ballard, Spahr, Andrews and Ingersoll, LLP. When not practicing
law, he has had the privilege of playing golf at courses such as Pine Valley,
Merion, and St. Andrew’s, along with over 100 others.
Planning for the Forum Annual Meeting in OctobER
in Marina del Rey, California is underway!
Please consider sponsoring the Meeting—for sponsorship opportunities and benefits,
contact Neeta Ragoowansi, Forum Sponsorship chair, at 212-713-1677
or email Neeta at [email protected].
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
8
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
Create a Compulsory Licensing Scheme
for On-Demand Digital Media Platforms
BY JAMES H. RICHARDSON
S
ince the digitization of audio recordings into MP3 format,
and the advent of affordable, portable MP3 players, the
music industry has been forced to evaluate complex copyright and intellectual property issues. The recent emergence
of cloud-based data storage suggests that the next frontier will
be streaming rights for audio recordings. Services like Pandora,
iHeartRadio, Last.fm, Spotify, Rdio, Beats Music, and now even
iTunes collect a fixed, recurring fee in exchange for unlimited
access to streamed content.
This paradigm shift represents the next evolutionary step
in an industry that has already greatly outpaced legislation
intended to govern its markets. The future of this market turns on the licensing scheme that providers and record
labels are able to agree upon. U.S. law provides for compulsory licensing fees, determined in accordance with various
factors.1 Some providers opt, instead, to negotiate alternative licensing arrangements. This article explores the impact
of copyright law on interactive streaming music services and
proposes a modified compulsory licensing scheme intended
to bring both content owners and distributors to the negotiation table.
THE COPYRIGHT ACT AND DIGITIZATION
Statutory Background
The U.S. Copyright Act of 1976 enunciates the exclusive rights granted to copyright owners.2 With respect to
music, the Act draws a distinction between “musical works”
and “sound recordings.”3 These two rights receive disparate
treatment at law. Sections 114 and 115 of the Act establish compulsory licensing exceptions to the exclusive rights
granted to copyright holders.4 By amendment, these compulsory licenses have evolved and adapted to changes in
technology.
The DPRA and DMCA
In response to industry-wide fears that the Copyright Act did
not sufficiently protect content owners’ rights in the face of
digitization, Congress amended §§ 106, 114, and 115 by passing the Digital Performance Right in Sound Recordings Act
of 1995 (DPRA) and, subsequently, the Digital Millennium
Copyright Act of 1998 (DMCA).5 The DPRA created complicated categorization criteria for the types of services that
would and would not be eligible to license works compulsorily.
This system placed streaming music into one of three categories: (1) interactive services; (2) noninteractive, subscription
services; and (3) noninteractive, nonsubscription digital audio
services. Each of these different types of services is accompanied by a different licensing requirement in correspondence
with its likelihood and tendency to supplant traditional content distribution.6
Interactive Services
Interactive services receive little benefit from the Copyright
Act as a result of the DPRA. After its enactment, providers of
interactive services were required to obtain authorization from
the owner of the sound recording copyright in order to provide
access to digital music, due to the substitutability of on-demand
digital music for traditional content distribution.7 The DMCA
further expanded the definition of interactive services, increasing the pool of services incapable of obtaining a compulsory
license.8 Spotify, Rdio, and related platforms allow users to preselect the songs in advance. These services are classified as
interactive, and are therefore ineligible for compulsory licenses.
Noninteractive, Subscription Services
Noninteractive, subscription services must pay a royalty to both
the sound recording owner and the owner of the musical work.9
However, the DPRA allowed qualifying services access to a
compulsory licensing fee structure for these copyrights.10 This
royalty rate is set by the Copyright Royalty Board (CRB).11 The
DMCA expanded this definition to include some services previously exempt as nonsubscription, noninteractive services.12
Noninteractive, Nonsubscription Services
Digital transmissions by noninteractive, nonsubscription services fall outside the scope of control of the sound performance
copyright owner under the DPRA, and are treated just as terrestrial radio.13 The DMCA left the definition of noninteractive,
nonsubscription services untouched.
SPOTIFY, STREAMING SUBSCRIPTIONS, AND THE FUTURE
The on-demand music platform Spotify has risen almost meteorically from a small European start-up to a multinational
distributor of digital media. The company’s proprietary software
platform provides a streamlined user interface, and from early
on, Spotify focused its resources and attention on the mobile
market, releasing applications for both Apple and Android
phones in 2009.14 Like many new technology companies,
Spotify operates under a “freemium” model, whereby basic, adfunded services are offered to users free of charge, and premium
features are offered at a cost.15 This model has enabled the company to rapidly accumulate users, many of whom opt to pay for
the premium service.16
Losing Upfront: The Spotify Business Model
This freemium model of customer accumulation is expensive.
Spotify must pay licensing fees to copyright holders for each
song played, whether offered to paying or nonpaying customers. Financial documents for Spotify Ltd. indicate that while the
company has dramatically grown its revenues, it posted a substantial operating loss in each of its first two years in the United
States.17 Such losses are common to companies in their infancy
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
9
stages. However, in traditional marketplaces, the costs to companies are relatively fixed, often kept down by the fungibility of
component goods. In markets for copyright-protected content,
however, goods are not readily interchangeable and are therefore susceptible to wildly varying price schemes.18 This threatens
Spotify’s ability to become profitable in the long term, as the
costs of licensing are apt to rise with the company’s profitability.
This potential impasse is further complicated by the fact that
on-demand, streaming music threatens to eventually supplant
content purchases entirely. Unlike noninteractive services, Spotify risks cannibalizing content sales, as opposed to driving them.19
Conflicting reports and statements have been issued regarding
this perceived cannibalization.20 While the impact of streaming,
on-demand music services on record sales is debatable, there is at
least an intuitive notion that these services act to displace sales.
The nonsubstitutability of copyrighted content and the
potential for cannibalization of sales create substantial leverage
for content owners during negotiation. Spotify’s current licensing fees to the major labels reportedly require that the company
pay the higher of $200 million, or around 75 percent of revenues
annually, substantially limiting Spotify’s ability to create a profitable business.21
Recent history highlights large record labels’ reluctance to
adapt to changing market conditions. If streaming subscription
services do in fact begin to displace traditional content, efforts
to stymie this transition will likely serve to push more consumers into different—and perhaps illegal—market alternatives.
Netflix: Pioneering Streaming Content
In many ways, Spotify’s rapid rise mirrors that of Netflix. In
1997, Netflix Inc. was founded as a subscription-based, mailorder, movie-rental service.22 As technology progressed, the
company sought to incorporate streaming content into its business. Initially, content acquisition was complicated, as many
major studios had already sold digital distribution rights for
movies to premium television networks. Thus, Netflix was
forced to engage these networks directly, most of which viewed
the upstart company as a potential threat to their business.23
Nonetheless, Netflix was able to secure these rights and establish a profitable streaming service.
Recently, Netflix renegotiated these distribution rights. The
new contracts are structured as fixed-length, fixed-price deals as
opposed to revenue sharing agreements.24 This structure allows
content owners to enjoy the upside of fixed profits, without the
associated risk of revenue sharing. Because relatively little law
governs negotiations, and because the marginal cost to owners of
licensing additional content is nonexistent, content owners are
free to license at very low rates to companies initially, and then
hike up these rates as those companies achieve success.25
Indeed, this appears to be the case with Netflix. From the
beginning of 2008 to the end of 2009, the cost of content
licensing was relatively stable at approximately $50 million per
quarter. In 2010, costs rose steadily to approximately $207 million. However, in the second quarter of the subsequent year,
content acquisition costs skyrocketed to $632 million, and
fell off only slightly to $560 million in the following quarter.26
Given the monopolistic nature of copyrights, there is a natural
tendency toward this sort of scheduled fee hike by content owners after a market has been established as profitable.
TOWARD A SOLUTION: COMPULSORY LICENSING
Pandora and the Perils of Compulsory Licenses
Compulsory licensing as modified by the DMCA was intended
to allow Internet radio providers to continue to operate, while
ensuring that the interests of content owners and artists were
protected. Yet, in practice, the law has served to encumber
Internet radio providers with exorbitant royalty rates. This renders such services’ business models unprofitable and thwarts
new entrants into the market, thus decreasing competition and
innovation. No company is more illustrative of the unsustainability of this system than Pandora.
Founded in 1999, Pandora pioneered a proprietary algorithm
for categorizing all recorded music, called the Music Genome
Project.27 The company chose to monetize this technology by
creating an online radio service that would incorporate users’
preferences into personalized radio stations. Pandora qualifies
for compulsory licensing and can avoid the cumbersome backand-forth with each individual content owner.28 Instead, human
capital is focused on categorizing copyrighted music. Yet the
rates paid by Pandora verge on punitive. Pandora pays a substantial share of its revenue to owners of sound recording rights.
Pandora’s financial statements indicate that the company has
“incurred significant net operating losses” since its inception in
2000, and as of January 2012, the company had an accumulated
deficit of $101.4 million.29 Pandora’s revenues have increased
significantly in recent years. Yet, costs are assessed on a per-play
basis, effacing the potential for increasing returns to scale.30 Further, per-play rates increase in each successive year. Therefore,
increased subscriptions do not combat the rising costs of service,
and the entirety of the shortfall must be procured from advertising revenue or hiked up subscription fees.31
Pandora exemplifies the complexity of operating under a
compulsory licensing regime. A royalty setting mechanism that
creates a framework about which the distributors and licensors
can negotiate, with incentives built in, might do well to combat
the problems presented above.
Proposed Alternatives
Recent scholarship has highlighted the disparate effects of
differing rates across distributional mediums. Much of the literature analyzes the problem broadly. Legislation aimed at
achieving parity is oft proposed, though rarely successful. On
the extreme end, one author advocates for a scheme similar to
that proposed by the Section 115 Reform Act of 2006 (SIRA),32
which would have created a blanket compulsory license, set by
the CRB, and applicable to all digital reproduction and distribution services, irrespective of gradations of interactivity.33 Yet,
such a solution paints the problem with too broad a brush; compulsory licenses carry inherent complexity and are invariably
unfair to one party.
Others have similarly voiced support for modified versions
of proposed statutes, such as the Performance Rights Act of
2009, which would have created a sound recording fee for terrestrial radio.34 One author suggested an alternative arrangement
whereby an opt-out provision would be added to the Act, allowing artists to choose not to receive sound recording royalties.35
However, this proposal seems overly optimistic. Few artists would
willingly opt out of receiving compensation for their work.
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
10
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
Another policy issue forestalling negotiations is the lack of
a net neutrality statute.36 Record labels hold out hope for preferential broadband speeds, which would thus allow providers
to charge increased rates for downloading and streaming over
broadband. This would significantly alter the cost equation for
digital media platforms and shift more bargaining power toward
labels and broadband providers. Hence, absent net neutrality
legislation, labels and content owners will not fully engage in
licensing negotiations.37
With respect to Spotify, one author discusses the implications of the lack of a compulsory license for interactive
services.38 He proposes three changes aimed at streamlining
content acquisition discussions and creating more equitable
treatment for artists as well as webcasters: (1) enact a net neutrality act to “force” record labels to the table; (2) create one
singular performance right for each work, and create a “onestop” licensing agency for these rights; and (3) set a compulsory
minimum licensing rate to protect artists’ compensation from
racing to the floor.39 This solution is an ambitious proposition
that would do well to curb some of the ills of the current copyright system. Practically, however, it is unrealistic: it implies an
overhaul of much of the Copyright Act, and the companies and
industries predicated upon it.
Though numerous papers discuss streaming music within the
context of compulsory licensure, few propose a tenable solution
with practical applicability. A solution should be tailored to
slightly modify the law in its current form in order to facilitate
fairer negotiation of licensing rates for interactive services without radical legislative change.
A New Compulsory Licensing Scheme
Given the potential for the “hostage-taking” rate setting
paradox discussed above, and the fact that streaming music
platforms continue to experience substantial losses, there
is a need for a solution that brings both parties to the table
and incentivizes them to engage in good faith negotiations.
As Pandora demonstrates, compulsory licenses in their current iteration are no panacea for this hostage-taking problem.
However, a scheme in which the royalty rate is set at a level
punitive to webcasters and then taxed progressively would
serve to create a more equitable distribution of bargaining
power between the parties.
Pandora indicates that compulsory rates set a price floor for
one party—record labels. Compulsory rates provide an institutionally codified anchor to which subsequent negotiations
are tethered. This anchor point allows the party for which the
rate is favorable to walk away from negotiations at any point.
Moreover, given the CRB’s adherence to its own prior rates in
assessing the forward-looking rate, there is only upward variation
from year to year.
Capping Compulsory Licensing Fees for Content Owners
A model that negates this inequitable distribution of bargaining power will allow negotiations to more accurately mirror the
fair market value of content licenses. In order to create such a
model, the penalty for failing to bargain must be similar to both
parties. To accomplish this, a compulsory rate must first be set so
as to prohibit profit realization by digital distributors. Thus, this
article proposes implementing a compulsory licensing fee that
follows distributors’ net revenue.40
By setting the compulsory licensing fee equal to each individual platform’s net revenue, digital distributors will have an
obvious incentive to negotiate with content providers; a failure
to do so would imply no prospect of profitability. The equation
for the default compulsory licensing fees to each company is
straightforward, and would look as follows:
π=ℓ
Here, π represents net revenue to the distributor, and ℓ is the
cost of content licensing. Setting a cap on licensing fees equal
to net profits sufficiently penalizes holdout distributors by negating profits. However, it does not apportion a disproportionate
amount of bargaining power to content owners by allowing
those entities to bankrupt distributors with royalty fees above
distributor net revenue.
Setting a Minimum Royalty Rate
While this compulsory rate is intended to facilitate negotiations, there exists a clear potential for distributors to abuse the
rate. First, platforms might refuse to negotiate for licenses in
their infancy: a compulsory rate that mirrors net revenue would
provide start-up companies with free content rights, allowing
them to write off costs of expansion against the costs of content.
Second, there is the potential that platforms might operate in a
manner that is not purely profit seeking.41
To mitigate these risks, a minimum royalty rate related to the
industry-wide average rate might be established by the CRB.
The CRB could require all interactive, streaming, digital content providers to submit their annual subscriber base and net
revenue figures, and then set a rate that corresponds to the
median42 of this figure, adjusted on a per-subscriber basis.43 This
floor would preempt the scenarios discussed above.
Taxing Licensing Fees: Encouraging Market Forces
The creation of a compulsory fee pinned to distributors’ revenues incentivizes licensees to engage in good faith negotiations.
