DMCA

Speaking at the World Creators Summit in Washington, D.C., U.S. Register of Copyrights Maria Pallante confirmed "Provid(ing) a full public performance right for sound recordings" -- assumed by some to mean broadcast radio royalties for records -- is a policy priority of the U.S. Copyright Office.

In October of 2011 the Copyright Office officially stated terrestrial radio royalties were a priority for the next two years, basing the argument on the need for parity with other services like Internet radio.

"There is an economic disadvantage between the businesses that offer sound recordings over the Internet as compared to those that offer them over the air (the former are required to pay performance royalties while the latter are not)," read the "Priorities and Special Projects" paper released in October 2011 (see more in RAIN here). "Finding a way to reconcile these differences has been a long-standing goal of Congress and the Copyright Office, and the Office will continue to provide analysis and support on this important issue."

Earlier this year Pallante pledged to work towards copyright law reform, focusing specifically on the DMCA (which is the primary law governing Internet radio's use of copyright sound recordings). See more in RAIN here.

The Courts, Intellectual Property and the Internet Subcommittee of the House Judiciary held its first hearing on comprehensive copyright review last month (see RAIN here).

London-based 7digital is releasing its "DMCA-compliant" music streaming platform to would-be U.S. webcasters. Turntable.fm's Piki service (more in RAIN here) is already using the 7digital service to stream.

7digital provides its digital music store and other related services to consumer electronics companies like Samsung and music services like Turntable.fm.

The company's streaming radio API is meant to make it easy to launch an Internet radio service that adheres to the restrictions of the U.S. law known as the Digital Millennium Copyright Act of 1998. (The law limits the ways in which "non-interactive" services can present and make music available to consumers.) The streaming API also affords access to 7digital's full catalog of more than 25 million tracks of licensed music.

7digital thinks there's real appeal to consumers and a growing market for curated, "non-interactive, DMCA-compliant" services -- that is, Internet radio.

The company's president for North America Vickie Nauman told TechCrunch, "It's such a great lean-back experience and we’ve been watching the marketplace and we feel that the partners that we have that are doing really well, combined with the need people have for a really easy way to listen to their music have led us to decide that this year we're really going to focus on radio."

7digital CEO and founder Ben Drury spoke at the recent RAIN Summit Europe conference in Brussels. Hear audio of the entire conference with SoundCloud. The links are in the right-hand margin of kurthanson.com.

Read more in TechCrunch here.

Billboard cites "a source" and reports:

"Major labels have made a commitment with SoundExchange to pay half of royalties from a statutory service in the event they have negotiated a direct deal. In other words, a major label with a direct deal with Pandora would still pay to SoundExchange the 50% of royalties afforded to artists under the statutory license. The label would not keep 100% of royalties and pay artists a royalty -- after recoupment -- as it does with royalties from purchases and non-statutory services."

Earlier this week (here) we discussed the fact that sound recording copyright owners are only legally required to split U.S. Internet radio royalties 50/50 with performers when the webcaster operates under the "statutory" webcast licenses (those are the deals which cover all recorded copyright music, with royalties payable to SoundExchange). In other words, copyright owners striking "marketplace" deals directly with webcasters (which is perfectly legal to do) are not under the 50/50 split requirement, and only need compensate performers under the terms of the individual artist/label contract.

This fact led some to speculate that direct license deals could benefit webcasters and copyright owners (labels) alike, to the detriment of artists. For example, a label and operator could negotiate a deal which pays the label just 67% of what it would have under the statutory. The webcaster gets a one-third discount, and the label earns more than the 50% of the statutory royalty.

Industry expert David Touve most recently examined this situation in light of Apple's direct label negotiations for its updcoming streaming radio service. He wrote, "it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement." Read more here.

Satellite radio operator SiriusXM and broadcasters like Clear Channel and Entercom have forged direct webcast royalty deals with several independent labels over the past months. Billboard says its source "does not know if independent labels have made a similar commitment with SoundExchange."

