Entertainment & Media Law Signal : Canadian Entertainment Lawyers for Licensing, Intellectual Property & New Media Matters

Canadian entertainment lawyers are forced to look on in wonderment (and envy?) at the plethora of entertainment law-related legal disputes which arise in the United States.  Now (finally!) one with a Canadian angle - Gingrich ordered to stop using Heavy song

U.S. presidential hopeful Newt Gingrich's campaign is striking a sour note with a Montreal record label.

Third Side Music has sent Gingrich's team a cease and desist order demanding they stop using the song "How You Like Me Now" at campaign events.

The song is by the British band The Heavy, and the Third Side record label holds the rights to it.

In recent years, particularly in the 2008 US presidential campaign, assertions of copyright intended to stop politicians from making use of songs reached such a fever pitch that it was one of the primary topics of discussion on Ben Sheffner's late, lamented blog (from which this post swiped its name) Copyrights & Campaigns, and the US Center for Democracy and Technology published a 2010 report entitled Campaign Takedown Troubles: How Meritless Copyright Claims Threaten Online Political Speech.  There are also some great law journal articles on the topic: for example, Erik Gunderson's "Every Little Thing I Do (Incurs Legal Liability): Unauthorized use of Popular Music in Presidential Campaigns" (14 Loy. L.A. Ent. L.J. 137 (1993-1994)) and David Johnston's "The Singer Did Not Approve This Message: Analyzing the Unauthorized Use of Copyrighted Music in Political Advertisements in Jackson Browne v John McCain" (27 Cardozo Arts & Ent LJ 687 (2010)).

What is the position under US copyright law regarding the use of songs by political campaigns?  First, we need to draw a distinction between using a song at a public event, like a rally, and using a song in an advertisement - the legal restrictions are different in the different circumstances.  Tamera Bennett provides a handy summary of the relevant legal implications:

...so long as a campaign secures the necessary public performance license, a song can be played at campaign events without any permission from the artist, songwriter or music publisher.  If Mr. Gingrich would like to incorporate the song into a video or advertisement, then his team would need to secure a master use license from the record label and a synchronization license from the music publisher.

Fairly simple: in the US, using a song at a public event requires only the securing of a valid public performance license from a performing rights organization (such as ASCAP, BMI or SESAC) by either the campaign or the venue at which the event is being held.  Beyond requiring that a public performance license has been secured, it seems that an artist or record company has no other ability to restrict the use of a composition or recording at a political event.  If, however, a political campaign wants to make use of a song in an ad, then a synchronization license and a master use license would be required.

So, if that's the case, on what basis might The Heavy and Third Side Music be objecting to the Gingrinch campaign's use of "How You Like Me Now"?  After all, available news reports indicate that the song was only being played at public events and not being used in ads, and it would be a pretty basic error for either the venue to not have a license or the campaign to not have acquired what is referred to as a "travelling blanket license".  What gives?

Here's where the differences between Canadian and US copyright laws come into the picture (Canadian copyright law is relevant because the record label is in Canada and it was evidently a Canadian lawyer who sent the letter to the Gingrinch campaign).  In Canada, the Copyright Act (Canada) gives to authors rights referred to as "moral rights".  The relevant part of Section 14.1 of the Act reads as follows:

The author of a work has, subject to section 28.2, the right to the integrity of the work...

Section 28.2 of the Act elaborates on what "integrity of the work" means:

The author’s right to the integrity of a work is infringed only if the work is, to the prejudice of the honour or reputation of the author,

(a) distorted, mutilated or otherwise modified; or

 

(b) used in association with a product, service, cause or institution.

 

Thus, under Section 28.2, the use of a composition "in association with a ... cause" which "prejudice[s]" the "honour or reputation of the author" would constitute an infringement of the author's moral rights.

Regrettably, we don't have any Canadian caselaw on point which would help us analyze the circumstances in which a Canadian author might be able to successfully claim an infringement of his or her moral rights if the author's song has been used by a Canadian political campaign.  Presumably the use of a song by a politician who does not enjoy the support of the author could constitute the necessary prejudice, since Canadian courts have held that the question of whether prejudice has occurred is a subjective one - essentially meaning that so long as the author thinks their reputation has been prejudiced, and so long as the author's opinion is "reasonably arrived at", then prejudice will have been deemed to occur (see Snow v. The Eaton Centre Ltd. (1982) 70 C.P.R. (2d) 105).  It doesn't take a very limber imagination to envision an artist who does not want their work used by a politician.

So, does that answer the question? Do The Heavy have a right to stop the Gingrich campaign from using their song?  Well, we're not quite there yet.  A list of just some of the issues which remain outstanding:

• first, the Gingrich campaign is operating in the US - which does not recognize moral rights for authors (or, properly, only recognizes moral rights for authors of works of visual art, such as painting and sculpture) - so someone could not assert a moral rights claim in the US
• second, the UK (from where The Heavy hail) only recognizes a more limited form of moral rights as compared to Canada - and the UK version of moral rights does not include the "used in association with a cause" branch which is found in the Canadian Copyright Act - The Heavy wouldn't suddenly acquire expanded moral rights simply because their record company was located in Canada
• third, moral rights are held by authors, not by record companies or music publishers - if anyone wanted to complain here, it would have to be The Heavy themselves (assuming they are the authors of the song in question), not their surrogates
• fourth, it would be interesting to inquire whether The Heavy (again, assuming they are the authors of the song in question) had waived their moral rights in any kind of music publishing contract they had signed