However, content owners would have little reason to reciprocate. The imposition of a punitive levy on this royalty would
create a strong incentive for license holders to engage in negotiations. Such a tax would look as follows:
τ=
{
α[1-(
α
π-ℓ
π
)]
π>0
π<0
Here, τ represents the tax rate to be applied to licensing
fees, α represents a discount rate,44 π represents the net revenue of the distributor excluding licensing fees, and ℓ represents
the licensing fees paid by the distributor to content owners.45
The impact of this system is that the proportion of taxes as
a share of the licensing fees decreases as the negotiated rate
declines. As the licensing fee decreases relative to net revenues, the size of the tax approaches zero.46 This system builds
in a punitive increasing marginal tax rate. Thus, both parties experience an upside by negotiating.47 The tax paid under
this scheme could be used to fund the CRB, and also to police
infringement.
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
11
CONCLUSION
Increased availability of high-speed Internet and the digitization of music have altered the landscape of content distribution
and protection. Spotify and services like it are the outflow of
technological adaptation in one of the most progressive markets in recent history. To continue to adapt, and to adequately
address consumer preferences, the law will need to again address
a technical and difficult legal issue: rate setting for on-demand
streaming services.
This article proposes a scheme that would penalize both content owners and distributors for failing to negotiate through a
system of progressive taxation. A system that seeks to facilitate
free-market rate setting negotiations would do well to address
many of the current issues confronting digital distribution in the
music industry.
While content owners might be reluctant to sacrifice established rates and revenue streams, such sacrifice is necessary to
adapt to the ever-changing market for music. Reticence should
be expected on behalf of an industry predicated upon a government-endorsed monopoly. Yet, the exclusive right granted by
copyright is intended to incentivize future creation of content,
not stifle innovation or limit consumer access to music. Copyright policy should reflect this goal. One such way is through the
establishment of a compulsory licensing framework that limits
either party’s ability to anchor to a potentially deleterious rate.
ENDNOTES
1. Copyright Act of 1976, 17 U.S.C. §§ 106, 114–15.
2. Compulsory licenses were originally established in the Copyright Act of
1909. However, in the interests of brevity, this article limits the discussion to
the Copyright Act of 1976 and subsequent legislation.
3. 17 U.S.C. § 102(a)(2), (7); Al Kohn & Bob Kohn, Kohn on Music
Licensing 1465–66 (4th ed. 2010) (noting that, typically, record labels own the
right to the sound recording, whereas composers possess the right to the musical work).
4. 17 U.S.C. §§ 114–15; see Kohn & Kohn, supra note 3, at 733.
5. Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No.
104-39, 109 Stat. 336 (1995) [hereinafter DPRA]; Digital Millennium Copyright Act, Pub. L. No. 105-304, §§ 101–02, 112 Stat. 2860, 2861–63 (1998)
[hereinafter DMCA].
6. See Bonneville Int’l Corp. v. Peters, 153 F. Supp. 2d 763, 766–68 (E.D.
Pa. 2001).
7. 17 U.S.C. § 114(j)(7); see also DPRA § 3(j)(4), 109 Stat. at 343 (defining “interactive service” as a service that “enables a member of the public to
receive, on request, a transmission of a particular sound recording chosen by . . .
the recipient”).
8. Steven M. Marks, Entering the Sound Recording Performance Right Labyrinth: Defining Interactive Services and the Broadcast Exemption, 20 Loy. L.A. Ent.
L. Rev. 309, 327 (2000); 17 U.S.C. § 114(j)(7); see also DMCA § 405(a)(4)
(D), 112 Stat. at 2898 (expanding the definition of “interactive services” to
encapsulate services that stream “specially created” programs, in contrast to the
“on-demand” characteristics of interactive services as defined by the DPRA).
9. On the other hand, terrestrial radio pays only the owner of the musical
work copyright.
10. DPRA § 4(3)(A), 109 Stat. at 345.
11. See id. § 5(d). The former Copyright Arbitration Royalty Panel was
phased out and supplanted with the three-judge Copyright Royalty Board pursuant to the Copyright Royalty and Distribution Reform Act of 2004, Pub. L. No.
108-419, 118 Stat. 2341.
12. See Bonneville Int’l Corp. v. Peters, 153 F. Supp. 2d 763, 769 (citing
DMCA § 405). Hence, services that formerly received treatment equitable to
that received by terrestrial radio stations are now forced to pay higher licensing
fees to maintain operations.
13. DPRA § 3(d), 109 Stat. 336–40.
14. Andres Sehr, Spotify Mobile Demo at Google Android I/O, Spotify Blog
(May 28, 2009), https://www.spotify.com/us/blog/archives/2009/05/28/spotifymobile-demo-at-google-android-io/; Spotify App Approved for iPhone, BBC News
(Aug. 27, 2009), http://news.bbc.co.uk/2/hi/technology/8225731.stm.
15. See Freemium, Investopedia, http://www.investopedia.com/terms/f/freemium.asp (last visited July 31, 2014); Fred Wilson, My Favorite Business Model, A
VC (Mar. 23, 2006), http://www.avc.com/a_vc/2006/03/my_favorite_bus.html.
16. Paul Sloan, Spotify: Growing Like Mad, Yet So Far to Go, CNET
(Mar. 12, 2013), http://news.cnet.com/8301-14013_3-57573394/
spotify-growing-like-mad-yet-so-far-to-go/.
17. PrivCo, Private Company Financial Report: Spotify, Ltd. 8 (2012),
available at http://www.privco.com/private-company/spotify-ltd. In 2010, the
company reported a net operating loss of approximately $37.5 million, and in
2011, this loss grew 57 percent to $59 million. Note that this net operating loss
tracks to—and even outpaces—the growth in revenue. Revenues in 2011 were
up 51 percent from 2010, compared to a 57 percent increase in net operating loss.
18. For example, the collection of all U2 recordings cannot be used as a
reference point when attempting to value the collection of all Kelly Clarkson
recordings, except perhaps to set a price ceiling.
19. For example, Pandora, Last.fm, and iHeartRadio provide exposure to
new content but do not allow users to repeatedly choose to listen to their favorite songs, whereas Spotify provides an on-demand interface.
20. See, e.g., Sheme Jobs, Spotify Users Are Twice as Likely to Purchase a Download, This Industry Thing of Ours (Sept. 21, 2012), http://
thisindustrythingofours.wordpress.com/2012/09/21/spotify-users-are-twice-aslikely-to-purchase-a-download/ (reporting NPD Group research that points to a
significantly higher propensity to purchase music on iTunes and Amazon among
Spotify users); Paul Resnikoff, Study: Spotify Is Detrimental to Music Purchasing, Digital Music News (Nov. 15, 2011), http://www.digitalmusicnews.com/
permalink/2011/11/15/cannibal (reporting NPD Group findings that access to
streaming music services has led to a decrease in propensity to purchase albums
among the two most dedicated demographics); Eliot Van Buskirk, Daniel Ek
on Spotify, Community and Music’s Future, Grammy.com (Feb. 2, 2012), http://
www.grammy.com/news/daniel-ek-on-spotify-community-and-musics-future
(quoting Spotify’s founder, Daniel Ek, as stating that “all the information available points to streaming services helping to drive sales”).
21. Eric Eldon, Spotify Is Having a Good 2012, TechCrunch (Nov. 10,
2012), http://techcrunch.com/2012/11/10/spotify-is-having-a-good-2012-revenues-could-reach-500m-as-it-expands-the-digital-music-market/.
22. Francois Brochet, Suraj Srinivasan & Michael Norris, Netflix: Valuing a
New Business Model, Harv. Bus. Sch. Case No. 9-113-018 (Jan. 11, 2013).
23. Id. at 3.
24. Id.
25. Note, however, that this dilemma does not exist between producers and
distributors of a non-intellectual property good for which there is a fixed marginal cost, as the producers must sell for at least marginal cost.
26. Id. at 12 (exhibit 6); see also NBCUniversal and Netflix Renew Multi-Year
TV and Film Content Agreement, NBCUniversal (July 13, 2011), http://www.
nbcuni.com/corporate/newsroom/nbcuniversal-and-netflix-renew-multi-year-tvand-film-content-agreement/; Netflix Announces Strategic Multi-Year Agreement
with Miramax, Miramax (May 15, 2011), http://www.miramax.com/company/
press/netflix-announces-strategic-multi-year-agreement-with-miramax.
27. Stephanie Clifford, Pandora’s Long Strange Trip, Inc. (Oct. 1, 2007), http://
www.inc.com/magazine/20071001/pandoras-long-strange-trip_pagen_2.html.
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
12
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
28. Contrast Spotify, which must negotiate with each individual copyright
holder.
29. Pandora Media, Inc., Annual Report (Form 10-K), at 13
(Jan. 31, 2013), available at http://www.sec.gov/Archives/edgar/
data/1230276/000119312512120024/d280023d10k.htm (explaining that the
company has “incurred significant operating losses in the past and may not be
able to generate sufficient revenue to be profitable”).
30. Under the pay-per-play royalty scheme, increased user base implies
essentially a 1:1 increase in associated costs, thus prohibiting Pandora to experience increasing returns to scale, and fixing marginal cost irrespective of
company size.
31. In light of consumer expectations of free content, elasticity of demand
for subscription access to Pandora is likely very high and subject to large fluctuations relative to price increases.
32. H.R. 5553, 109th Cong. (2006). The bill was never enacted, and thus
expired.
33. See Patrick McKay, Ending the Power to Say No: The Case for
Extending Compulsory Licensing to Cover Digital Music Reproduction and
Distribution Rights 12 (Oct. 14, 2010) (unpublished manuscript), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1692336.
34. H.R. 848, 111th Cong. (2009); see also S. 379, 111th Cong. (2009).
35. See Jessica L. Bagdanov, Internet Radio Disparity: The Need for Greater Equity
in the Copyright Royalty Payment Structure, 14 Chap. L. Rev. 135, 158 (2010).
36. Casey Rae-Hunter, Better Mousetraps: Licensing, Access, and Innovation
in the New Music Marketplace, 7 J. Bus. & Tech. L. 35 (2012); John Eric Seay,
Legislative Strategies for Enabling the Success of Online Music Purveyors, 17 UCLA
Ent. L. Rev. 163 (2010).
37. Rae-Hunter, supra note 36, at 59–60.
38. See Seay, supra note 36, at 169.
39. Id. at 173–75.
40. This article proposes a statutory licensing system intended to apply
to interactive services, though these recommendations might likewise be
incorporated into current statutory licensing provisions, disaggregated by interactivity. That the rate is tacked to distributor net revenue makes it much more
widely applicable than traditionally proposed “blanket licenses,” which do not
address the differential value of differing types of streaming music service.
41. That is, a company might emerge to provide access to content at a minimal price, sheltered from internalizing the appropriate licensing costs. Such a
company could operate with a neutral balance sheet in perpetuity and offer artificially inexpensive content.
42. Alternatively, the median might be supplanted with some other percentile, or the arithmetic mean; though the mean is subject to downward bias.
43. To ensure that this minimum rate is not downwardly biased by recent
entrants, the CRB might consider only companies that have existed for a minimum amount of time (e.g., three or more years).
44. α can also be viewed as the maximum tax to be levied upon the net revenue of the distributional platform.
45. Other schemes of taxation can be envisioned, such as a quadratic, or
logarithmic function, which would exhibit decreasing returns to increased
licensing fees. This equation is merely illustrative of the principle of increasing
marginal taxation on licensing fees.
46. Conversely, as the licensing rate share of net revenue increases, the tax
rate approaches the maximum rate established, α.
47. To make this tax rate more or less punitive to content owners, the value
of α can be modified up or down. Or, the entire equation can be either squared
or square rooted, which would thus create accelerated or decelerated marginal
tax increases, respectively, as the rate nears its supremum.
James (Jake) H. Richardson is a joint J.D. & M.B.A. candidate at UCLA.
Following law school, Jake plans to practice with Gunderson Dettmer,
LLP in the technology and start up space, hoping to combine his interest in
entertainment and media with his enthusiasm for entrepreneurship. He may
be reached at [email protected].
SAVE THE DATES!
September 17–19, 2014
Annual Nashville Entertainment
Law Symposium
November 12-15, 2014
North American Entertainment,
Sports, & Intellectual Property
Law Summit
Hutton Hotel & Palmer Plaza | Nashville, TN
Co-Sponsored with the Americana Music Association
Andaz Hyatt Papagayo Resort | Liberia, Costa Rica
October 9–11, 2014
April 23-24, 2015
Forum Annual Meeting
Ritz-Carlton Marina del Rey | Marina del Rey, CA
October 21–25, 2014
ABA Section of
International Law Fall Meeting
6th Annual International
Legal Symposium on the World
of Music, Film, Television,
and Sports
The Palms Hotel & Spa | Miami Beach, FL
Forum Panel: Global Distribution of
Entertainment Content in the Digital Era:
Rights, Action, Roll ’Em
2015 Forum
Annual Meeting
Hilton Buenos Aires | Buenos Aires, Argentina
The Grand Hyatt Washington DC | Washington, DC
October 8-10, 2015
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
13
Richard Cheese, Seu Jorge, and the
Scope of Permissible Changes under
Section 115 Licenses
BY ERIC LAURITSEN
S
ection 115 of the Copyright Act provides that once the
owner of a musical composition has authorized the work
to be recorded and distributed once, he or she must permit
others to do so as well.1 Upon payment of a statutorily determined fee, these compulsory licensees gain “the privilege of
making a musical arrangement of the work to the extent necessary to conform it to the style or manner of interpretation of the
performance involved,” but may not modify its “basic melody
or fundamental character.”2 In theory, alterations beyond this
limit instead require noncompulsory licenses for the creation of
derivative works at rates negotiated by the parties.3 In practice,
however, § 115 compulsory licenses are often utilized to record
and distribute performances in which the underlying melodies
or lyrics bear little resemblance to those of the original works.
