CHICAGO MUSIC GUIDE – LEGAL TIPS (By: Michelle M. Wahl, Partner)
Swanson, Martin & Bell, LLP (330 N. Wabash, Ste. 3300, Chicago, IL 60611)
The Music Modernization Act – A Long Overdue Overhaul to the Music Copyright Licensing Infrastructure
The Music Modernization Act seeks to overhaul the music copyright licensing infrastructure, a daunting task that most would say, is long overdue. The bill is a bipartisan package incorporating several pieces of legislation, including the CLASSICS Act, the AMP Act and rate standard parity provisions from the Fair Play Fair Pay Act.
Among its proposed changes, the Act would fundamentally alter Section 115 of the U.S. Copyright Act, which regulates compulsory licenses in nondramatic musical works, or songs outside of a movie, television show or play. Specifically, the bill seeks to reform Section 115 to ensure timely compensation to songwriters by ending the Notice of Intent process and instead creating a single Mechanical Licensing Collective funded by the digital services and providing a publicly accessible database for song ownership information. The bill further seeks to establish an agency devoted to licensing and royalties that would be led by a board comprised of individuals from various sectors of the music industry. This agency would be tasked with identifying rightsholders, issuing blanket licenses to digital services and would collect and pay royalties to the appropriate rightsholders.
Additionally, the bill seeks to close the pre-1972 loophole by establishing federal copyright protection that would guarantee compensation for artists who recorded their music prior to February 15, 1972. It would also require digital radio to pay master rights sound recording performance royalties for music created prior to 1972 (e.g., addressing the CLASSICS portion of the bill).
The bill would also codify SoundExchange’s practice of honoring “Letters of Direction” from artists who wish to share royalties with producers and other creatives who participated in the creation of the works. It further provides a process whereby participants in recordings made before the digital performance right was established in 1995, can share in digital royalties for those sound recordings, and would further provide a “willing buyer, willing seller” rate standard requiring digital platforms to pay fair market value for music.
The bill also seeks to revamp the current rate court system who hears disputes over royalties paid by digital services. In other words, instead of having one judge hearing all rate court cases for ASCAP and another hearing the same for BMI, the Act would provide for a Southern District of New York judge being randomly assigned to each individual case. In so doing, the Act seeks to repeal Section 114(i) of the U.S. Copyright Act, and replace it with judges who would have the ability to gauge market value for musical compositions.
The Music Modernization Act passed the U.S. House in April 2018 by unanimous vote and was introduced in the Senate on May 10, 2018 by Sen. Orrin Hatch (R-UT) and a bipartisan group of co-sponsors. The Act has received widespread support across the various industry groups and is expected to pass early.