In sum, then, can The Heavy prevent the Gingrich campaign from using their song at public events?  Not under US law.  Could they prevent a Canadian politician from using their song at a public event in Canada? Possibly - though if they wanted to take the dispute to court they would certainly be breaking new ground in Canadian copyright law.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Chris Castle has collected all of the installments from his ongoing series of posts More Questions for Artists: Record Producer Agreements which covers, in fascinating detail (but readable prose!) just about everything you could possibly want to know about record producer agreements.  The collected posts are an incredibly valuable resource for recording artists and the lawyers who advise them.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Music Canada has released (hat tip: Sundeep Chauhan - @CopyrightReport) a handy publication entitled Licensing Digital Music in Canada, which, starting on page 6, provides useful charts and links to describe what licenses are needed to provide different types of online music services (e.g., for digital downloads, talk to the record labels, SOCAN and CMRRA).  Contact information is provided for all the relevant copyright collectives, the major labels and a slew of indie labels.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Music Canada, the trade association which "represents Canada’s major [record] labels", has a very handy "licensing primer" on its website, which includes a nice little table summarizing (with links) which collectives you need to obtain licenses from in order to obtain authorization to do certain things with "song" (e.g., talk to AVLA if you need permission to reproduce a sound recording, talk to CMRRA if you need permission to reproduce a composition).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A number of news outlets have recently reported on the flood of litigation which is expected to arise in the United States as a result of recording artists seeking to terminate and reclaim ownership of their sound recordings issued in 1978 and in subsequent years (New York Times:  Record Industry Braces for Artists’ Battles Over Song Rights; Rolling Stone: Record Biz Braces for Legal Battles Over Copyright Law). 

Steve Gordon, over at the Entertainment, Arts & Sports Law Blog, has written The Comprehensive Guide to Reclaiming Old Masters, which rather elegantly sets out the relevant legal analysis under the US Copyright Act.  Gordon highlights two significant issues which will need to be addressed, the latter of which I had not seen previously raised: first, are the sound recordings "works made for hire" and, second, are the artists the only relevant "authors" of the sound recordings, or could producers be considered to be authors (and hence entitled to a reversionary interest) as well?  In any event, it appears that the US music industry is in for a few years of "interesting times" (to borrow from the purported Chinese curse) - as the clock ticks down to the dates on which some of the most commercially successful sound recordings of the last fifty years start to become eligible for "reclamation" by artists and performers.

So - do any similar concerns arise under Canadian copyright law?  The short answer is "not really", at least not in the same way that it is happening under US law - but Canadian copyright law does have a "reversionary interest" which will one day pose similar problems to current owners of some types of copyrighted materials.

Section 14 of the Copyright Act (Canada) provides that, 25 years after an author dies, the copyright in any works which the author created and for which the author was the first owner of copyright (so, basically, excluding works created "in the course of employment") automatically reverts back to the estate of the author.  So, for example, if Bill Smith writes a novel, then enters into an agreement with a book publisher for that novel which grants the publisher the exclusive right to distribute the book, and then Bill dies, 25 years after Bill dies, the rights in the novel revert back to Bill's estate, irrespective of the publishing contract Bill signed or anything which might be contained in it.  Thus, copyright owners should be vigilant about any works they own/control whose author is deceased - the author's estate could pop up out and assert their rights.

Does Section 14 of the Copyright Act (Canada) apply to sound recordings?  It does not appear to, since Section 14 only applies to "works", and "sound recordings" are technically not "works", but a separate subject-matter of copyright protection found in Section 18 of the Act.  The "maker" of a sound recording is the owner of copyright in that sound recording, and so the ownership of Canadian record labels in sound recordings for which they were the "maker" seems more secure than their US counterparts (setting aside for the moment the convoluted analysis which would be required for sound recordings created prior to the current iteration of the "sound recording" regime found in the Act).  All that being said, Section 14 would certainly apply to musical compositions, and so any publishing or licensing arrangements entered into in respect of a musical composition would be subject to the reversionary interest.

Is any of this a good idea?  As I argued in this article published earlier this year, I don't think so:

For copyright exploiters, the existence of the reversionary clause poses a troubling challenge: the security of their tenure as owner is subject to the reversionary interest of the author's estate. For creators, the clause wreaks a counter-intuitive result: given the uncertainty in their ownership and the possibility that they may be excluded from the last twenty-five years of the copyright term, exploiters will be inclined to discount the value they are prepared to pay for a work.

Exploiters may also, given the tenuous nature of their ownership interest, be disinclined to invest resources toward the exploitation of works nearing the reversionary threshold, since they will be unsure whether an author's estate will "pop up" and assert an ownership claim. The doubtful status of ownership of the work is compounded by the fact that so few authors and estates are even aware of the existence of the reversionary interest-leaving assertions of an estate's rights to those who are well-advised by counsel or lucky enough to come across the clause.

Worse, the philosophical and logical foundations of the reversionary interest remain weak. It is unclear why, aside from sentimental reasons, the heirs of creators of copyrightable works should be entitled to an ownership interest in works which the author licensed or sold during his or her lifetime. Not only is no other form of intellectual property treated in this fashion, no other form of property whatsoever is treated this way-a patent, apartment complex or shares of capital stock once owned by a deceased individual are not suddenly snatched from their current owners and bestowed upon an estate on the twenty-fifth anniversary of the death. That threshold further highlights the arbitrary nature of the interest: if the concern is to ensure that the heirs of creators are not left destitute, why would the law require them to wait twenty-five years?