A prime example of an artist who exploits this phenomenon
is Richard Cheese, whose hallmark is performing well-known
compositions with raunchy, violent, or otherwise lurid lyrics as though they were part of a lounge act, complete with
the occasional “Thank you!” as if to acknowledge some imagined audience member dropping a dollar into the tip jar on his
piano.4 To be sure, in many of his recordings, Cheese remains
faithful to the melodies of the original works and reproduces the
lyrics verbatim, making his case for § 115 protection reasonably
strong.5 In others, however, he distorts the original melodies so
much that, apart from the lyrics, one would be hard-pressed to
identify any similarities whatsoever between Cheese’s rendition
and the one that made the composition famous.6 Yet even while
taking these liberties, Cheese, and his band Lounge Against the
Machine, record and distribute all of their performances under
§ 115 licenses.7 And Cheese does not stand alone on the legitimacy of this practice; many of the songwriters whose works he
has performed have given him positive feedback, reflecting their
apparent consent to his licensing and royalty practices.8
The questionable application of § 115 licenses to uses
beyond the apparent scope of the statute is not unique to
Cheese’s satirical or “swankified” genre.9 Take, for example, the
Brazilian artist Seu Jorge, who recorded David Bowie compositions such as “Rebel Rebel” and “Ziggy Stardust” with the lyrics
translated into Portuguese for his 2005 album The Life Aquatic
Studio Sessions.10 Although “a translation” is the very first example given in the Copyright Act of the type of alteration that
constitutes the making of a derivative work,11 and in Jorge’s own
words he “changed the words quite a lot” to purposefully alter
the songs’ messages,12 Jorge likewise released his albums pursuant to § 115.13 Far from challenging this scheme, Bowie praised
Jorge and was quoted in the album’s liner notes as stating,
“Had Seu Jorge not recorded my songs in Portuguese, I would
never have heard this new level of beauty which he has imbued
them with.”14 Importantly, as with those artists who have given
positive feedback to Cheese, any decision to challenge the use
of a compulsory license would be made by the publishing companies to which the songwriters transferred their composition
copyrights rather than the songwriters themselves.15 But while
the songwriters’ acquiescence is thus not legally determinative per se, it is at least illuminating with respect to moral rights
considerations, a crucial justification for § 115’s limitations in
the first place.16
The remainder of this article explores § 115’s legislative history in an effort to discern the intent of its framers regarding
its scope, discusses the limited history of § 115(a)(2) in the
courts,17 and assesses possible explanations for the lack of strict
enforcement among copyright owners.
LEGISLATIVE HISTORY OF § 115
Section 115 was enacted together with the other overhauls of
the Copyright Act of 1976.18 Its analog under the 1909 Act was
section 1(e),19 which marked a partial legislative abrogation of
the Supreme Court’s holding in White-Smith Music Publishing
Co. v. Apollo Co. that perforated piano rolls did not constitute “copies” implicating copyright laws.20 The provision was
the product of an intense lobbying campaign that featured congressional testimony from the likes of John Philip Sousa,21 and
indeed brought all “mechanical reproductions”—including
piano rolls—within copyright owners’ reach.22 This grant came
with an important condition attached, however; once composition owners authorized an initial reproduction of the work,
“any other person [could] make similar use of the copyrighted
work upon payment to the copyright proprietor of a royalty of
two cents on each such part manufactured, to be paid by the
manufacturer thereof.”23 This compulsory licensing scheme was
designed to prevent monopolistic ownership of compositions by
piano roll manufacturers, which Congress feared would otherwise result from the enhanced protections.24
Apart from describing their permitted use as “similar” to that
in which the owner had engaged, section 1(e) did not specifically address the scope of licensees’ rights. While one might
have thus expected the judiciary to be quickly called upon to
fill the gap, almost 40 years went by before that came to pass.
Then, in the 1948 case of Edward B. Marks Music Corp. v. Foullon, Judge Goddard offered the following statements, in an
opinion that was affirmed by the Second Circuit with Judge
Learned Hand writing for the court:
It is . . . to be noted that the requirement that a “compulsory licensee” be limited in its use in mechanical
reproduction to the use originally made or granted by
the plaintiff in the initial mechanical reproduction, has
been liberally construed. This requirement has been said
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
14
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
to mean that the reproduction need not be identical, but
that some latitude must be allowed to each manufacturer
to prepare an individual instrumental or vocal arrangement of the composition.25
The House Judiciary Committee cited this language approvingly when it began considering modifications to the 1909 Act,
noting, “The authorities on the subject agree that the compulsory licensee merely is permitted ‘some latitude’—not that he
has complete freedom to alter or distort the character of the
copyrighted work.”26
Beyond these fleeting remarks, however, the scope of permissible modifications under compulsory licenses received little
further attention as Congress set out to draft the new Copyright
Act. This is likely due to the infrequency of litigation on the
issue under section 1(e),27 and a resulting belief that it simply
did not need to be a priority. Indeed, looking back at the road to
the enactment of the 1976 Copyright Act, the House Judiciary
Committee noted the narrowness of Congress’s concerns regarding § 115. “The real issue was [simply] how much the rate under
[compulsory licenses] should be,” the committee report stated.28
The report did note in passing that § 115(a)(2) was intended
to “recognize the practical need for a limited privilege to make
arrangements of music being used under a compulsory license,
but without allowing the music to be perverted, distorted, or
travestied,”29 but offered no examples or elaborations on this
mandate.
Just as the similar vagaries created few problems under the
1909 Act, they have been litigated very sparsely under the modern version, as explored below.
THE BOUNDARIES OF § 115(a)(2) AND THE “ARRANGEMENT
PRIVILEGE”
TeeVee Toons v. DM Records Doesn’t Change Much
The judicial history of § 115(a)(2) is likewise notable mostly
for its meagerness. That is, there are hardly any instances in
which owners of musical composition copyrights have sought
to enforce their rights to prevent second comers from distorting
“the basic melody or fundamental character” of their works. TeeVee Toons, Inc. v. DM Records, Inc., which marks the only time
that an Article III court has considered the issue, constitutes
one notable exception.30 That case concerned six compositions
written wholly or in part by the rapper Lil Jon: “Stop Trippin,”
“Cut Up,” “Y’all Don’t Feel Me,” “Get Crunk,” “Bounce Dat
Ass,” and “Who U Wit.”31 After a long and complicated set of
transactions, the compositions came into the possession of the
plaintiff, a music publisher, who brought suit against two record
labels for which the rapper later recorded altered renditions of
the works.32
Each side produced experts to support its theories as to the
nature of the recordings, and the resulting affidavits and testimony illustrate varying interpretations of the law and the type
of inquiry for which it calls. In the deposition of the defendants’
expert, for instance, the plaintiff’s attorney asked whether
changing the chorus of the Beatles’ song “She Loves You” such
that it went, “She doesn’t love you / Yeah yeah yeah” would
be permissible under § 115.33 Somewhat shockingly, the expert
was not prepared to say that it would.34 In response to the
question, “When does an arrangement constitute a new derivative work?” she replied, “In my opinion, that would be when it
contains more new material than previous material.”35 For his
part, the plaintiff’s expert was prepared to testify about concrete
distinctions that characterized the various iterations of the compositions. His affidavit stated, for example, “A new synthesizer
melody is added at approximately :00 to :32, 1:17 to 2:00, and
2:45 to 3:18 in ‘Cut Up’ on Certified Crunk.”36
Ruling on cross motions for summary judgment, the court
concluded, “At the very least, the existence of the undisputed
changes in the remixes and the varying interpretations of the
significance of those changes raises issues of fact that cannot be
decided on this motion for summary judgment.”37 On the one
hand, the court at least recognized that overstepping the scope
of a compulsory license creates a cognizable claim. However,
given that the case settled in 2012,38 this paltry recognition
marks the entirety of the law that the suit generated.
The Ringtone Decision
The only other dispute dealing with the scope of alterations
permissible under § 115 took place before the United States
Copyright Office in 2006, and concerned the making of various
types of ringtones and ringbacks for use on cellular telephones.39
The office’s involvement in that dispute came in response to
two certified questions from the Copyright Royalty Board,
which was engaged in rate setting proceedings and faced what
it deemed to be a novel question regarding the application of
§ 115 to these uses.40 Arguing in favor of the provision’s application was the Recording Industry Association of America
(RIAA), while a group of songwriter coalitions and composition
copyright holders represented the opposing viewpoint.41
Of particular significance in the ringtone proceeding was
the making of “monophonic” and “polyphonic” ringtones and
ringbacks, as differentiated from “mastertones,” listed here in
increasing order of resemblance to the master recordings on
which they are based.42 Monophonic tones are those “having
a single melodic line,” while polyphonic tones include both a
melody and a harmony. Mastertones are actual digital renditions
of the sound recordings as commercially released, including full
instrumentation and harmonization. On its strongest footing,
therefore, the copyright owners’ objection concerned the application of compulsory licenses to uses that reduced elaborate,
full-length compositions into ringtones with a single melodic
line of around 30 seconds in length. The owners contended that
such changes went beyond what the Copyright Office’s opinion
referred to as the “arrangement privilege” under the first clause
of § 115(a)(2).43
The RIAA focused its arguments on derivative work jurisprudence, noting that “[f]or the derivative work right to be
infringed, the defendant must have created a derivative work,
and for the derivative work to have been created, the Act
requires the contribution of expressive content capable of
standing on its own as a copyrightable work.”44 Reducing a composition’s melody to a single or polyphonic tone and editing
out all but approximately 30 seconds of it—the only alterations
necessary for making most of the ringtones and ringbacks—did
not meet this requirement, the RIAA argued.45
For their part, the copyright owners did not dispute the
RIAA’s statement of the law regarding the making of derivative
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
15
works or its relevance to § 115,46 but argued that the modifications involved with making ringtones and ringbacks did indeed
meet the creativity requirement under Feist Publications, Inc.
v. Rural Telephone Service Co.47 The owners thus rejected the
RIAA’s contention that the modifications simply amounted to
permissible musical “arrangements” under § 115(a)(2), supporting this conclusion with citations to numerous narrowly phrased
definitions of the term. For example, they pointed to the Oxford
English Dictionary, which defines an “arrangement” as “[t]he
adaptation of a composition for voices or instruments for which
it was not originally written.”48
Ultimately, while it recognized that the question was
intensely fact-driven,49 the Copyright Office sided with the
RIAA on most points.50 The office endorsed a definition of
“arrangement” as “[t]he process or result of readjusting a work
for performance by different artistic means than originally
intended,” or “a relatively close or literal rendering of the
substance and form of a work with only those modifications
demanded by the limitations or peculiarities of the medium in
view.”51 Because the alterations to most compositions were simply geared toward meeting the demands of the new medium of
cellular telephones, the Copyright Office reasoned, the modifications were covered by the arrangement privilege.52
Taken together, while the authority of the decisions
addressed above is more persuasive than binding, they both
seem to assume that § 115(a)(2) implicates traditional derivative work analysis. Revisions adding new copyrightable
content are not permitted, while all others constitute privileged
“arrangements.” Importantly, however, these disputes were aberrational and the question has again receded from view. The
next section explores various hypotheses as to why this is so.
POSSIBLE EXPLANATIONS FOR LACK OF § 115(a)(2)
LITIGATION
The combination of legislative ambiguity regarding § 115(a)(2)
and scant case law interpreting the ambiguity is rather puzzling.
Returning to the examples of Richard Cheese and Seu Jorge,
one wonders why the composition copyright owners have not
sued these licensees for overstepping the bounds of their compulsory licenses—especially when the limited precedent seems
to support such a claim. Given the long history of the statute
and its predecessor, and given the importance of § 115 to the
music publishing industry, it is unlikely that songwriters and
music publishers have simply never considered that the cause
of action exists. As such, their acquiescence must stem from an
affirmative choice not to exercise their statutory rights.
The explanation for this choice likely comes somewhere at
the intersection of three factors. First, perhaps the copyright
owners simply enjoy the follow-on renditions or view them as
a tribute that they are flattered to receive, and thus do not care
about gleaning the maximum (or perhaps any) possible monetization from them. While there is some evidence that copyright
owners (or at least songwriters) enjoy the licensees’ variations in some instances,53 one need only look to any one of the
numerous cases regarding the nonpayment of royalties to see
that nonmonetary considerations are often not enough in isolation—Campbell v. Acuff-Rose Music, Inc. comes to mind as just
one example.54 As such, the true explanation must be somewhat
more complex.
Second, perhaps copyright owners are concerned about negative externalities in strictly enforcing their rights. Of course,
externalities like the direct costs of litigation are not unique
to the music industry, so these factors alone could not explain
what seems to be a unique reluctance in this area. However, the
famous concentration of the music industry may mark the key
distinction that makes litigation extra problematic.55 That is,
perhaps the tight-knit nature of the business causes the shadow
of the future to loom extra large. This effect may be exacerbated
by the fact that hardly any such disputes have been litigated
in the past, so a party that takes it to that point now would be
seen as exceptionally aggressive or litigious and thus risk serious
reputational harm. The weakness of this explanation, however,
is apparent based on the fact that music industry players frequently sue one another over other issues.56 If reputational harm
was as deep of a concern as this purported explanation assumes
it to be, one would not expect these other suits.
Finally, it may simply be that when copyright owners receive
a royalty at the statutory rate, they are happy with the income
and unconcerned with the precise legal mechanics underlying the license.57 This may be doubly true where the licensees
pay the full statutory rate, because the copyright owners and
original recording artists (assuming they were the songwriters as well) are often accustomed to receiving a discounted rate
for the original use.58 That is, “controlled composition clauses”
in recording contracts often require recording artists who write
their own works to accept a royalty of 50 percent or 75 percent of the statutory rate for their own use of their composition.
Because no such discount usually applies when third parties
record their own follow-on renditions of the composition, the
songwriters and copyright owners effectively receive a premium
for the later uses.
CONCLUSION
Future scholarship may seek to determine with certainty the
explanation for copyright owners’ apparent decision not to
bring claims under § 115. The question is an important one, as
it may illuminate tremendous efficiencies of compulsory licensing regimes and lead to their application in new and greater
realms. Whatever the explanation, however, compelling circumstantial evidence suggests that they have made this decision.
Their choice in this regard has paved the way for artists like
Richard Cheese and Seu Jorge to make their very livings off of
revising the “basic melody and fundamental character” of the
works they deal in, even while operating under § 115.
ENDNOTES
1. 17 U.S.C. § 115(a)(1) (“When phonorecords of a nondramatic musical
work have been distributed to the public in the United States under the authority of the copyright owner, any other person . . . may, by complying with the
provisions of this section, obtain a compulsory license to make and distribute
phonorecords of the work.”).
2. Id. § 115(a)(2).
3. See id. § 106(2) (giving copyright owners the exclusive right “to prepare
derivative works based upon the copyrighted work”).
4. See, e.g., Richard Cheese, Rape Me, on The Sunny Side of the Moon:
The Best of Richard Cheese (Surfdog Records 2006) (original music and
lyrics by Kurt Cobain) (“I’ll kiss your open sores / Thank you!”). Notably,
while Cheese is a prominent example of this genre-bending scheme in that
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
16
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
it constitutes the majority of his performing career, other artists have at least
dabbled in similar things. Examples are Ben Folds’s performance of the work
“Bitches Ain’t Shit” (originally performed by Dr. Dre) and Dynamite Hack’s
rendition of “Boyz in the Hood” (originally performed by Eazy-E).
5. See id. (exhibiting the same melody and similar tempo as the Nirvana
recording).
6. See, e.g., Richard Cheese, Shake Ya Ass, on Tuxicity (Surfdog Records
2003) (original music and lyrics by Michael Tyler, Pharrell Williams, and Chad
Hugo).