Read Billboard's story here.

We've heard recently that Apple's "iRadio" webcasting service has hit snags in licensing discussions with rights owners (most recently here).

It's important to note that any such deals that result from negotiation with labels mean Apple will not operate under the statutory webcast license (any service willing to operate within the statutory's requirements can pay that rate -- no negotiation needed). A direct license with labels could allow Apple to avoid the statutory's specific limitations on the use of music (its prohibition on "on-demand" and other measures known as the "sound performance complement"). It might even grant Apple a preferred royalty rate.

Such an arrangement would also free the labels from the statutory's required 50/50 split of the royalties with performers. As per the DMCA, the royalties SoundExchange collects from webcasters operating under the statutory license get split between copyright owners (record labels, who get 50%) and performers (the featured performer gets 45%, with 5% going to musicians unions for backup performers).

But the DMCA also allows for copyright owners to negotiate directly with webcasters, which is what appears to be happening with Apple. In such a case, the DMCA's requirements (like the "sound performance complement" and the "50/45/5" split) don't apply. Performers would still most likely earn something from webcast plays on a service with a direct license, under the terms of their particular contract with their record label. But if some artists are chafing at what they're paid by webcasters paying the statutory, they'll likely make far less from Apple iRadio plays.

"And so, it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement," writes Washington and Lee University assistant professor David Touve in Rockonomic here.

It's feasible to imagine that a record label, no longer required to share 50% of the webcasting royalties, could grant a major licensee like Apple a significant discount, and still earn more than it would under that statutory. Apple's savings, and the labels' bonus, would come from what performers would have earned under the statutory license.

House Judiciary Committee Chairman Bob Goodlatte (pictured) says he'll lead his panel to "conduct a comprehensive review of U.S. copyright law over the coming months," likely (at least partially) in response to Register of Copyrights Maria Pallante's copyright reform (reported in RAIN here). Goodlatte spoke at the World Intellectual Property Day at the Library of Congress.

"The goal of these hearings will be to determine whether the laws are still working in the digital age," Goodlatte said.

Among other issues, "there are concerns about statutory license and damage mechanisms. Federal judges are forced to make decisions using laws that are difficult to apply today. Even the Copyright Office itself faces challenges in meeting the growing needs of its customers - the American public."

Last year Utah Rep. Jason Chaffetz (R), a member of the Judiciary Committee, introduced the Internet Radio Fairness Act (read more in RAIN here). A companion bill was introduced to the Senate by Oregon Senator Ron Wyden (D). The bill calls to change the legal standard by which judges determine the statutory royalty rate for streaming radio. The royalty rates for most other, related uses of copyright sound recordings use the standards set in section 801(b) of the Copyright Act. The 1998 Digital Millennium Copyright Act made an exception for Internet radio, requiring rates to be set to what the judges felt a hypothetical "willing buyer and willing seller" would agree. The law would bring Internet radio in line with media like cable- and satellite radio, requiring rates to be set along 801(b) guidelines.

The bill has yet to be re-introduced to this year's Congress.

Read more in The Verge here.

A New York appeals court has ruled that the "safe harbor" provisions of the 1998 Digital Millennium Copyright Act do not extend to recordings made before 1972.

The ruling came in an appeal from Universal Music Group of a lower court decision which favored online music service Grooveshark. The service claimed (and was validated, at least at first) that it wasn't liable for user-uploaded pre-1972 sound recordings, as it was protected by the DMCA's "safe harbor" rules (read more here).

However, it's the DMCA which establishes and governs the way digital services (e.g. online radio) pay for the public performance of copyright sound recordings. Might this ruling call into question whether the law truly covers webcasters' use of pre-1972 recordings?

Digital Music News quotes the decision: "The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation... it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress intended for the DMCA only to apply to post-1972 works."

We're looking forward to learning whether this decision has any impact on Internet radio. Read Digital Music News coverage here.