Our Copyright Act requires many alterations to make it easily comprehensible and coherent. Eliminating the reversionary interest would be a minor step in the right direction.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On May 30, 2011, the Ontario Superior Court of Justice approved the settlement agreements reached among the four major Canadian record labels, CMRRA and SODRAC (click here for previous Signal coverage of the topic).  As reported by Christine Dobby in the Legal Post:

But, in what was described in court as a contentious and heated process that included eight court-assisted mediation meetings and numerous case management appearances, the parties reached an agreement that includes the financial settlement as well as a process for dealing with future use of unlicenced work.

“The result overall is approximately $50.2-million in settlement benefits to the class,” Mr. Foreman said. “I believe it’s a strong financial resolution to the case.”

Harrison Pensa, who acted as counsel to the plaintiffs in the matter, have updated their website to include the Court approved Notice of Certification and Settlement Approval. Of particular interest is the requirement for the creation of "a revised Canadian mechanical licensing platform", to be implemented by January 1, 2013, and which will include a publicly accessible website to "allow for public review and submission of ownership claims of unidentified Musical Works".  So not only will crowd-sourcing become part of the process, but works which remain unidentified will be made the subject of a license application by CSI (CMRRA-SODRAC Inc.) to the Copyright Board under the unlocatable copyright owners regime - and royalties paid in respect of those works will be held in trust pending eventual identification.  The new mechanism seems to be an innovative and productive solution to the challenge of unidentified owners.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Over the last couple of weeks a number of articles have come to my attention which, in different measures, I thought provided some great background information on how the business facets of the film and television industries work and what types of arguments can be made for and against the types of copyright reform which many think are necessary to facilitate the continued survival of the entertainment industries in light of digital technology:

• The Economist wrote about Hollywood's disc problem: video nasty, highlighting how innovative business models and delivery systems have undercut the gargantuan DVD/Blu-ray cash behemoth
• in a longer, much more detailed piece, The Economist looked at Hollywood and home entertainment: unkind rewind, a brilliant little explanation of the economics of the film/TV industries and how the increasingly rapid closing of different "windows" of exploitation (eg theatrical, pay-per-view, home video) is impacting different elements of the distribution chain (how unhappy do you think theatre owners are that movies will soon be available for home consumption in as little as eight weeks from their initial theatrical release?)
• with a hat tip to Lon Sobel, Peter Yu's Digital Copyright and Confuzzling Rhetoric offers an enjoyable read on the various arguments being advanced by many parties in the ongoing struggles for copyright reform - he covers four arguments in favour of stronger protection and enforcement, four arguments against it, and offers five strategies for making more convincing the arguments of the entertainment industries

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Pandora Media, Inc.'s Form S-1 (hat tip: Geist), filed with the US Securities and Exchange Commission on February 11, 2011, offers interested readers some detailed information not just about their financials, but also about the licensing arrangements that US-based online music services have to put in place:

(From the "What We Do" section): Our largest royalty expense arises from our use of sound recordings. We obtain performance rights licenses and pay performance rights royalties to the copyright owners of sound recordings, typically performing artists and recording companies, pursuant to the Digital Performing Right in Sound Recordings Act of 1995, or DPRA, as amended by the Digital Millennium Copyright Act of 1998, or DMCA. Under federal statutory licenses created by the DPRA and DMCA, we are permitted to stream any lawfully released sound recordings and to make reproductions of these recordings on our computer servers, without having to separately negotiate and obtain direct licenses with each individual copyright owner. These statutory licenses are granted to us on the condition that we operate in compliance with the rules of statutory licenses and pay the applicable royalty rates to SoundExchange, the non-profit organization designated by the Copyright Royalty Board, or CRB, to collect and distribute royalties under these statutory licenses. The rates we pay to SoundExchange for non-interactive streaming of sound recordings pursuant to these licenses are privately negotiated or set by the CRB. In 2007, the CRB set royalty rates for non-interactive, online streaming of music that were extremely high. In response to the lobbying efforts of internet webcasters, including Pandora, Congress passed the Webcaster Settlement Acts of 2008 and 2009, which permitted webcasters to negotiate alternative royalty rates directly with SoundExchange outside of the scope of the CRB process. In July 2009, certain webcasters reached a settlement agreement with SoundExchange establishing a royalty structure more favorable to us that by its terms will apply through 2015. This settlement agreement is commonly known as the “Pureplay Settlement.” Once the rates and terms of the Pureplay Settlement came into effect in July 2009, any qualifying commercial webcaster could elect to avail itself of those rates and terms by filing an initial notice, followed by annual notices, of election with SoundExchange through 2015. In July 2009, we elected to be subject to the Pureplay Settlement and have timely filed notices of election with SoundExchange for 2010 and 2011 and intend to continue to make such elections through 2015.