7. See F.A.Q.—Frequently Asked Questions, Richard Cheese & Lounge
Against the Machine, ¶ 5.3.2), http://www.richardcheese.com/rcfaq.html
(last visited Aug. 4, 2014) (“Do you have to get [the songwriters’] permission
to include their songs on your CDs? Nope. Doing a remake of a song is legally
allowed . . . as long as you pay the statutory royalty rate of 9.1 cents per song per
CD sold.”). Cheese seems not to consider the possibility that his renditions may
be a fair use of the compositions such that no royalty would be required whatsoever. The assumption that Cheese is not a fair user also underlies the analysis in
this article.
8. See id. ¶ 5.3.1) (“What do the original artists think of you doing covers
of their songs? They’re fine with it, especially since each artist receives a royalty
payment of 9 cents for each Richard Cheese song we sell! We’ve had some great
feedback from artists who truly call themselves Richard Cheese fans . . . .”).
Cheese advertises his feedback from many of the songwriters whose works he
has performed, but does not mention any response from publishing companies
to whom they presumably transferred their copyright interests.
9. Cheese rejects the characterization of his performances as parody, so
perhaps some care should be taken not to describe them in that way. See id.
¶ 5.3.3) (“Please don’t call what we do ‘parody.’ We might satirize, bastardize, and swankify, but we are not parodying.”). Whatever label one chooses,
however, it is clear that his purpose is in large part comedy of some strand or
another.
10. Seu Jorge, The Life Aquatic Studio Sessions Featuring Seu Jorge
(Hollywood Records 2005).
11. See 17 U.S.C. § 101.
12. See Dan Nishimoto, Review of The Life Aquatic Studio Sessions Featuring Seu Jorge, Stylus Mag. (Dec. 20, 2005), http://www.stylusmagazine.com/
reviews/seu-jorge/the-life-aquatic-studio-sessions-featuring-seu-jorge.htm (quoting Jorge as stating, “I wanted each song to be about a different character [from
the film The Life Aquatic with Steve Zissou]. So, ‘Lady Stardust’ is about Ned
Plimpton [Owen Wilson’s character] wanting to be a good father, and ‘Changes’
is about Steve Zissou [Bill Murray’s character] changing himself as a person,
although nobody who doesn’t speak Portuguese is going to know that.”).
13. See Copyright Catalog Search for “Jorge, Seu,” http://
cocatalog.loc.gov/cgi-bin/Pwebrecon.cgi?Search_Arg=Jorge+Seu&Search_
Code=NALL&PID=AxLFo2sNcd2g_CNUhofpNcRKR&SEQ=201408041225
54&CNT=25&HIST=1 (last visited Aug. 4, 2014) (showing a musical composition registration for the original track “Team Zissou,” but only sound recording
registrations for the other performances).
14. David Bowie, liner notes for The Life Aquatic Studio Sessions Featuring Seu Jorge, supra note 10.
15. See 17 U.S.C. § 106 (granting the exclusive rights under the Copyright
Act to “the owner of copyright,” not to the author of the work).
16. Cf. 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright
§ 8.04(F) (2009) (stating in regards to § 115 that “[s]uch respect for the integrity of a musical composition evinces Congressional regard for the moral rights
of composers.”).
17. See In re Mech. & Digital Phonorecord Delivery Rate Adjustment Proceeding (Ringtone Decision), Docket No. RF 2006-1 (Copyright Office Oct. 16,
2006), available at http://www.copyright.gov/docs/ringtone-decision.pdf.
18. Pub. L. No. 94-553, § 115, 90 Stat. 2541 (codified as amended at 17
U.S.C. § 115).
19. Pub. L. No. 60-349, § 1(e), 35 Stat. 1075 (repealed 1976).
20. 209 U.S. 1, 17 (1908) (“In no sense can musical sounds which reach us
through the sense of hearing be said to be copies as that term is generally understood, and as we believe it was intended to be understood by the statutes under
consideration.”).
21. See Arguments Before the Comms. on Patents of the S. and H., Conjointly,
on S. 6330 and H.R. 19853 to Amend and Consolidate the Acts Respecting Copyright, 59th Cong. 23–26 (1906) (statement of John Philip Sousa) (“When these
perforated-roll companies and these phonograph companies take my property
and put it on their records they take something I am interested in and give
me no interest in it. When they make money out of my pieces I want a share
of it.”); see also Section 115 of the Copyright Act: In Need of an Update? Hearing Before the Subcomm. on Courts, the Internet, and Intellectual Property of the H.
Comm. on the Judiciary, 108th Cong. 2 (2004) [hereinafter Section 115: In Need
of an Update?] (statement of Marybeth Peters, Register of Copyrights) (“During this period (1905–1909), copyright owners were seeking legislative changes
which would grant them the exclusive right to authorize the mechanical reproduction of their works . . . .”).
22. See Copyright Act of 1909, § 1(e) (granting copyright owners the exclusive right to set the work to “any form of record in which the thought of the
author may be recorded and from which it may be read or reproduced”).
23. Id.
24. See Section 115: In Need of an Update?, supra note 21 (statement of
Marybeth Peters) (“Congress, however, was concerned that the right to make
mechanical reproductions of musical works might become a monopoly controlled by a single company. Therefore, it decided that rather than provide for
an exclusive right to make mechanical reproductions, it would create a compulsory license . . . .”).
25. 79 F. Supp. 664, 667 (S.D.N.Y. 1948), aff’d, 171 F.2d 905 (2d Cir. 1949).
Unfortunately, the judge cited no sources in which this remark “ha[d] been
said.”
26. H. Comm. on the Judiciary, 88th Cong., Copyright Law Revision
Part 3: Preliminary Draft for Revised U.S. Copyright Law and Discussions and Comments on the Draft 430 (Comm. Print 1964) (citing Melville
Nimmer, The Nature of the Rights Protected by Copyright, 10 U.C.L.A. L. Rev.
60, 102–03 (1962) (“[The] right to record anew under a compulsory license . . .
must envisage some minimal change and new arrangement if only to conform to
the range and style of the licensee’s performers.”)).
27. The Edward B. Marks case is the only known instance in which the
question was considered.
28. H.R. Rep. No. 94-1476, at 107 (1976).
29. Id. at 109.
30. No. 05 Civ. 5602, 2007 WL 2851218 (S.D.N.Y. Sept. 27, 2007).
31. Id. at *1.
32. Id. at *1–3. While the defendants characterized their use of the compositions as “remixes,” the plaintiff described them as “modified uses.” Id. at *1.
Of course, there is nothing clearly advantageous to one side or the other about
either of these characterizations.
33. Transcript of Deposition of Elizabeth Marlowe at 55, TeeVee Toons, No.
05 Civ. 5602 (S.D.N.Y. Aug. 25, 2006), ECF No. 69-3.
34. See id. (“It would depend on if that’s the only change to the work. I
would have to hear it, but it could.”).
35. Id. at 60–61.
36. Affidavit of Lawrence Ferrara at 3, TeeVee Toons, No. 05 Civ. 5602
(S.D.N.Y. June 12, 2006), ECF No. 130-2.
37. TeeVee Toons, 2007 WL 2851218, at *9.
38. See Docket No. 1:05-cv-05602, PlainSite, http://www.plainsite.org/
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
17
dockets/my5kzo8b/new-york-southern-district-court/tvt-music-inc-v-rep-salesinc-et-al/ (last visited Aug. 4, 2014) (noting settlement pursuant to Rule 41 of
the Federal Rules of Civil Procedure in March 2012).
39. Ringtone Decision, supra note 17.
40. Id. at 1 (“1. Does a ringtone, made available for use on a cellular telephone or similar device, constitute delivery of a digital phonorecord that is
subject to statutory licensing under 17 U.S.C. § 115 . . . ? 2. If so, what are the
legal conditions and/or limitations on such statutory licensing?”).
41. Id. at 2. The coalition included the National Music Publishers Association, the Songwriters Guild of America, the Nashville Songwriters Association,
and others.
42. See id. at 5 (defining the different categories of ringtones and ringbacks
and their varying levels of fidelity to the more typical recordings).
43. Id. at 24–30.
44. Id. at 17.
45. Id. (“RIAA concludes that ringtones are nothing more than partial
copies that lack sufficient originality to be protected as derivative works or to
infringe the derivative works right.”).
46. Id. at 18 (“[The copyright owners] argue that ringtones satisfy any creativity requirement for the copyrightability of a derivative work.”).
47. 499 U.S. 340 (1991).
48. Ringtone Decision, supra note 17, at 26 n.107.
49. See id. at 24 (“In sum, there is a broad spectrum of ringtones, and
whether one would be considered a derivative work depends on the nature of
the ringtone.”).
50. Cf. id. at 34 (“We believe that Section 115’s general requirements are
applicable to all types of ringtones (monophonic, polyphonic, or mastertone).”).
51. Id. at 27.
52. Id.
53. Richard Cheese and Seu Jorge, the case studies focused on throughout this article, have each received laudatory feedback from the songwriters
whose works they have dealt in. See supra note 8 and accompanying text; text
accompanying note 14.
54. 510 U.S. 569 (1994). Incidentally, in that case, 2 Live Crew conceded
that a compulsory license would not have applied to their use because they
altered the composition’s fundamental character. Had they not made such a
concession, the case may have presented the Supreme Court with the opportunity to weigh in on the meaning of § 115(a)(2) and the scope of permissible
changes under a compulsory license. As it was, however, no such analysis was
necessary.
55. See generally Jack Bishop, Concentrations of Power and Property in the
Music Industry, RedOrbit (Oct. 3, 2005), http://www.redorbit.com/news/
technology/258789/concentrations_of_power_and_property_in_the_music_
industry/ (discussing the business structure of the music industry and its various
sectors).
56. See, e.g., Selle v. Gibb, 741 F.2d 896 (7th Cir. 1984) (leading and frequently cited case on “striking similarity” in infringement claims).
57. See generally Olufunmilayo B. Arewa, From J.C. Bach to Hip Hop: Musical Borrowing, Copyright, and Cultural Context, 84 N.C. L. Rev. 547, 634 n.490
(2006) (collecting scholarship assessing the creation of a compulsory licensing scheme for digital sampling on the theory that such regimes offer greater
efficiencies).
58. See Jay Rosenthal, The Recording Artist/Songwriter Dilemma: The Controlled Composition Clause—Enough Already!, Landslide, Mar./Apr. 2011, at
46 (describing common mechanical royalty negotiation practices in recording
contracts).
Eric Lauritsen is due to begin work as an associate with the Costa Mesa,
California office of Latham and Watkins in October. He graduated magna
cum laude from Duke Law School this past May, where he focused his
studies on copyright and trademark law and served as co-president of the
Sports and Entertainment Law Society. He hopes to focus his law practice on
the music industry. He can be reached at [email protected].
www.ShopABA.org
Music Law for the GP
Thomas R. Leavens
Music law involves several key substantive areas of law—copyrights, trademarks, and
identity rights, to name a few. While traditional entities such as songwriters and record
companies have always existed, technological advances in digital distribution have
brought important new players into the mix. Concerns about the usage rights of digital
music have emerged as well as agreements arising from the use of music in advertising
and branding. Inexpensive duplication technology, the portability and ubiquity of mobile
music devices, and the ease of transmitting digital files have also become areas of concern.
2014, 169 pages, 6 x 9, Paperback,
Product Code: 5110769
General Public Price: $54.95
Forum Committee on
Entertainment and Sports
Industries Member Price: $32.95
Music Law for the General Practitioner provides lawyers with comprehensive information
on the business and legal topics that are likely to be encountered when representing a
musical talent, producer, or consumer.
Topics include:
• Music publishing
• Financing of bands
• Record companies and producers
• Agents
• Taxes
• Musician’s estate
AMERICAN BAR ASSOCIATION
www.ShopABA.org
Phone: 1-800-285-2221 Fax: 1-312-988-5568
Publications Orders
P.O. Box 10892 • Chicago, IL 60610
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
18
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
19
The Day the Music Died
continued frome page 1
monetary value, too, if an estate chooses to sell the collection.7
But the music industry has changed dramatically over the
last two decades, and the music industry’s relationship with
death has changed too. The biggest change involves digital
music and the legal challenges of applying old law to a new
medium. One new question related to digital music is what
happens to digital music when the owner dies? This question
confronts musicians and consumers alike. Independent musicians who use websites to sell and promote their music may lose
access to those songs and money from sales after death. Consumers may lose access to digital record collections stored on
services like iTunes. Thus, there is a digital inheritance problem
in the music industry.
The Stored Communications Act (SCA) is the primary culprit of the digital inheritance problem. The SCA was originally
adopted to regulate federal wiretaps during criminal investigations.8 Today, it regulates Internet user policies. This article
explores the SCA and its role in interfering with estates and
digital music by outlining the SCA’s history and how it came to
regulate user policies, and then addressing how the SCA frustrates digital inheritance in the music industry for artists and
consumers alike. Finally, an amendment to the SCA is suggested so that estates may be guaranteed the right to control
musicians’ content and so that heirs and beneficiaries may enjoy
lost ones’ digital record collections.
“I’ve Been a Moonshiner:”9
The Stored Communications Act’s History
The SCA has its roots in Prohibition bootlegging, but now
serves as a barrier to digital inheritance. In 1923, federal agents
installed wiretaps on telephone poles outside the houses of
suspected bootleggers in Seattle, Washington.10 The investigation produced more than 775 pages of transcripts and led
to several convictions.11 Roy Olmstead, the chief bootlegger, appealed his conviction on the grounds that government
agents had impermissibly tapped his phone, thereby violating
the Fourth Amendment.12 The Supreme Court disagreed on
spatial grounds, holding that because the government had not
trespassed on Olmstead’s land, they had not violated the Fourth
Amendment.13
The Court again took up the issue of government wiretaps
40 years later, after the FBI tapped a phone booth that was commonly used by a suspected gambling ring leader.14 Charles Katz
was convicted with the information that the FBI collected and
subsequently challenged his conviction on Fourth Amendment
grounds.15 The Court reversed his conviction, holding that
because a warrant could have easily been secured from a magistrate, the wiretap was unjustifiable.16
Realizing the need for federal wiretap regulation, Congress
adopted the Wiretap Act in 1968.17 The Wiretap Act soon
became outdated, though, as new forms of digital technology evolved outside the Act’s reach.18 Accordingly, in 1986,
Congress passed the Electronic Communications Privacy Act
(ECPA) to bring the Wiretap Act’s protections in line with new
forms of electronic communications.19 Title II of ECPA, commonly known as the Stored Communications Act, specifically
deals with computer communications.20 Section 2702 of the
SCA, known as the voluntary disclosure provision, most affects
the digital inheritance problem.21 Specifically, section 2702 prohibits Internet services, including digital music providers such
as iTunes, from disclosing account content and information to
unauthorized individuals and prohibits anyone other than the
user from accessing accounts without authorization.22
“We All Recognize That I’m the Problem Here:”23
The SCA’s Interference with Digital Inheritance
In general, Internet sites, including digital music providers, prohibit anyone other than the registered account holder from
accessing the account and prohibit online music providers
from turning over any content on accounts to anyone except
the account holder.24 These user policies limit account access
because providers have strictly interpreted the SCA to avoid
liability, even though the SCA’s requirements are unclear as
they relate to estates.25 The end result is that estates are generally precluded from account access or receiving account content
because of the way that providers have interpreted the SCA.
