Recently, I sat in on a well-attended speaker event at Cassels Brock.
The first speaker at the event was Erich C. Carey, Vice President and Senior Counsel of the National Music Publishers’ Association (NMPA), which is the trade association that represents American music publishers and their songwriting partners.
The NMPA often advocates for music publishers and songwriters, and the focus of Mr. Carey’s presentation was their work leading up to, and a general update regarding the US Music Modernization Act, with particular emphasis on how the MMA will change mechanical licensing.
The second speaker was John Phelan. Mr. Phelan is the director general of The International Confederation of Music Publishers, the trade association which represents the interests of the music publishing community internationally. Constituent members include music publishers’ associations from Europe, Middle East, North and South America, Africa and Asia-Pacific. One of ICMP’s stated missions is to increase copyright protection internationally. The focus of Phelan’s presentation was the European Copyright Directive, and specifically article 13, the so-called “value gap” provision.
The Music Modernization Act
Carey explained that the MMA combined three previously separate bills– The Classics Act, the AMP Act, and the Music Modernization Act. The bill passed unanimously through both the senate and house of representatives, and was passed in September 2018. Carey’s talk was focused on how the MMA would change mechanical licencing.
Mechanical Licensing – Background
Mechanical rights to a piece of music are those that stem from the mechanical embodiment of the piece.
According to Carey, mechanical licensing was put into place to compel licensing for a set royalty to piano players in cinemas.
The US Copyright Act codified this in s.106, while s.115 instated the copyright royalty board which has continued to be the body that adjusts the standard licensing fee.
The Copyright Act is now out of date in some ways. In the current era of streaming services, there are often issues matching the mechanical rights owner to the song. Under the Copyright Act, if there was a matching issue the streaming service would simply have to send a notice of intent to use the music to the copyright office, and would not have to pay until the true owner was identified.
While this would appear to be a sensible approach, a few years ago, the copyright office received 60 million notices of intent. This completely overwhelmed the system and effectively allowed the streaming services to use music without paying.
Proponents of MMA believe it can provide a solution
The MMA is in part meant to allow streaming services to pay rights-holders in a more straight-forward, streamlined way. The MMA creates a mechanical licensing collective. The collective will be run by a board of directors representing the music publishing industry, and will include three committees, including an Operations Committee, Unclaimed Royalties Committee, and Dispute Resolution Committee.
Streaming services with unmatched music will have to pay the appropriate royalty to the collective. The collective will then hold the money until the rights-holder can be found. The collective will also allow blanket licences, allowing streaming services to licence an entire body of work and not be concerned about outstanding royalties owed.
Costs associated with enacting the MMA
In accordance with the MMA, streaming services will pay for the costs associated with the MMA infrastructure.
The services have agreed to taking on the costs because there will be clear rules where there were none before, and so with the proper infrastructure in place they will now be protected from copyright infringement claims if they follow proper procedure.
Carey sees the MMA as a marketplace solution, which has allowed the typically slow-changing law to be specifically tailored to a rapid technological advancement.
He made it clear that there is still much to do regarding outlining the structure and technical implementation of the MMA, and that policy makers and industry members have a lot to do before the MMA’s January 1st, 2020 launch date.
European Copyright Directive
Mr.Phelan began his presentation at this point to discuss his area of expertise. The European Copyright Directive was adopted on April 17, 2019. Its purpose is to create better protections for rights holders. Mr. Phelan focused his talk on what is known as the “value gap” provision, or Article 13 of the directive.
Many services earn a significant portion from content that they do not pay for, and which they use without fear of liability.
Mr. Phelan used YouTube as an example – until the directive was proposed, YouTube was covered under the Safe Harbour clause, which exempted services that were technical, automatic and passive from copyright laws.
As a result, YouTube was paying 20x less per user per year than what they should have been.
The directive aims to close the gap between the money services gain from the artists’ work and the money the artists see. Article 13 eliminates many exemptions, including the one that YouTube was originally covered by.
Under the new directive, services that have been available in the EU for more than three years or have a gross revenue over €10 million will be held liable for copyright infringements unless they can demonstrate taking certain steps to mitigate the issue.
They must show that they have made best efforts to get permission from the copyright holder and made best efforts to ensure that material without permission was not made available, and that they have acted quickly to remove any infringing material.
Reaction to Article 13
Though Article 13 may seem relatively straightforward, it has been a topic of heated social discourse.
Movements such as Create Refresh and #DeleteArticle13 are concerned that the new rules will be a censorship of sorts, causing services to block parody videos, live stream gaming, and other content.
Many are concerned about what they perceive to be restrictions on their online freedoms.
However, proponents of the directive state that it is a long-awaited modernization of the law, and that it will help protect artists. Members of the European parliament appear to agree as the directive has been passed.
Transposition of European Copyright Directive
The next step, Mr. Phelan said, is transposition. This means that within two years of the date the directive was published in the Official Journal of the European Union – May 17, 2019, – every country in the EU must enact laws that comply.
The European Commission will then examine each country’s enactment to make sure that it complies with the shared directive.
Transposition comes with its own set of challenges, as different countries have different ideals about the internet and copyright.
Staying up to date on European Copyright Directive
As the directive is transposed across the EU, Mr. Phelan suggests following the IPKat Blog entries by Eleonora Rosati for insightful and up to date commentary.
Written by Rachel Marcus, IPilogue Editor and JD Candidate at Osgoode Hall Law School.
In 2018, the US Music Modernization Act (MMA) was signed into law and included provisions that addressed the issue of matching mechanical rights owners to a song in the world of streaming. The MMA established and tasked the Mechanical Licensing Collective (MLC) with negotiating mechanical licenses with digital service providers. This contrasts Canada’s orphan works regime, which is governed by section 77 of the Copyright Act and allows the Copyright Board of Canada to grant a licence to an applicant who has reasonably tried but failed to locate a copyright owner. The Copyright Board’s 2009 report on Orphan Works noted that of the applications received for licences pursuant to section 77, only half were granted with over 20% abandoned as the copyright owner was found with the help of the Board and often collective societies. For example, CMRRA has created a portal to help match musical works with rightsholders. Erich C. Carey, Vice President and Senior Counsel of the National Music Publishers’ Association (NMPA) noted that the US Copyright Act and Copyright Office are unprepared to address the issues of orphan works in the era of streaming services, at one point receiving 60 million notices of intent to use music where the owner could not be found. This essentially allowed streaming services to use music without paying. As such, the MLC will likely be an effective mechanism in assisting users with locating and matching rights holders with works, which is essential as streaming continues to dominate the music industry.