As the charts available in the filing show, the Pureplay Settlement, in setting rates for the non-subscription portion of Pandora's service, contemplates a licensee fee which has a floor of 25% of gross revenues.  And that does not include payments owing in respect of Pandora's use of compositions (which are the subject of separate licenses with ASCAP, BMI and SESAC, which shave another few points off gross revenues).  Indeed, as the Statement of Operations shows (page F-3 of the filing), Pandora spends an amount equal to approximately half of its gross revenues on content acquisition (meaning license fees payable to rights owners).  Puts the discussion from last fall about the license fees sought by Canadian music collectives in a slightly different light.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Eriq Gardner at THR, Esq. reported earlier this month about a recent lawsuit filed in the United States: CBS Sued Over 63-Year-Old Song Used in 'Family Ties'.  A copy of the complaint can be found here.  The facts of the claim, as set out in the complaint, are fairly straightforward: in 1985, the producers of the sitcom Family Ties entered into a license agreement with the owners of copyright in a song entitled "The Texaco TV Star Theatre Theme Song".  The license agreement authorized use of the song in the television broadcast.  In 2008, the current owners of the rights in the sitcom decided to release episodes of the show on DVD - and only subsequently released that they had undertaken an activity which lay beyond the scope of the license they had entered into twenty-three years previously.  Attempts to enter into a retroactively effective license were unsuccessful, and the plaintiffs elected to bring the copyright infringement claim.

The dispute highlights the dangers, for producers of film, TV and other audio-visual content, of the dangers of entering into licenses for content which have a limited duration or a limited scope of authorized media.  It would have been a remarkably prescient individual in 1985 who could have foreseen that popular television shows would have an economically valuable afterlife as home video products - but bargaining for rights "in perpetuity, in all media whether now known or hereafter devised" would have saved some headaches down the line.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• From the "old, but new to me" file, the Future of Music website has an interesting post listing The 29 Streams: twenty-nine streams of revenue which "music" can "generate".  Some are a bit of a fudge - "government grants" isn't really what I'd consider a "revenue stream" - but the post offers a handy, and nicely-detailed, explanation of how composers, performers and owners of sound recordings can monetize their "assets".
• The Economist offered a brief overview of changes to the concert-pricing paradigm in Live music: pricing the piper.  A couple of interesting innovations appear to be afoot: dynamic pricing (where tickets become more expensive closer to the date of performance, or prices fluctuate in accordance with demand) is particularly interesting, and seems to be similar to what the airline industry already does (meaning that concert-goers will now get to enjoy that unique feeling of never being quite that you didn't just overpay for your ticket...).  It's also worth remembering what the Economist notes: "At least four players are involved in putting on a live-music show: an artist, a promoter, a ticket-seller and a venue."
• With a tip of the hat to Entertainment Law Reporter, Richard Watt has written a fascinating article (of course, I can't claim to understand much of the math used in the article) on the "correct" price for music licenses for radio broadcast (in other words, how much should a radio station have to pay in order to license music for use on air?): Fair Copyright Remuneration: The Case of Music Radio. The article is of interest for anyone considering how the Copyright Board of Canada sets tariffs for music exploitation. (Slightly frightening point from the article's conclusion: radio play appears not to increase the sale of music.)
• Chris Castle offers a lengthy consideration of How Not to Monetize File Sharing. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

JETLawBlog has an interesting post up about the ongoing dispute between concert impresario Michael Cohl and LiveNation (Upcoming Rolling Stones Tour Fuels the Battle between Live Nation and Michael Cohl) - of particular value is a link to the purchase agreement which memorialized the "divorce" between the parties.  The agreement provides an intriguing drafting precedent in a number of respects: from the structuring of the payments and the description of the assets, to, in particular, the manner in which the non-competition provisions were handled.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In UMG Recordings, Inc. v Troy Augusto, the US Court of Appeals for the Ninth Circuit confirmed that promotional CDs which are distributed by record companies are not subject to restrictions on their sale (hat tip: Barry Werbin). As the court noted, many record companies distribute music CDs to various individuals or organizations (such as music critics and radio stations) in an attempt to develop marketing buzz.  The CDs are often marked with phrases such as "Promotional Use Only - Not for Sale", or even bear printed statements such as:

"This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws."

Universal Music Group was chagrined to find that Mr. Augusto was obtaining promotional CDs and selling them on eBay - and sued Augusto for copyright infringement (on the basis that Augusto had infringed on UMG's exclusive right to distribute the CDs).  Augusto, in defence, raised the US "first sale" doctrine (found in Section 109(a) of the US Copyright Act, which states that "the owner of a particular copy or phonorecord ... is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord" (Section 109(b) nonetheless prohibits the "rental, lease, or lending" of the CD).  UMG argued that there had never been a "sale" of the CDs, only a license on particular terms - terms which were breached by Augusto's subsequent sales on eBay.

The Ninth Circuit Court of Appeals held that no license had been created: there did not need to be a "sale" of the CD in order to trigger the "first sale" doctrine, only a transfer of title - and title had been transferred by the fact that the CDs were mailed out without any prior agreement (or even discussion) with the recipient as to how the CDs were to be handled.  Simply printing words on the CDs was not sufficient to create a license or to otherwise restrict the ability of the recipient to deal with the CDs.  The court also held that, in the alternative, Augusto was able to rely on the provisions of the Unordered Merchandise Act, which results in the CDs effectively being treated as "gifts" and confers on recipients the right to dispose of the merchandise as they see fit.

(Although not much attention was paid to the matter, the Ninth Circuit distinguished software licenses mostly on the basis that software owners are able to "control" what software users/licensees are able to do with their software - and there seems to be an implicit recognition that software users need to affirmatively "accept" a software license and that the software itself can impose restrictions on what users are able to do with the software (such as the use of copy controls).  However, while that analysis might work for "click-wrap" licenses, it is unclear whether it would work for "shrink-wrap" licenses.)