Even though providers make accounts nontransferable and
inaccessible, some content stored on online accounts can be
transferred under an estate.26 In particular, music uploaded to
music provider websites by independent artists and some digital
music purchased by consumers can be transferred after death.27
Since estates cannot access accounts, though, they are in effect
segregated from assets stored on music websites. This has several ramifications. First, independent artists’ estates may lose the
ability to control their copyrighted material uploaded to music
provider websites and any profits produced by those songs. Second, consumers’ estates may lose the ability to distribute or
sell any unrestricted songs purchased through music websites.28
Accordingly, the SCA, by way of its influence on music provider user policies, prevents the effective administration of
digital music assets that are lawfully owned by estates and heirs.
“I Spend My Bread Making Demos All Day:”29
Independent Musicians and the Digital
Inheritance Problem
The Raspberries sing about the dream of making it big in the
music industry.30 In Overnight Sensation, the band describes
the dream—hearing their songs on the radio and making a
hit record.31 In attempting to reach their dream, the band also
depicts the struggles of making it big by highlighting the struggles of gaining wider exposure and the time spent making and
sending demo tapes to potential distributors.32
In the 40 years since The Raspberries sang about making it
big, the dream has not changed, but the way independent artists
gain new fans and exposure to the music industry has. Today,
artists often utilize the Internet to gain exposure to new audiences and to the wider music industry.33 To this end, several
websites have recently sprung up to help independent musicians
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
20
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
gain more notoriety and new audiences. For instance, one site,
Bandcamp, allows independent artists to upload their music and
sell to individual consumers.34 Bandvista, a rival site, hosts independent band websites and song sales.35 Even more established
sites such as Amazon and iTunes have options for independent
musicians to upload their music for sale.36
The user policies of Bandcamp, BandVista, Amazon, and
Apple each restrict access to the account holder only.37 For
instance, Bandcamp’s privacy policy allows only the registered user to access the account. Apple’s and Amazon’s terms of
service are equally restrictive and state that the account is nontransferable.38 As mentioned, these user policies reflect provider
worries about liability under the SCA.39 Accordingly, estates are
precluded from accessing user accounts and content stored on
these accounts, which has several consequences.
The first consequence of the way that providers have
interpreted the SCA in their user policies is that estates of
independent artists lose the ability to control the copyrighted
content on provider websites. Musicians do not surrender the
copyright to songs that they upload to music websites.40 Accordingly, musicians do not surrender any of the exclusive rights of
copyright, either. Therefore, musicians retain the right to control the distribution of their uploaded music. 41
Copyrights and their commensurate rights transfer at death.42
When estates are prohibited from accessing accounts after
death, they effectively lose the ability to control the song’s distribution.43 Accordingly, the way that providers interpret the
SCA’s requirements in their user policies effectively prevents
estates from exercising their rights to control copyrighted music
stored on music provider websites and accounts.
The second consequence of the way that providers have
interpreted the SCA’s requirements is that estates may lose
access to the profits that songs generate. Account access is often
required to distribute profits and to control where profits are distributed. Because estates cannot access accounts, they cannot
control or change profit distribution. This can have financial
consequences for the estate because song profits may not be distributed to the proper parties and may not be used by the estate
to settle any outstanding liabilities. Thus, the music industry’s digital inheritance problem effectively prevents musicians’
estates from controlling song distribution and any profits that
those songs produce.
“Pay[ing] Homage to the Man Who Long Ago
Collected all the Songs the Singers Know:”44
Inheriting Digital Music Collections
The Song Collector tells the story of a man who builds his record
collection over many years.45 He does so by recording the sung
stories of people in his community.46 By the end of the song, the
song collector amasses a sizeable record collection. The song
shows us what a record collection embodies: the sound and
memory of a person and of a culture.47
Like the protagonist in The Song Collector, individuals invest
a lot of time and money in their record collections.48 Although
traditional record collections are easily transferrable because of
their tangibility, online music collections have raised questions
about how they transfer at death. To this end, Bruce Willis was
rumored to be preparing to sue Apple over the right to pass on
his record collection to his children.49
Some have argued that no digital music transfers via estate
because the music bought online is subject to a license that
terminates at death.50 This assumption may not hold, though.
Apple, the largest digital music retailer,51 arguably sells an unrestricted copy of the song itself, rather than a license. If this is
so, songs purchased on iTunes would be transferrable at death.
Accordingly, there is an argument in favor of accommodating
digital music inheritance for digital music collections.
Apple’s user agreement states that users purchase unrestricted song copies.52 Because it is an unrestricted purchase, the
user should thus be subject to the same rights in using and dispensing with the song as if she had purchased it at a record store
on a tangible medium.53 Among other things, the user would
be subject to the first sale doctrine and would be allowed to use,
sell, or transfer the copy of the song that they purchased within
copyright restrictions.54
Apple does restrict the usage of the song in some notable
ways, but these restrictions do not create a license. For instance,
Apple’s user policy limits the number of devices that are permitted to access any iTunes account and restricts the number of
times that a user may burn a song or playlist to another medium
such as a CD.55 Copyright law prohibits unauthorized copying
and distribution.56 Apple’s provisions restricting account access
and burning reinforce the law’s requirement, but go no further.
Accordingly, Apple’s Terms and Conditions, when read as a
whole, grant users unrestricted songs when those songs are purchased on iTunes.57
Other online music stores are more restrictive in the rights
that they give to song purchasers. For instance, Google unambiguously outlines that anything purchased through the Google
Play store, including music, is subject to a license.58 Amazon’s
music store contains an equally restrictive clause.59 Thus, the
end situation is that digital music transferability depends on
where the music is bought.60
Because most digital music sold today is unrestricted, the first
sale doctrine would apply to many digital music libraries. The
first sale doctrine allows purchasers of lawfully purchased copies to sell or transfer that copy without the copyright holder’s
further permission.61 Applied to digital music, this means that
if a user purchases an unrestricted copy of digital music, they
would be able to transfer or sell that copy of the music without further permission from the copyright holder. Importantly,
this right is transferrable after death.62 To this end, several websites have sprung up recently in an attempt to profit off of used
digital music sales.63 These sites have yet to perfect a model
that conforms to copyright requirements and the first sale doctrine because of difficulties of ensuring that only the originally
purchased copy of the digital music is transferred.64 Given the
number of parties tackling the problem, as well as the potential
value of the used digital music market, a system that conforms
to copyright law requirements may soon exist, though.65 To this
end, even Apple and Amazon have anticipated the used digital music market and received patents for possible digital music
exchanges.66
The SCA and providers’ user policies would prevent estates
from taking advantage of such a service. Estates could utilize such services to sell unrestricted digital music collections
and use the money to settle liabilities, or, if no liabilities exist,
could distribute the proceeds of any used digital music sales to
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
21
appropriate heirs and beneficiaries.67 Because estates cannot
access accounts, though, they cannot transfer song ownership
or otherwise sell the digital music stored on music websites.
Therefore, the SCA effectively prevents estates from distributing consumers’ music, which, as demonstrated, can have clear
financial consequences.
“Problems That Wait Never Get Solved:”68
Amend the SCA
The problem with the SCA is that it is unclear how the Act
applies to digital estates. Thus, providers have adopted strict
user policies to protect themselves against potential liability
under the Act, which in turn precludes estates from accessing
various accounts and digital assets. The SCA presently outlines
three exceptions to the Act.69 Adding a fourth exception where
heirs, beneficiaries, and executors are also exempted under the
Act would resolve the ambiguity around how the SCA applies
to digital inheritance and would thus encourage music providers
to adopt friendlier user policies.70
Amending the SCA is not the final step, though. Following an SCA amendment, music providers should reevaluate
their user policies to ensure that they are in line with the Act’s
new requirements and so that they resolve any ambiguity as to
whether estates can access music stored on accounts.
Few music websites have considered how to handle digital
death. In fact, one Apple representative stated that Apple had
no policy about inheriting iTunes accounts.71 Moreover, there
are no court cases that have forced digital music providers to
address digital inheritance issues.72 Other social media platforms
have faced legal challenges regarding digital asset inheritance,
though, which means that Apple and other online music providers may soon have to grapple with the digital inheritance
problem.73
In particular, digital music providers should clearly outline
a policy that considers digital assets in their terms of use. The
policy should outline what rights, if any, an estate has in the
account and the digital content contained in the account. If
estates have an interest in content on provider accounts, the
terms of use should also outline a policy and process whereby
estates can prove the death or incapacity of the user and who
may access the account and its contents and for what reasons.
This way, providers can accommodate estates and ensure that
they themselves are still meeting the SCA’s requirements by
not disclosing account information or contents to unauthorized
individuals.
Consumers have responsibility in digital estate reform, too.
Currently, few individuals have digital estate plans.74 The result
is that even if the federal government and online music providers were to allow estates to have access to accounts and content,
it could be unclear how a decedent would have distributed their
digital assets, including their digital music.75 To resolve this,
consumers should outline who should receive which aspects
of their digital estates and how their digital assets, including
their digital music, should be disposed of in the case of death or
incapacity.
Following an SCA amendment, consumers should do three
things in particular to ensure that their digital music transfers after death. First, users must account for their digital assets
in their estate plans because digital assets are becoming more
varied and greater in number and value. Moreover, the list containing account information and passwords should be separate
from a will because of the privacy and identity theft risks associated with listing such information in a public document like
a will or a trust.76 Second, estate plans should clearly outline
who should receive which digital assets because decedents may
have different wishes for who receives their Facebook or email
accounts versus who receives their digital record collection.77
Clearly listing who receives what would also lessen liability for
providers because there would be clear guidelines for who has
consent to access which accounts.78 Finally, consumers should
regularly update their estate plans because digital accounts are
often and easily opened or closed.79 This way, estates could clear
up any confusion surrounding digital asset inheritance and how
it applies to digital record collections.
Conclusion
The SCA stands in the way of digital music inheritance to
the detriment of musicians and consumers. The SCA’s lack of
clarity regarding how it applies to digital estates causes providers to err on the side of caution when crafting user policies.
Accordingly, musicians’ estates may lose the ability to control
the distribution of some aspects of the musician’s collection
stored on music websites. Additionally, consumers’ estates may
lose access to digital record collections which has both economic and emotional costs for heirs and beneficiaries. An SCA
amendment would allow heirs and beneficiaries access to digital music and to enjoy or sell the music as each heir sees fit.
It would also allow estates to control the distribution of songs
and control profits generated by song sales in accordance with
copyright law. Beyond an SCA amendment, providers and
consumers have responsibilities in digital estate reform, too.
Providers should reevaluate their terms of service and consumers should make clear how their digital assets should be
distributed. This way, heirs and beneficiaries can enjoy the digital music, even after the day that it dies.
Endnotes
1. Don McLean, American Pie (United Artists Records 1971).
2. Queen, No-One But You (Only the Good Die Young) (Parlophone
1997).
3. How Michael Jackson Made $1 Billion Since His Death, Billboard, http://www.billboard.com/articles/news/957679/
how-michael-jackson-made-1-billion-since-his-death?page=0%2C1.
4. “Though [Janis Joplin] enjoyed an enthusiastic following during her
colourful career, her commercial success came after her death.” Do You Remember?: April 1969 – Rock Legend, Evening Mail (Birmingham, U.K.), Feb. 5,
2002.
5. Jon Bream, Hendrix’s Music Alive, Well 40 Years Later, Minneapolis Star
Trib., Apr. 1, 2010.
6. Nick Hornby best summed up his relationship with his record collection:
Is it so wrong, wanting to be at home with your record collection? It’s
not like collecting records is like collecting stamps, or beermats, or
ancient thimbles. There’s a whole world in here, a nicer, dirtier, more
violent, more peaceful, more colorful, sleazier, more dangerous, more
loving world than the world I live in; there is history, and geography,
and poetry, and countless other things I should have studied at school,
including music.
Nick Hornby, High Fidelity 83 (1995).
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
22
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
7. The average American spends nearly $360 on e-books and digital music
annually. See Quentin Fottrell, Who Inherits Your iTunes Library?: Why Your
Digital Books and Music May Go to the Grave, Wall St. J. (Aug. 23, 2012,
4:57 PM), http://www.marketwatch.com/story/who-inherits-your-ituneslibrary-2012-08-23. Also, some records can have considerable value. For
instance, Jimi Hendrix’s The Cry of Love, can be valued at upwards of £1000.
Their Word is Vinyl, Evening News (Edinburgh), Sept. 19, 2000. These records
can be sold as part of the estate to settle any outstanding liabilities, or if no liabilities exist, can be distributed to heirs and beneficiaries.
8. See infra.
9. Bob Dylan, Moonshiner (Special Rider Music 1991) (1961).
10. United States v. Olmstead, 5 F.2d 712, 712 (W.D. Wash. 1923). The
bootlegging ring produced more than $176,000 of revenue in a bad month
(nearly $2.4 million in 2013 dollars). Id.
11. United States v. Olmstead, 277 U.S. 438 477 (1928) (Brandeis, J.,
dissenting).
12. Id. at 456.
13. Id. at 457.
14. Katz v. United States, 389 U.S. 347, 348 (1967).
15. Id.
16. Id. at 354. Justice Harlan had a different perspective on the Fourth
Amendment, noting that the Fourth Amendment was implicated when individuals manifest a reasonable expectation of privacy. Id. at 361 (Harlan, J.,
concurring) (“Fourth Amendment expectations of privacy [are] reliant on first
that a person have exhibited an actual (subjective) expectation of privacy and,
second, that the expectation be one that society is prepared to recognize as
‘reasonable.’”). Justice Harlan’s concurrence has since become the prevailing
understanding of the Fourth Amendment. See Kyllo v. United States, 533 U.S.
27, 32–33 (2001).
17. See Omnibus Crime Control and Safe Streets Act of 1968, Pub. L.
No.90-351, 82 Stat. 197 (1968). In particular, the Act made it illegal for anyone
to “willfully intercept[], endeavor[] to intercept, or procure[] any other person to
intercept or endeavor to intercept any wire or oral communication.” Id. See also
S. Rep. No. 1097 (1968), reprinted in 1968 U.S.C.C.A.N. 2112, 2153. The Senate Report noted that the Act “conform[ed] to the constitutional standards set
out in . . . Katz v. United States…” Id.
18. S. Rep. No. 99-541 at 2 (1986). The Wiretap Act was said to have “not
kept pace with the development of communications and computer technology.”
Id.
19. See Electronic Communications Privacy Act of 1986, Pub. L. No.
99-508, 100 Stat. 1848 (1986) (“Title I of the Electronic Communications
Privacy Act addresses the interception of wire, oral and electronic communications. It amends existing chapter 119 of title 18 to bring it in line with
technological developments and changes in the structure of the telecommunications industry.”); S. Rep. No. 99-541 at 2 (1986).
20. See Orin S. Kerr, A User’s Guide to the Store Communications Act, and a
Legislator’s Guide to Amending It, 72 Geo. Wash. L. Rev. 1208, 1220 (2004).
21. 18 U.S.C. § 2702 (2012).
22. 18 U.S.C. § 2702 (a–b) (2012); 18 U.S.C. §2701 (2012).
23. We Are Scientists, Ghouls (EMI 2008).
24. I8 U.S.C. § 2701(c) (2012); 18 U.S.C. § 2702(b) (2012).
25. The Deputy General Counsel of Facebook expressed hope that courts
could add clarity as to when providers could provide access to third parties,
saying that he is “itching for that fight” and waiting for a case to go before a federal judge “to define exactly what content . . . is protected so that it’s clearer
to everyone.” See Mark Howitson, Deputy Gen. Counsel, Facebook, Keynote
Address at LegalTech New York 2010: Facebook: Perspectives on Corporate
eDiscovery and Social Media (Feb. 2, 2010), available at http://www.legaltechshow.com/r5/contest.asp?sweeps_code=ltny2010.
26. See infra notes 50–65 and accompanying text.
27. See infra
28. See infra.
29. Overnight Sensation, The Raspberries (Capitol Records 1974).
30. Id.
31. Id. (“I just want a hit record, yeah / Wanna hear it on the radio / Want a
big hit record, yeah / One that everybody’s got to know.”).
32. Id. (“I use my bread making demos all day / Writing in the night while in
my head I hear / The record play / Hear it play”).
33. See Greg Rollett, How Musicians Are Using Social Media to Connect With
Fans, Mashable, (Mar. 12, 2010), http://mashable.com/2010/03/12/musicianssocial-media/. Some independent musicians have successfully utilized social
media websites like YouTube and MySpace to gain exposure to greater audiences. See, e.g., gootmusic, YouTube, http://www.youtube.com/user/gootmusic/
videos; againstthecurrentNY, YouTube, http://www.youtube.com/user/againstthecurrentNY/about; Kathryn Masterson, Who Needs a Record Deal? Artists Can
Now Sell Their Music Directly to Fans on MySpace, Chi. Trib., Oct. 5, 2006.
34. Bandcamp, Bandcamp, https://bandcamp.com/.
35. What is BandVista? BandVista, http://www.bandvista.com/about/.
36. See Bandcamp Terms of Use, Bandcamp, http://bandcamp.com/terms_of_
use (last updated Oct. 15, 2010); Apple, iTunes Terms and Conditions, iTunes,
http://www.apple.com/legal/internet-services/itunes/us/terms.html [hereinafter
Apple Terms and Conditions].
37. See BandVista Web Site Terms and Conditions and Privacy Policy, BandVista, http://www.bandvista.com/terms/.
38. See Apple Terms and Conditions, supra note 36; See Submissions Policy, Amazon, http://www.amazon.com/gp/feature.
html?ie=UTF8&docId=1000700491 (last visited Dec. 29, 2013).
39. See Howitson, supra note 25.
40. See BandCamp Terms of Use, supra note 36 (“Company will not have any
ownership rights in any elements of a Band’s Music.”).
41. 17 U.S.C. § 106 (2012). The six exclusive rights of copyright are: 1) to
reproduce the copyrighted work; 2) to prepare derivative works; 3) to distribute copies of the copyrighted work; 4) to perform the copyrighted work publicly;
5) to display the copyrighted work publicly; and 6) to perform the copyrighted
work publicly by means of a digital audio transmission. Id.
42. See 17 U.S.C. § 201(d)(1) (2012) (“The ownership of a copyright may
be transferred in whole or in part by any means of conveyance or by operation
of law, and may be bequeathed by will or pass as personal property by the applicable laws of intestate succession.”).
43. Account access is generally required in order to control content on the
account. Since estates cannot access the account, they cannot control the distribution of the music on the account, including the ability to remove the music
from the account if the estate chooses.
44. The Song Collector, Chumbawamba (No Masters 2010).
45. Id.
46. Id.
47. Id. (“And now the old Society sing the songs / Word for word, and kept
where they belong / As once again, they eulogize the past / You can hear the
ghosts of history laughing last.”).
48. As of 2011, the average American has $2,000 worth of entertainment
files as part of their digital estate, including digital music files. Jamie P. Hopkins,
Afterlife in the Cloud: Managing a Digital Estate, 5 Hastings Sci. & Tech. L.J.
209, 221 (2013).
49. See ZachWhittaker, Bruce Willis to Take on Apple Over iTunes Inheritance, CBS News (Sept. 3,2012, 3:40 PM), http://www.cbsnews.com/
news/bruce-willis-to-take-on-apple-over-itunes-inheritance-updated/. The
threat of suit did not pan out, though. See Zach Whittaker & Chenda
Ngak, Bruce Willis is not Suing Apple Over iTunes Inheritance, Wife Tweets,
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
23
CBS News (Sept. 3, 2012, 4:04 PM), http://www.cbsnews.com/news/
bruce-willis-is-not-suing-apple-over-itunes-inheritance-wife-tweets/.
50. See Fottrell, supra note 7.
51. See Apple Press Info, iTunes Store Top Music Retailer in the US, Apple,
http://www.apple.com/pr/library/2008/04/03iTunes-Store-Top-Music-Retailerin-the-US.html. Apple enjoys a 64 percent share of the digital music market,
making it by far the largest music seller in the world. Pandora Awareness Surpasses 50 Percent of all Internet Users, In the Second Quarter of 2012, NDP Group
(Sept. 18, 2012), https://www.npd.com/wps/portal/npd/us/news/press-releases/
itunes-continues-to-dominate-music-retailing-but-nearly-60-percent-of-itunesmusic-buyers-also-use-pandora/.
52. Apple Terms and Conditions, supra note 36 (“Apple is the provider of the
iTunes Service, which permits you to purchase or rent digital content (“iTunes
Products”) for end user use only under the terms and conditions set forth in this
Agreement.”) (emphasis added). Other aspects of the Apple EULA, such as the
section covering e-books, clearly state that Apple is granting a license to use
those products. Id. (“Apple is the provider of the App and Book Services that
permit you to license software products and digital content”) (emphasis added).
Since Apple clearly shows that it can create a license for the use of some of its
products and because that language is noticeably absent from the section covering music, it suggests that Apple sells unrestricted copies of music. Id. See also
Claudine Wong, Can Bruce Willis Leave His iTunes Collection to His Children?:
Inheritability of Digital Media in the Face of EULA’s, 29 Santa Clara Computer
& High Tech. L.J. 703, 739–40 (2013).
53. See Brilliance Audio, Inc. v. Haights Cross Communications, Inc., 474
F.3d 365, 373 (6th Cir. 2007).
54. See 17 U.S.C. §109(a) (2012); see also Bobbs-Merrill Co. v. Straus, 210
U.S. 339, 350 (1908) (holding that purchasers of books did not need the permission of the copyright holder to sell or otherwise use the copy of the book
after purchase); Capitol Records, LLC v. ReDigi, Inc., 934 F. Supp. 2d 640, 654–
55 (S.D.N.Y. 2013) (holding that copies made by the purchaser of copyrighted
material are not subject to the first sale doctrine).
55. See Apple Terms and Conditions, supra note 36.
56. See 17 U.S.C. § 106 (2012).
57. For a more in-depth analysis of the Apple terms of service as it relates to
song purchases, see supra note 55. at 718–25.
58. Google states that the user “will have the non-exclusive right . . . to
view, use, and display the [music] . . . for your personal, non-commercial use
only.” Google Play Terms of Service, Google Play, https://play.google.com/intl/
en_us/about/play-terms.html (last updated Nov. 20, 2013).
59. Amazon’s user agreement grants the user “a non-exclusive, non-transferable right to use the Music Content only for [their] personal, non-commercial,
entertainment use.” Conditions of Use, Amazon, http://www.amazon.com/gp/
help/customer/display.html/ref=footer_cou?%20ie=UTF8&nodeId=508088 (last
updated Dec. 5, 2012).
60. Since Apple is by far the biggest music retailer in the world, more than
half of all digital music sales would be of unrestricted songs. See NDP Group,
supra note 51. Accordingly, the digital inheritance problem is especially relevant to consumers.
61. To conform to the First Sale Doctrine, sellers must sell the original copy
of the digital music file bought from an online music store. See Capitol Records,
934 F. Supp. 2d at 654–55; Wong, supra note 52, at 746–47.
62. See 17 U.S.C. § 201(d) (2012).
63. ReDigi was the first attempt to sell used digital assets, including digital
music. About ReDigi, ReDigi, http://newsroom.redigi.com/about/. Lexink has
also entered the used digital music market with an application called “Unloder.”
Unloder, Lexink, http://www.lexink.com/Unloder/.
64. See Capitol Records, 934 F. Supp. 2d at 648 (holding that ReDigi’s mode
of selling used digital music involved copying the music and thus did not
conform to the first sale doctrine).
65. The Institute of Electrical and Electronic Engineers has been working
on a platform that guarantees the transmission of the original copy of the purchased music only, thereby keeping the sale in line with the requirements of the
first sale doctrine. IEEE Standards Assn, IEEE P1817 Standard for ConsumerOwnable Digital Personal Property, IEEE, http://grouper.ieee.org/groups/1817/
(last modified Feb. 25, 2011).
66. See Secondary Market for Digital Objects, U.S. Patent No. 8,364,595
(filed May 5, 2009) (issued Jan. 29, 2013) (Amazon’s patent for a used digital
music market); Managing Access to Digital Content Items, U.S. Patent Application No. 13/531280 (filed June 22, 2012) (Apple’s patent application for a
used digital music market).
67. See Kelly Greene, Passing Down Digital Assets, Wall St. J., Aug. 31,
2012, at A1.
68. Problems, Joe Walsh (Full Moon 1985).
69. See 18 U.S.C. § 2701(c) (2012); see also Matt Borden, Covering Your
Digital Assets: Why the Stored Communications Act Stands in the Way of Digital
Inheritance, 75 Ohio St. L.J. (forthcoming 2014).
70. The model Act could follow the following model:
(c) Exceptions.— Subsection (a) of this section does not apply with
respect to conduct authorized—
(1) by the person or entity providing a wire or electronic communications service;
(2) by a user of that service with respect to a communication of or
intended for that user; or
(3) in section 2703, 2704 or 2518 of this title.
(4) by any heir, beneficiary, or fiduciary of an estate of a deceased user of
an electronic computing service or a remote computing service.
The express exemption of estates from the Act could encourage providers
to loosen strict user policies for estates. See Matt Borden, Covering Your Digital
Assets: Why the Stored Communications Act Stands in the Way of Digital Inheritance, 75 Ohio St. L.J. (forthcoming 2014).
71. Roger Yu, Digital Inheritance Laws Remain Murky, USA Today (Sept.
19, 2012, 9:55AM), http://usatoday30.usatoday.com/tech/story/2012/09/19/
digital-inheritance/57804428/1.
72. See Wong, supra note 52, at 716 (noting that the reason that digital
music providers had not addressed digital inheritance in their user policies is
because the right person to challenge the issue had not died yet).
73. Yahoo has seen the most attention surrounding digital inheritance.
The most discussed case involved the family of a fallen Marine who sought to
gain access to the soldier’s email account after he was killed in Iraq. See Jim
Hu, Yahoo Denies Family Access to Dead Marine’s E-mail, CNET (Dec. 21, 2004,
2:49 PM), http://news.cnet.com/Yahoo-denies-family-access-to-dead-marinese-mail/2100-1038_3-5500057.html. An Oakland County, Michigan court
eventually granted a court order requiring Yahoo! to turn the account contents
over to the family. See In re Ellsworth, No. 2005-296, 651-DE (Mich. Prob. Ct.
2005); Jennifer Chambers, They Win Right to See Late Son’s Messages, Detroit
News, Apr. 21, 2005, at A1. Facebook has also been a target of digital inheritance cases. See, e.g., In re Request for Order Requiring FACEBOOK, INC. to
Produce Documents and Things, 923 F.Supp.2d 1204, 1206 (N.D. Cal. 2012)
(affirming Facebook’s refusal to provide account content for the estate of a British supermodel who committed suicide in 2008).
74. Only 31 percent of Americans have wills. See Alyssa A. DiRusso, Testacy and Intestacy: The Dynamics of Wills and Demographic Status, 23 Quinnipiac
Prob. L.J. 36, 52 (2009). Of these, very few have incorporated digital estates
into their wills. See id. at 53.
75. Individuals do not fully think through their digital estate plans because
they do not think of their assets when formulating estate plans, because they
become frustrated compiling a list of their digital assets, and because they
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
24
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
sometimes are over-confident that they have covered all their bases in planning
their digital estate. See Gerry W. Beyer & Naomi Cahn, When You Pass On,
Don’t Leave the Passwords Behind: Planning for Digital Assets, Prob. & Prop, Feb.
2012, at 40, 43.
76. Id.
77. Jessica Hopper, Digital Afterlife: What Happens to Your Online Accounts
When you Die?, Rock Center (June 1, 2012, 10:53 AM), http://rockcenter.
nbcnews.com/_news/2012/06/01/11995859-digital-afterlife-what-happensto-your-online-accounts-when-you-die?lite. Naomi Cahn, professor of law at
George Washington University noted that people would generally treat digital
assets such as online bank accounts different than social media accounts. Id.
78. Providers would still be liable under the SCA if they granted access to
someone other than the estate under the proposed amendment. See supra note 70.
79. Frank S. Baldino, Estate Planning and Administration for Digital Assets,
Md. B.J., Dec. 2012, at 28, 30.
Matthew C. Borden graduated in 2014 from The Ohio State University
Moritz College of Law and The John Glenn School of Public Affairs at
The Ohio State University. Mr. Borden wishes to express his gratitude to
the GRAMMY Foundation for a truly once in a lifetime opportunity, to
Professor Gerry Beyer for inspiration and guidance, and to Tasha Miracle
and Daniel Inscore for their helpful comments. He may be reached at
[email protected].