Canadian copyright law does not enjoy the benefit of a codified "first sale" doctrine, though there is some limited recognition of the concept of "exhaustion", which would be functionally equivalent (see previous Signal discussion about the "first sale" doctrine).  Pascale Chapdelaine, in an IPilogue post we previously highlighted, offers some detailed thoughts about Canadian recognition of a first sale doctrine:

The doctrine of first sale finds its roots in the English common law rule against restraints on alienation of property. In effect, it modulates two competing property interests in the copyrighted work, e.g. the intangible exclusive rights of the copyright holder in the copyrighted work and the property rights in the tangible embodiment of this work by the purchaser. One limits the rights of the other and vice versa (although very asymmetrically, as the exclusive rights conferred by copyright impose greater limitations on copy ownership than the reverse).  First sale is also consistent with the normative values of freedom and autonomy that underlie property including chattels, as well as the instrumental goals of copyright to encourage the creation and dissemination of copyrighted works, when viewed from a broader perspective that also encompasses users of copyrighted works.

Pascale notes that Bill C-32 (The Copyright Modernization Act) incorporates references to the first sale/exhaustion doctrine.  Bill C-32 would, if passed in its current form, appear to result in Canadian law being consistent with the decision in UMG v Augusto.  Clauses 4, 9 and 11 of Bill C-32 create what is colloquially referred to as a "making available" right - similar to the exclusive right to distribute a work created by Section 106(3) of the US Copyright Act.  Clause 4 of Bill C-32 would add a new subclause (j) to Section 3(1) of the Copyright Act (Canada), which would result in the section reading as follows [emphasis added]:

3.(1) For the purposes of this Act, “copyright”, in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever, to perform the work or any substantial part thereof in public or, if the work is unpublished, to publish the work or any substantial part thereof, and includes the sole right...

(j) in the case of a work that is in the form of a tangible object, to sell or otherwise transfer ownership of the tangible object, as long as that ownership has never previously been transferred in or outside Canada with the authorization of the copyright owner,

Clause 11 of Bill C-32 would modify Section 18 of the Copyright Act (Canada) by adding a new Section 1.1 reading as follows:

(1.1) ... a sound recording maker’s copyright in the sound recording also includes the sole right to do the following acts in relation to the sound recording or any substantial part of it and to authorize any of those acts: ...

(b) if it is in the form of a tangible object, to sell or otherwise transfer ownership of the tangible object, as long as that ownership has never previously been transferred in or outside Canada with the authorization of the owner of the copyright in the sound recording.

That would have the effect of making the decision of a Canadian court faced with facts similar to those in Augusto almost certainly the same as the Ninth Circuit's decision (at least with respect to copyright issues - I'll leave commentary on whether Canada has anything similar to the Unordered Merchandise Act to someone else).  The new Section 3(1)(j) and 18(1.1) would give record companies the exclusive right to transfer ownership of the tangible object on which a sound recording was embodied - in other words, the physical CD.  But, they would enjoy that right only if ownership had never previously been transferred with the authorization of the record company.  Note that the language does not require a "sale" - only a "transfer of ownership".  Thus, just as the Ninth Circuit held, a Canadian court would likely determine that ownership of the CD had been transferred when the record company mailed out the promo CDs, and that the recipient of the CD, and anyone to whom they transferred the CD, would be free in turn to sell or transfer the CD. 

Of course, the analysis in the preceding two paragraphs depends on Bill C-32 being passed with the relevant language intact.  In the absence of Bill C-32 being passed, Canadian copyright owners do not enjoy an express "making available" right, so Canadian record companies would appear to be in an even less enviable position than their US counterparts when trying to prevent unauthorized sales of promotional CDs.  The possible arguments they could raise would be limited to a copyright infringement action due to a breach of a license term, or a straightforward breach of contract case; without having done any research on the matter, I'm not sure I can see why Canadian courts would be any more receptive to such arguments than the Ninth Circuit was.  Possibly, if the album or single in question had not yet been made publicly available for sale, the record companies could argue that the work on the CD was "unpublished" and that selling a promotional CD was an infringement of their right to "publish" the work - but surely that would be a very time-limited prospect.  Presumably, then, the brisk trade in promo CDs on online auction sites and in used record stores will continue unimpeded on both sides of the border.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A settlement, which remains subject to court approval, has been reached in the "Pending Lists" class action copyright infringement lawsuit: Major Canadian Record Labels Reach Agreement Regarding Payments to Songwriters and Publishers.  From the press release:

EMI Music Canada Inc., Sony Music Entertainment Canada Inc., Universal Music Canada Inc. and Warner Music Canada Co. have reached an agreement to pay songwriters and music publishers for outstanding "pending list" claims and to resolve a proposed class action lawsuit.

The current music licensing system allows for recordings to be issued without preclearance from copyright owners but subject to licensing agreements with CMRRA and SODRAC, who represent most publishers and songwriters. The vast majority of royalties owing for such sales have always been and will continue to be paid promptly by the record labels. The proposed agreement settles all alleged copyright infringement liability related to that small minority of unlicenced works that have accumulated over the years. The proposed agreement also establishes a new mechanism that will expedite future payments of mechanical royalties to music rights holders.

As also noted in the press release, the "settlement is a compromise of disputed claims and is not an admission of liability or wrongdoing by the record labels".  Michael Geist is reporting that the settlement involves a $45 million payment (though that number doesn't appear in the press release).  The amended Statement of Claim in the class action can be found here.  The plaintiffs' lawyers maintain a website with details about the lawsuit here.  It will be particularly interesting to see the details of the "new mechanism" which has been agreed to, which, in the words of Alain Lauzon, the General Manager of SODRAC, "will keep the pending list problem from building up again".