Lyrical Restraint
continued frome page 1
lyrics springs from the seemingly obvious assumption that song
lyrics are valuable independent of songs. Indeed, lyrics must
have inherent value: lyrics spawn lucrative remixes, which may
incorporate all of the lyrics and none of the melody of a song.
It is less obvious, however, that published lyrics, which lack
acoustic accompaniment, could still generate revenue outside of
songs. This is especially true for songs written in the last decade,
as record sales have declined dramatically, while demand for
more immersive, audiovisual experiences, like concerts and
music videos, has risen.4 In other words, music customers are
less content than ever to purchase physical copies of songs,
which sometimes include printed lyrics; thus, the value of lyrics
increasingly depends on other kinds of products, like music videos and concerts.
To exaggerate the case, consider the sensational song and
music video, “Wrecking Ball.” If the recording studio scratched
out the spectacle of Miley Cyrus swinging nude atop the wrecking ball, and muted the sound of Cyrus’s voice, leaving the
audience with only the lyrics of the song printed starkly on
a computer screen, the market for the studio’s product would
shrink asymptotically. In fact, the market for music and music
videos dwarfs the market for lyrics: in 2009, one of the top lyrics sites generated $10 million in revenue,5 whereas the music
industry generated $16.5 billion in revenue in 2012.6 Nonetheless, lyrics sites have the potential to profit, either from
advertisements or user subscriptions.7 While lyrics sites have
not yet perfected the model for generating revenue, the market persists, and many of the 50 sites targeted by the NMPA sell
advertising space.8
Much is at stake in the war between music publishers and
lyrics sites. If music publishers and the NMPA prevail, users of
lyrics sites may see an end to the free, crowd-sourced sites on
which they rely. As one music law professor noted in an interview with the Washington Post, “the copyright-holders have the
law on their side. It’s too bad, though, because these sites do a
service for people.”9 That is particularly true for free sites like
Rap Genius, which does not sell advertising space and publishes
extensive user – and artist-written annotations for its lyrics.
While existing copyright law provides a rigid, bright-line
rule against unlicensed use of copyrighted song lyrics, music listeners’ demand for lyrics sites necessitates a different approach.
Lyrics sites satiate public thirst for knowledge of correct song
lyrics. If music publishers refuse to license song lyrics to websites
at a reasonable rate, then the legal status quo may deprive music
audiences of the listening experiences they desire. This article
outlines the statutory law governing copyrighted song lyrics,
discusses the seminal case brought by music publishers against
lyrics sites, and argues that a compulsory licensing scheme balances the financial interest of music publishers and the cultural
imperative to disseminate knowledge.
STATUTORY FRAMEWORK
Two kinds of copyrights protect songs: sound recording copyrights and musical composition copyrights. Under the
Copyright Act of 1976, sound recordings are “works that result
from the fixation of a series of musical, spoken, or other sounds,
but not including the sounds accompanying a motion picture or
other audiovisual work, regardless of the nature of the material
objects, such as disks, tapes, or other phonorecords, in which
they are embodied.”10 In other words, “the sound recording is
the aggregation of sounds captured in the recording,”11 or the
actual, fixed sounds that the listener hears when he or she plays
the song on a phone or laptop. By contrast, the musical composition consists of the unfixed elements of the song, including
rhythm, harmony, melody, and any accompanying words.12
Musical composition copyrights thus protect song lyrics. While
it is possible for one person to own both the musical composition copyright and the sound recording copyright for a song,
frequently record companies own recording copyrights, while
music publishers hold composition copyrights.13
For both kinds of copyrights, the Act provides exclusive
rights to copyright holders:
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
25
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to
authorize any of the following:
(1) to reproduce the copyrighted work in copies or
phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of
ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and
other audiovisual works, to perform the copyrighted work
publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic,
or sculptural works, including the individual images of a
motion picture or other audiovisual work, to display the
copyrighted work publicly; and
(6) in the case of sound recordings, to perform the
copyrighted work publicly by means of a digital audio
transmission.14
Under § 106, therefore, copyright owners have something of a
legal monopoly over their copyrighted works, subject only to
the limitations of §§ 107–22, none of which readily apply in the
case of lyrics sites.
Commonly, however, would-be infringers claim safe harbor
under the fair use provision of § 107, which provides in pertinent part, “the fair use of a copyrighted work, including such
use by reproduction in copies . . . or by any other means specified by [section 106], for purposes such as criticism, comment,
news reporting, teaching[,] scholarship, or research, is not an
infringement of copyright.”15
In determining whether the use made of a work in any
particular case is a fair use the factors to be considered shall
include:
(1) the purpose and character of the use, including
whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in
relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or
value of the copyrighted work.16
While the list of fair use factors is nonexhaustive, in general lyrics sites’ use of copyrighted works does not constitute
fair use.17 While the first factor weighs in favor of nonprofit
sites like Rap Genius, it weighs against the many sites that sell
advertising for profit. The second factor also weighs against lyrics sites, as courts consider use of creative, fictional works such
as songs less permissible than use of nonfiction works, like newspaper articles. The third factor is particularly ominous for lyrics
sites, which inherently aim to publish copyrighted lyrics in their
entirety for the benefit of their users. Finally, the effect of lyrics
sites’ use is to saturate the market for lyrics, potentially diminishing the financial value of published lyrics to naught.
The Act also provides for statutory damages, which take the
place of actual damages at the election of the copyright owner.
Under § 504(c), a copyright owner may elect before final judgment to recover statutory damages for all infringements of any
one work “in a sum of not less than $750 or more than $30,000
as the court considers just.”18 That is, for all claims of infringement concerning a particular work, aggregate statutory damages
range from $750 to $30,000. In the case of willful infringement,
however, the court may increase the award up to $150,000.
Likewise, in a case where the infringer proves that he or she
“was not aware and had no reason to believe that his or her acts
constituted an infringement of copyright,” the court may reduce
the minimum award to $200.19
A CLAIM AGAINST LYRICS SITES: PEERMUSIC V. LIVEUNIVERSE
As lyrics websites began to flourish just recently, case law concerning copyright claims against such sites is only beginning
to blossom. A 2010 case, Peermusic, III, Ltd. v. LiveUniverse,
Inc., brought by music publishers against the owners of www.
lyricsdownload.com, was probably the first of its kind.20 Reflecting the tenuousness of lyrics sites’ legal position, the defendants
in LiveUniverse opposed the suit primarily by delay rather than
legal argument. The court ultimately entered a default judgment
against the defendants after numerous pretrial delays, but several court orders shed light on the court’s likely ruling should it
have decided on the merits.
In LiveUniverse, the plaintiffs were a number of music publishers holding copyrights to millions of songs by thousands
of artists. The plaintiffs sued LiveUniverse and Brad Greenspan, the owners and operators of www.lyricsdownload.com,
www.completealbumlyrics.com, and www.lyricsandsongs.com,
alleging that the infringing websites copied, distributed, and
publicly displayed “the lyrics from hundreds of thousands of
[the plaintiffs’ songs], without permission or licenses although
such licenses [were] readily available.”21 Moreover, the plaintiffs
averred that the defendants “knowingly assist[ed] and induce[d]
their website users’ infringement of [the plaintiffs’] rights” by
allowing those users (1) to contribute copyrighted lyrics to the
lyrics sites, and (2) to incorporate copyrighted lyrics on the
users’ own websites.22 Despite the allegations concerning website users, the plaintiffs did not bring a separate action against
any individual user.
Pursuant to the statutory damages provision of the Copyright Act, the plaintiffs in LiveUniverse sought damages in the
amount of $150,000 for each instance of infringement.23 In light
of the defendants’ publication of “over 700,000 lyrics with hundreds more added daily,”24 the plaintiffs essentially aimed to
decimate the defendants’ websites. More concerning, an award
of that amount would obliterate any unlicensed lyrics site that
published enough lyrics to be useful to its users.
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
26
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
After the LiveUniverse defendants ignored multiple discovery
requests and court orders, the plaintiffs moved for imposition
of sanctions, and eventually for default judgment against the
defendants. Due to the defendants’ litigation strategy (or lack
thereof), the court’s final judgment does not provide significant
insight into the court’s reasoning. In a tentative ruling on the
plaintiffs’ motion for preliminary injunction, however, the court
evinced its general line of thought. To prevail on a motion for
preliminary injunction, a plaintiff “must establish that he is
likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance
of equities tips in his favor, and that an injunction is in the public interest.”25
First, the court addressed the plaintiffs’ likelihood of success on the merits of the case. Concluding that the plaintiffs
established ownership of the infringed material, and that the
defendants directly infringed the plaintiffs’ “exclusive right to
reproduce, publicly distribute, and publicly display the lyrics to
[the infringed] songs” under § 106(1), (3), and (5), the court
concluded that the plaintiffs had shown a likelihood of success on the merits.26 The court’s holding as to rights (1) and
(5), reproduction and public display, respectively, would obtain
in virtually any claim against lyrics sites. As to exclusive right
(3), however, the court was probably referring to the defendants’ practice of providing users with prewritten computer
code, called “widgets,” which allowed users to add hyperlinks to
the lyrics on the users’ personal websites.27 Notably, the court
did not consider the defendants’ publications “derivative works”
under § 101, though in the case of websites that publish annotations to lyrics, the published lyrics could constitute derivative
works.28
The court next noted that the plaintiffs were entitled to a
presumption of irreparable harm, which the defendants had not
rebutted. Considering the balance of equities, the court cited a
Ninth Circuit case for the premise that “a defendant who knowingly infringes another’s copyright cannot complain of the harm
that will befall it when properly forced to desist from its infringing activities.”29 With respect to the public interest, the court
cited another Ninth Circuit case, axiomatically concluding “[t]
o neglect the public interest in the protection afforded a copyright is to forget the purpose of copyright law.”30 Finally, the
court held that the requested injunction was overbroad, as it
targeted songs not owned by the plaintiffs, but the court granted
the plaintiffs’ motion as to the songs at issue in the case.31
In October 2012, the court issued a permanent injunction
incorporating the terms of the preliminary injunction, and
awarded to the plaintiffs statutory damages of $12,500 for each
of the 528 songs that the plaintiffs showed to be infringed, for
a total of $6.6 million, plus costs and attorneys fees.32 Notably, in determining the amount of statutory damages, the court
requested information as to the defendants’ ordinary licensing
fees, which the defendants did not provide.33 In future cases,
courts may find such evidence relevant in determining the
amount of statutory damages, notwithstanding licensing fees’
closer relationship to compensatory damages.
FINDING A CHORD: COMPULSORY LICENSING
While the plaintiffs in LiveUniverse heralded the award as a victory for music publishers and songwriters alike,34 the ultimate
effect of such judgments is not entirely clear. The nature of song
lyrics makes them an awkward fit for the rigid protections of the
Copyright Act. For instance, the publication of other literary
works, such as books, magazines, and newspapers, creates independent markets for those works. When someone infringes a
book copyright, the infringer directly harms the market for that
book and deprives the author of a sale. Song lyrics, on the other
hand, depend on the songs in which they are written and the
general demand for music. When a website infringes a composition copyright by publishing unlicensed song lyrics, the website
may actually bolster the market for that song by enabling familiarity among users, who may then venture out to see a concert,
benefiting the composition copyright holder,35 or decide to purchase a copy of the song, benefiting the recording copyright
holder.36
Despite the optimism of some scholars,37 the fair use defense
to infringement probably does not apply to unlicensed lyrics
websites, due to the nature of the copyrighted works and the
fact that lyrics sites publish lyrics in their entirety. Under the
legal status quo, courts must treat song lyrics as they treat other
literary works, even though lyrics occupy a distinct niche in
the market for the written word. To be sure, the Copyright Act
provides composition copyright holders the same rights as the
copyright holders of other written works. As Justice Stewart
wrote in 1975, “[t]he immediate effect of our copyright law is to
secure a fair return for an ‘author’s’ creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for
the general public good.”38
The general public good would best be served, however, by
a compulsory licensing scheme, such as the compulsory license
for phonorecords under § 115. Specifically, § 115 allows people
to make and distribute phonorecords of nondramatic musical
works by obtaining a compulsory license, thus circumventing
the strictures of § 106.39 The license applies to musical compositions, but only includes distribution of phonorecords of such
works, defined as “material objects in which sounds . . . are fixed
by any method . . . and from which the sounds can be perceived,
reproduced, or otherwise communicated.”40 In short, § 115’s
compulsory licensing scheme allows for an artist to “cover” a
previously released work, so long as the artist does not fundamentally alter the work.
If the legislature adopted a compulsory license for publication of song lyrics, then composition copyright holders and
artists would profit from lyrics sites, and the general public
would benefit from the subsequent dissemination and availability of song lyrics. A compulsory license would also obviate
concerns about record companies hoarding the rights to song
lyrics, or charging users exorbitant fees. While some websites
currently have a sufficient user base to fund the attainment of
licenses, either through donations or advertising revenue, a
compulsory license must take into account the significant barriers to entry in the song lyrics market. Namely, lyrics sites benefit
from a network effect; that is, the more lyrics a site publishes,
the more users it gains, and vice versa. If licenses are not priced
affordably, new lyrics sites will have difficulty attracting the
necessary funds to build viable databases. Without an affordable, compulsory license, barriers to entry, coupled with the
exclusivity of copyright holders’ rights, may deprive millions of
listeners the musical experience they desire, whether singing to
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
27
Miley in their cars, or at home watching a controversial awards
ceremony.
ENDNOTES
1. Final Ruling on Motion for Default Judgment, Peermusic, III, Ltd. v.
LiveUniverse, Inc., No. CV-09-6160-GW (C.D. Cal. Oct. 9, 2012), 2012 WL
4840803.
2. Order of Court, Peermusic, III, Ltd. v. Motive Force LLC, No. 2:09-cv01137 (W.D. Pa. Jan. 4, 2010).
3. Alex Pham, NMPA Targets Unlicensed Lyric Sites, Rap Genius
among 50 Sent Take-Down Notices, BillboardBiz (Nov. 11, 2013), http://
www.billboard.com/biz/articles/news/legal-and-management/5785701/
nmpa-targets-unlicensed-lyric-sites-rap-genius-among.
4. Bart Cammaerts et al., London Sch. of Econ. & Political Sci.,
Media Policy Brief 9: Copyright & Creation: A Case for Promoting
Inclusive Online Sharing 7 (2013), http://www.lse.ac.uk/media@lse/documents/MPP/LSE-MPP-Policy-Brief-9-Copyright-and-Creation.pdf.
5. See Christian Kerstetter, Don’t Forget the Lyrics!: A (Fair Use) Defense of
Lyrics Websites, 40 AIPLA Q.J. 339 (2012) (referring to MetroLyrics.com).