The Pending Lists lawsuit became the subject of online debate about a year ago, when Michael originally reported on it (Canadian Recording Industry Faces $6 Billion Copyright Infringement Lawsuit), which prompted a fairly blistering response from Barry Sookman (Geist inflates pending lists claim to vilify record labels).  The legal press also got in on the action, with The Lawyers Weekly providing coverage.

UPDATE (1/10/11 - 1pm): The Harrison Pensa website for the case has been updated to include copies of the various settlement agreements with each of the defendants.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A round-up of music-related items which have collected in my Reader over the last little while:

Tamera Bennett posted a couple of items of interest relevant to music law:

• a chart showing income streams for recording artists
• a short memo on music publishing royalties (How the Money Flows: Songwriter Income Streams)

As sales of recorded music continue to fall (which is to say, sales of physical media are falling faster and further than increased digital sales can make up for), of increasing importance to artists and performers are other forms of revenue:

• The Dave Matthews Band shows how to make money in the music industry
• techdirt looks at some alternative methods for making money from music
• The Economist argues that things aren't so bad after all (which I suppose is comforting to those working in areas of the music industry which are making money, but not so much for others): Having a ball - In the supposedly benighted music business, a lot of things are making money

For additional cheery reading, check out New BPI Report Shows Illegal Downloading Remains Serious Threat to Britain's Digital Music Future (hat tip: Entertainment Law Reporter).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Ontario government today proclaimed into force the Ticket Speculation Amendment Act, 2010 which amends the Ticket Speculation Act, RSO 1990, c. T-7.  According to this CBC story, the new legislation is intended to "stop U.S. entertainment giant Ticketmaster and others from selling and reselling tickets to the same event".

As it stands, the Ticket Speculation Act makes virtually all sales of (or even attempts to sell) a ticket to a sports or entertainment event (whether a "theatre, opera house, public hall, show, game, grandstand, race meeting, exhibition or amusement of any kind") for any amount over the face value of the ticket an offence subject to a fine of not more than $5,000.

Municipalities may also have by-laws which speak to the matter of "scalping" - the City of Toronto's Municipal Code contains Chapter 743-2 which prohibits using or occupying "a street for the purposes of the sale, or offering for sale, of event tickets".  Violating that provision of the Municipal Code carries its own fine of up to $5,000.  (There have been a couple of unsuccessful attempts by persons charged with violating the Code to argue that the provincial law somehow supercedes or renders unenforceable the municipal law - see City of Toronto v. Cacciatore (2007 ONCJ 92 (CanLII), affirmed Toronto (City of) v. Cacciatore (2002 CanLII 44998 (ONCA)), and R. v. Koverko (2005 ONCJ 420 (CanLII)).)

Julie Gibson, in 2008, wrote a nice overview in the Lawyers Weekly of ticket scalping legislation throughout Canada: Hot tickets - The move from streetside scalping to online ticket speculation. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

John Jurgensen in the Wall Street Journal has written a fascinating piece on the business practices which have made Shawn Carter (occasionally referred to as Jay-Z) once of the richest music moguls in the world: The State of Jay-Z's Empire.

Jay-Z is notable not just for the breadth of his business activities (from book publishing to sports team ownership to executive roles at music labels), but for the savvy manner in which he structures the deals he enters into:

Jay-Z's music career began in 1996, when no major labels wanted to sign the 26-year-old local rapper. He and two partners formed an independent label, Roc-A-Fella Records, by necessity. That move eventually strengthened his bargaining position. Mr. Liles, who was an executive at the iconic rap label Def Jam, recalls Jay-Z declining an offer of a traditional signing deal. "He looked at me and said 'I own the company I rap for.' " Instead, Roc-A-Fella entered a joint venture with Def Jam.

... In 2005, Jay-Z took the job of president and CEO of Def Jam while rival labels courted him. What clinched the deal with the label—by then owned by Universal Music Group—was a contract clause giving the rapper full ownership of his past recordings for Def Jam. These rights revert to him starting in 2014.

... By the time he left Def Jam in 2007, he had begun quiet negotiations with Live Nation for his next move. ... With financing from Live Nation that included about $25 million up front and $5 million annually in overhead, the rapper started Roc Nation, an umbrella for his own output and an incubator for new talent. In exchange, Live Nation shares in all new business done by Roc Nation. That ranges from a percentage of potential "Decoded" earnings to publishing revenue from the songwriter Philip Lawrence, a Roc Nation signee who has had two No. 1 songs this year, including "Just the Way You Are" by Bruno Mars.

Diversification of revenue streams, in other words, is a project not just forbusiness ventures in the music industry, but for individual artists as well.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The decision of the High Court of Ireland (which is a trial level court and not an appellate court) in EMI Records (Ireland) et al v UPC Communications (full text of the decision available here) is a fascinating (if long) read.  The plaintiffs sought an injunction against an internet service provider to "prevent the theft of their copyright by third parties illegally downloading it over the internet".  Peculiarly, according to the decision, "the form of injunction is left to the discretion of the court".  Analyses of the decision which are well-worth reading are offered by Barry Sookman and James Gannon.  In any event, in light of his finding that "the business of the record companies is being devastated by internet piracy", it is clear from the tenor of the decision that Mr. Justice Charleton of the High Court really, really wanted to grant an injunction - but found that the High Court lacked the jurisdiction to do so.  The High Court's conclusion:

Solutions are available to the problem of internet copyright piracy. It is not surprising that the legislative response laid down in our country in the Copyright and Related Rights Act 2000, at a time when this problem was not perceived to be as threatening to the creative and retail economy as it has become in 2010, has made no proper provision for the blocking, diverting or interrupting of internet communications intent on breaching copyright. In failing to provide legislative provisions for blocking, diverting and interrupting internet copyright theft, Ireland is not yet fully in compliance with its obligations under European law. Instead, the only relevant power that the courts are given is to require an internet hosting service to remove copyright material. Respecting, as it does, the doctrine of separation of powers and the rule of law, the Court cannot move to grant injunctive relief to the recording companies against internet piracy, even though that relief is merited on the facts.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

While late to the party, I thought I'd take a moment to provide a legal perspective on last week's blogosphere brouhaha regarding the Canadian Broadcasting Corporation's evident policy of not allowing Creative Commons-licensed music to be used on (at least) its radio broadcasts and podcasts.  For background, see the comments to this post at the CBC's website, particularly the comment made by Chris Boyce, who is Programming Director at the CBC; this post by Michael Geist; this post at the Creative Commons blog (which itself contains numerous links to other sites covering the story); and this post by Chris Castle.  I should also note, for what it's worth, that I am an admirer of the Creative Commons effort to create a licensing scheme which facilitates the dissemination of creative works.

If I had to use two phrases to summarize my concerns to a client who asked whether they could or should be using CC-licensed materials on their radio broadcasts or podcasts, it would be these: ease of use; and lack of legal recourse.

To see how we get to those concerns, let's start by looking at how the CBC is currently situated.  They have, according to comments left at the CBC website, a bulk licensing arrangement in place with a music provider (APM Music).  That arrangement likely provides something along these lines: the CBC pays a license fee, gets access to a huge library of music, and can essentially make whatever use they'd like of the music contained in that library when creating their broadcasts.  All they do is give their employees/contractors access to the library and they can have at 'em - find a song you like and stick it into the program, no worries, because it's all covered by the license which a lawyer farther up the chain has vetted and confirmed is acceptable.  How does that compare to the situation where someone wants to make use of CC-licensed music?  Let's back into the answer to that question by looking at Chris Boyce's comment [emphasis added]:

The issue with our use of Creative Commons music is that a lot of our content is readily available on a multitude of platforms, some of which are deemed to be “commercial” in nature (e.g. streaming with pre-roll ads, or pay for download on iTunes) and currently the vast majority of the music available under a Creative Commons license prohibits commercial use.

In order to ensure that we continue to be in line with current Canadian copyright laws, and given the lack of a wide range of music that has a Creative Commons license allowing for commercial use, we made a decision to use music from our production library in our podcasts as this music has the proper usage rights attached.

As others have pointed out, there is some CC-licensed music which is available for commercial use (though as Boyce notes, the vast majority is not).  Let's look at the explanation offered by the CC wiki:

The majority of music released under a CC license uses one of the licenses that prohbit commercial use (BY-NC, BY-NC-ND, BY-NC-SA). Below are some pointers to finding music that allows commercial use.

If your use also involves adapting the music (including syncing to video), you'll further have to exclude music under Attribution-NoDerivatives (BY-ND; which does allow commercial verbatim use), and either release your work under Attribution-ShareAlike (BY-SA) or also exclude music under that license. This leaves music under plain Attribution (BY) or in the public domain.

Already we're starting to get into some potential wrinkles.  We have to exclude all music licensed under an NC license, but what about ND licenses?  The wiki explanation says if you want to "adapt" the music, you have to exclude BY-ND licensed music.  What does "adapt" mean?  Let's look at a Canadian CC BY-ND license: there's no mention of the word "adapt", but it does say that a licensee cannot "alter, transform, or build upon this work".  That starts to worry me.  What does "alter" mean?  Does that mean I can't edit the work (for example, just playing the chorus, or editing the track so that the chorus comes before the verses, or speeding it up, or slowing it down)?  What exactly are my radio programmers planning on doing with this track?  Are they going to play the entire track as a track so listeners can listen along, or are they planning on using the track is some more innovative way, such as incorporating it into an on-air skit?  It's hard for me to predict what someone is going to do with the song, and hence whether the BY-ND license will permit that use - presumably the bulk licensing arrangement already addresses this kind of situation, so that would be one less headache to deal with. 

If I drill down further into the full text of BY-ND license, I'm really not any farther ahead - there's still no definition of "adapt", or "alter", and while there's a definition "Derivative Work", the license doesn't actually state that what I'm allowed to do or not do in connection with a "Derivative Work", though it does say that a "Derivative Work" is "a work that produces or reproduces the Work or any substantial part thereof in any material form".  Going back to the face-plate of the BY-ND license, it states "No Derivative Works" - which seems to mean that I can't incorporate the licensed Work into any other work, which would preclude me from using the Work in a radio show, which is itself a "work".  The full text of the license does include a definition of a "Collective Work", and states that a Collective Work is not a "Derivative Work" - but is a radio broadcast a "Collective Work"?  Hard to say - arguably it is, but all of the examples used to illustrate the definition of "Collective Work" are print-based.  Again, my bulk license would expressly contemplate using licensed tracks in radio broadcasts, so my concerns there would be minimal.