6. Eric Pfanner, Music Industry Sales Rise, and Digital Revenue Gets the Credit,
N.Y. Times, (Feb. 26, 2013, http://www.nytimes.com/2013/02/27/technology/
music-industry-records-first-revenue-increase-since-1999.html?_r=0.
7. Indeed, in 2012 the popular lyrics site Rap Genius received “a $15 million investment from Silicon Valley venture firm Andreessen Horwitz.” Pham,
supra note 3. See also Joseph Plambeck, Lyrics Sites at Center of Fight over Royalties, N.Y. Times, May 9, 2010, http://www.nytimes.com/2010/05/10/business/
media/10lyrics.html?pagewanted=all (“Every week there is some new potential income for lyrics . . . . The revenue is not significant now, but it’s just the
beginning.”).
8. Pham, supra note 3.
9. Caitlin Dewey, The Music Industry Is Going After Rap Genius—
And the Law Is on Its Side, Wash. Post, Nov. 12, 2013, http://
www.washingtonpost.com/blogs/style-blog/wp/2013/11/12/
the-music-industry-is-going-after-rap-genius-and-the-law-is-on-their-side/.
10. 17 U.S.C. § 101.
11. T.B. Harms Co. v. Jem Records, Inc., 655 F. Supp. 1575, 1576 n.1
(D.N.J. 1987).
12. See U.S. Copyright Office, Circular 56(A), Copyright Registration of Musical Compositions and Sound Recordings (2012); 3
Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 2.05[D].
13. Ben Sisario, In Music Piracy Battles, Lyrics Demand Respect Too, N.Y.
Times, Nov. 11, 2013, http://www.nytimes.com/2013/11/12/business/media/inmusic-piracy-battles-lyrics-demand-respect-too.html?_r=0.
14. 17 U.S.C. § 106.
15. Id. § 107.
16. Id.
17. But see Kerstetter, supra note 5, at 363 (arguing that each statutory factor
weighs in favor of fair use). Strangely, Kerstetter argues that “because the market
for song recordings is unlikely to be affected negatively by lyrics websites,” the
fourth factor weighs in favor of fair use. In the case of song lyrics, however, it is
the musical composition, and not the sound recording, that might be negatively
affected by lyrics websites. That is, “fair use” publication of song lyrics deprives
the composition copyright owner of revenue for publishing those same lyrics.
18. 17 U.S.C. § 504(c)(1).
19. Id. § 504(c)(2).
20. Kerstetter, supra note 5, at 344.
21. Complaint at ¶ 5, Peermusic, III, Ltd. v. LiveUniverse, Inc., No. CV09-6160-GW (C.D. Cal. Aug. 24, 2009).
22. Id.
23. Id. ¶ 44.
24. Id. ¶ 33.
25. Order on Motion for Preliminary Injunction at 2, LiveUniverse, No. CV09-6160-GW (C.D. Cal. May 13, 2010) (quoting Am. Trucking Ass’ns v. City
of L.A., 559 F.3d 1046, 1052 (9th Cir. 2009)).
26. Id. at 2–3.
27. Complaint, supra note 21, ¶ 36.
28. See 17 U.S.C. § 101 (“A ‘derivative work’ is a work based upon one or
more preexisting works, such as a . . . musical arrangement . . . or any other form
in which a work may be recast, transformed, or adapted. A work consisting of
editorial revisions, annotations, elaborations, or other modifications which, as a
whole, represent an original work of authorship, is a ‘derivative work.’”).
29. Order on Motion for Preliminary Injunction, supra note 25, at 4 (quoting Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 829 (9th Cir.
1997) (internal quotation marks omitted)).
30. Id. (quoting Elvis Presley Enters., Inc. v. Passport Video, 357 F.3d 896,
899 (9th Cir. 2004)).
31. Id. at 5.
32. Final Ruling on Motion for Default Judgment, LiveUniverse, No. CV09-6160-GW (C.D. Cal. Oct. 9, 2012), 2012 WL 4840803, at *4.
33. Id. at *1–2.
34. Press Release, Arent Fox, Arent Fox Wins Landmark $6.6 Million Copyright Damages Judgment in Song Lyric Infringement Lawsuit
(Oct. 11, 2012), http://www.arentfox.com/newsroom/press-releases/
arent-fox-wins-landmark-66-million-copyright-damages-judgment-song-lyric.
35. See 17 U.S.C. § 106(4).
36. See id. § 106(3).
37. See generally Kerstetter, supra note 5.
38. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).
39. 17 U.S.C. § 115.
40. Id. § 101.
Sam Guthrie is a May 2014 graduate of the University of Virginia School
of Law. Sam will join the Washington, D.C. office of Vinson and Elkins in
September, where he will focus on federal tax controversy and tax planning
matters. He may be reached at [email protected].
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
28
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
Fifty Ways to Be a Lawyer
(sung to the tune of “Fifty Ways to Leave Your Lover”)
By Shelly Rosenfeld
The issue is so clear in the case, he said to me
We must convince the judge and jury to agree
But what if I can’t write the motion beautifully?
There must be fifty ways to be a lawyer
It’s sometimes when you think a case is going well
then you realize it’s time to write a Motion to Compel
And once you’ve started writing you cannot unring that bell
There must be fifty ways to be a lawyer
Fifty ways to be a lawyer
You just review the files, Miles
Get a new client, Bryant
Make sure to bill, Gill
Just get contingency
Don’t forget to file, Lyle
Don’t go to trial, Kyle
Just beg and plea, Dee
And get your agreed fee
You just review the files, Miles
Get a new client, Bryant
Make sure to bill, Gill
Just get contingency
Don’t forget to file, Lyle
Don’t go to trial, Kyle
Just beg and plea, Dee
And get your agreed fee
It seems to take so long to find the magic case
Until it’s been so long you wish you’d be any other place
But if you leave your seat you’ll start to lose the race
About the fifty ways (to be a lawyer)
He said why don’t you just push it to the very max
And if you stay up all night you’ll begin to see the facts
And when I could not see straight
I realized it’s probably time to relax
There must be fifty ways to be a lawyer
Fifty ways to be a lawyer
You just review the files, Miles
Get a new client, Bryant
Make sure to bill, Gill
Just get contingency
Don’t forget to file, Lyle
Don’t go to trial, Kyle
Just beg and plea, Dee
And get your agreed fee
You just review the files, Miles
Get a new client, Bryant
Make sure to bill, Gill
Just get contingency
Don’t forget to file, Lyle
Don’t go to trial, Kyle
Just beg and plea, Dee
And get your agreed fee
Extra Verse
We help clients in their time of greatest pain
Type memos until our eyes begin to strain
But it’s all in the pursuit of our personal gain
There must be fifty ways to be a lawyer
You just review the files, Miles
Get a new client, Bryant
Make sure to bill, Gill
Just get contingency
Don’t forget to file, Lyle
Don’t go to trial, Kyle
Just beg and plea, Dee
And get your agreed fee
Law Students
Be sure to visit the Forum’s Facebook page and subscribe at
https://www.facebook.com/#!/groups/135643383201194/
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
29
2013–2014
LEADERSH I P
RO STER
ABA FORUM on the ENTERTAINMENT
and SPORTS INDUSTRIES
CHAIR
RICHARD J. IDELL
Idell and Seitel, LLP • San Francisco, CA
BUDGET CHAIR
ANDREW BOORTZ
Nexon America Inc. • El Segundo, CA
CHAIR-ELECT
JANINE S. SMALL
Carroll, Guido & Groffman • New York, NY
ANNUAL MEETING SPONSORSHIP CHAIR
NEETA RAGOOWANSI
New York, NY
IMMEDIATE PAST CHAIR
CHRISTINE LEPERA
Mitchell Silberberg & Knupp LLP • New York, NY
LIAISONS/SPECIAL APPOINTMENTS
LAW STUDENT LIAISON
PAMELA D. BASS
West Hartford, CT
GOVERNING COMMITTEE MEMBERS
TODD BRABEC
Tarzana, CA
GARY GREENSTEIN
Wilson Sonsini Goodrich & Rosati • Washington, DC
YOUNG LAWYERS LIAISON
RACHAEL SHINOSKIE
Schorr Law, APC • Los Angeles, CA
HENRY W. ROOT
Lapiduc, Root, Franklin & Sacharow, LLP • Santa Monica, CA
LIASON TO THE ABA COMMISSION ON RACIAL
AND ETHNIC DIVERSITY IN THE PROFESSION
CHERYL L. DAVIS
Menaker & Hermann LLP • New York, NY
BOBBY ROSENBLOUM
Greenberg Traurig, LLP • Atlanta, GA
CYNTHIA SANCHEZ
National Copyright Institute (INDAUTOR) • Mexico City, MX
CYNTHIA SANCHEZ
National Copyright Institute (INDAUTOR) • Mexico City, MX
LIAISON TO THE SECTION OF
INTELLECTUAL PROPERTY
KENNETH M. KAUFMAN
Manatt, Phelps & Phillips, LLP • Washington, DC
DEBBIE SPANDER
Wasserman Media Group • Los Angeles, CA
OPERATIONS CHAIRS
SPECIAL PROJECTS CHAIR, ENTERTAINMENT
PETER DEKOM
Peter J. Dekom, a Law Corporation • Los Angeles, CA
SPECIAL PROJECTS CHAIR, SPORTS
JEFFREY GEWIRTZ
Brooklyn Nets & Barclay Center • Brooklyn, NY
EDITOR-in-CHIEF, Entertainment and Sports Lawyer
STEPHEN G. WEIZENECKER
Barnes & Thornburg LLP • Atlanta, GA
BOOK PUBLISHING CHAIR
ROBERT G. PIMM
Law Office of Robert G. Pimm • Walnut Creek, CA
MEMBERSHIP CHAIR
TRAVIS LIFE
Life Law Office • Chicago, IL
ABA BOARD OF GOVERNORS LIAISON
STEPHEN E. CHAPPELEAR
Frost Brown Todd LLC • Madison, WI
SECTION OF INTERNATIONAL
LAW PRACTICE LIAISON
ALEXANDRA DARRABY
The Art Law Firm • Los Angeles, CA
DIVISION CHAIRS AND VICE CHAIRS
ARTS & MUSEUMS
LEANN SHELTON
Rockwell Group • New York, NY
CHERYL DAVIS (2012 | Vice Chair)
Menaker & Hermann LLP • New York, NY
DIGITAL MEDIA AND NEW TECHNOLOGIES
MELISSA DEVITA (Co-Chair)
Qualcomm Incorporated • San Diego, CA
Dara L. Gelbtuch (Co-Chair)
Vevo • New York, NY
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
30
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014
ELECTRONIC GAMING
SETH J. STEINBERG
Digital Arts Law
San Francisco Film Centre • San Francisco, CA
SPORTS
JASON HILLMAN (Co-Chair)
Cavaliers Operating Company, LLC • Cleveland, OH
VERED N. YAKOVEE (Co-Chair)
Boston Celtics • Boston, MA
INTERNATIONAL
ALEXANDRA DARRABY
The Art Law Firm • Los Angeles, CA
MAIDIE OLIVEAU (Vice Chair)
Arent Fox LLP • Los Angeles, CA
LICENSING, MERCHANDISING, AND BRANDING
LEONARD GLICKMAN
Cassels Brock & Blackwell LLP • Toronto, CANADA
casey schwab (Vice Chair)
Playa Del Rey, CA
LITERARY PUBLISHING
SCOTT BAIN
George Mason University • Arlington, VA
THEATER AND PERFORMING ARTS
VICTORIA G. TRAUBE
Imagem USA • New York, NY
ANKE STEINECKE (Vice Chair)
Random House Inc. • New York, NY
MARSHA S. BROOKS (Vice Chair)
Brooks & Distler • New York, NY
LITIGATION
LAWRENCE A. WAKS
Jackson Walker LLP • Austin, TX
M. GRAHAM COLEMAN (Vice Chair)
Davis Wright Tremaine, LLP • New York, NY
BRIAN D. CAPLAN (Vice Chair)
Caplan & Ross, LLP • New York, NY
VOLUNTEER LAWYERS FOR THE ARTS
MARCI walker
Lawyers for the Creative Arts • Chicago, IL
KENNETH FREUNDLICH (Vice Chair)
Freundlich Law • Beverly Hills, CA
PETER J. STRAND (Vice Chair)
Leavens, Strand Glover & Adler LLC • Chicago, IL
MOTION PICTURES, TELEVISION, CABLE, AND RADIO
DANIEL (DAN) H. BLACK (Co-Chair)
Greenberg Traurig, LLP • Los Angeles, CA
casey summar (Vice Chair)
Arts & Business Council of Greater Nashville • Nashville, TN
VERNON GREGG CHU (Co-Chair)
BBC Worldwide Americas • New York, NY
ABA FORUMS DEPT.
321 N. Clark Street • MS 18.2
Chicago, IL 60654
DANIEL MARK (DAN) SATORIUS (Vice Chair)
Satorius Law Firm, PLLC • Minneapolis, MN
MUSIC AND PERSONAL APPEARANCES
JUDY TINT
Judy Tint, Counselor at Law • New York, NY
ZEINA HAMZEH GRENIER (Vice Chair)
Universal Music Publishing Group • Santa Monica, CA
Forum Manager
TERESA UCOK
[email protected]
Entertainment & Sports Lawyer Managing Editor
ERIN REMOTIGUE
[email protected]
ANDY TAVEL (Vice Chair)
Tavel & Shulman, PC • New York, NY
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
Summer 2014 / Volume 31, Number 2 / Entertainment and Sports Lawyer
31
Nonprofit Organization
U.S. Postage
PAID
American Bar Association
Forum on the Entertainment and Sports Industries
American Bar Association
321 North Clark Street
Chicago, IL 60654-7598
Volume 31, Number 2, Summer 2014
ISSN: 0732-1880
Membership and Subscription Information: 800/285-2221
Printed on Recycled Paper
I n this I ss u e
1
1
2
3
7
8
9
14
29
The Day the Music Died: Digital Inheritance and the Music Industry
by mattHEW c. borden
Lyrical Restraint: Lyrics Site and Copyright Infringement
by sam guthrie
Message from the Chair
Last Call at the Oasis: Modifying the Noninteractive Webcast Royalty System to Support Sustainability
by mihajlo babovic
Letter from the Editor
BOOK REVIEW
The Little Book of Golf Law
by Stanley w. root, jr.
Create a Compulsory Licensing Scheme for On-Demand Digital Media Platforms
by james h. richardson
Richard Cheese, Seu Jorge, and the Scope of Permissible Changes under Section 115 Licenses
by eric lauritsen
Fifty Ways to Be a Lawyer
by shelly rosenfeld
Published in Entertinment & Sports Lawyer, Volume 31, Number 2, Summer 2014. © 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written
consent of the American Bar Association.
32
Entertainment and Sports Lawyer / Volume 31, Number 2 / Summer 2014