Maybe I'll just avoid the potential confusion and, as the CC wiki recommends, limit myself to songs which are licensed under a BY (Attribution) license.  (The BY-SA (Share Alike) license is a non-starter since it would mean that the resulting work (ie the radio broadcast) would itself need to be licensed on a CC BY-SA basis, and I'm assuming that the client isn't willing to contemplate - maybe they are, but that's going to get into policy considerations which are beyond the scope of this exercise.) 

So, the edict goes forth: employees, you can use music licensed under a CC BY licenses.  Have at 'em!

 The CC wiki, in addition to pointing to a variety of other sites which contain CC licensed music which allows for commercial use, contains this information:

As of October 2010 Jamendo hosts 7414 albums under BY-SA, 1607 albums under BY, and 987 albums under BY-ND.

Clicking on the middle link takes us here, and since we're patriotic Canadians we're going to filter for Canadian music, which takes us here.  Clicking on the first album in the search results reveals a critical flaw - the album is actually licensed under a BY-SA license, not just a BY license (it's also licensed under a US version of the CC license, not a Canadian version, but let's set that aside for the moment).  So, as a lawyer, I'm already getting worried for my client - it seems that every time one of their employees tries to find a simple BY licensed song, they're going to have to investigate whether the search engine their using is actually pulling up only BY licenses, or BY+ licenses.  The second album is also BY-SA, but when I get to the third album, I discover that it is a simple BY license.  Taking a spin through the full text of the Attribution 3.0 license, it's looking good (setting aside for the moment that it is a US form of the license, not a Canadian one) - no concerns about restrictions on use, no real issues at all, frankly, until we get to this:

UNLESS OTHERWISE MUTUALLY AGREED TO BY THE PARTIES IN WRITING, LICENSOR OFFERS THE WORK AS-IS AND MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE WORK, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF TITLE, MERCHANTIBILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR THE ABSENCE OF LATENT OR OTHER DEFECTS, ACCURACY, OR THE PRESENCE OF ABSENCE OF ERRORS, WHETHER OR NOT DISCOVERABLE. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO SUCH EXCLUSION MAY NOT APPLY TO YOU.

Here's my legal take on that: um, no.

Even better/worse, at the bottom of the license is this:

Creative Commons is not a party to this License, and makes no warranty whatsoever in connection with the Work. Creative Commons will not be liable to You or any party on any legal theory for any damages whatsoever, including without limitation any general, special, incidental or consequential damages arising in connection to this license.

Here's my legal take on the combination of those two quotes: no, no, no, no, no.

My client, the licensee, could take no comfort from these licenses whatsoever.  What assurances do I have that the person who is putting up this music and tagging it with a CC license has any rights whatsoever to do so?  I have no idea whether this person owns the music they claim to own.  Creative Commons (understandably) is also refusing to make any representations about the rights in the song.  So if it turns out that the person who is purporting to make this song available under a CC license does not, in fact, have the right to do that, then the licensee is left with no obvious legal recourse - can't sue the person who put up the song (since the license disclaims representations and liability) and can't sue CC itself (since the license disclaims representations and liability).  If I use a bulk licensing service and something goes wrong, I can sue them (i.e., an entity with actual assets) for breach of the representations and warranties in their license with me - and the onus is on them to ensure that they have properly licensed the rights they are claiming to grant to me.  A CC license, on the other hand, expressly states that it contains no representations and warranties, and that the licensors are not liable for damages.

So we get back to my concerns expressed above.  In comparison to a bulk licensing service, the CC approach contains a number of drawbacks: a comparatively limited selection of music; high transaction costs in that each potential track will not only need to be paid for, but someone will need to actively review each license for compliance with the strict BY requirement (as distinct from the bulk licensing scheme where only one license per provider is reviewed); a lack of certainty regarding ownership of the rights which are purportedly being licensed; and a lack of meaningful legal recourse if it turns out that the "licensor" did not own the necessary rights.

As I alluded to above, I think the Creative Commons licensing scheme is an innovative and productive undertaking, one which places an enormous amount of power in the hands of licensors and licensees who use the licenses in an informed manner.  But the concerns outlined above illustrate that an enormous amount of caution is warranted in making the decision to use such licenses, particularly for large commercial or public broadcasters.  (As an aside, I note that Chris Boyce's original comment indicated that while the CBC would not be using CC-licensed music, it would continue to use other CC-licensed works such as photographs - I don't think that the analysis outlined in this post differs all that much when it comes to the use of works other than music.)

UPDATE: I neglected to make mention of Tony Duarte's incisive post at IPilogue which examines CC-type licenses for film and TV productions, and which raises some concerns of broader application when reviewing such licenses - The Hazards of Mass Licensed Internet Digital Content For Film and Television Reuse.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The US Federal Court of Appeals for the Second Circuit decision in US v ASCAP (sometimes referred to as ASCAP v RealNetworks) (text of decision is available here) has generated a surprising amount of commentary - particularly from practitioners and academics outside of the United States.  The two cruxes (cruxii?) of the decision are that the downloading of a digital song file does not constitute a "public performance" for purposes of US copyright law - and so entities (such as RealNetworks and Yahoo!, who were applicants and appellees in the case) who offer music downloading services to end-users are not liable to make payment to performing rights organizations such as ASCAP - and that the district court charged with setting the royalty which ASCAP could charge to online service providers made some analytical errors in deciding on a rate.  For purposes of this post, only the first issue, that relating to public performances, will be discussed.

As Barry Sookman has noted (in a comprehensive post on the matter), the decision highlights differences between Canadian and US copyright law.  Ben Chaliss, writing at the 1709 Copyright Blog (and from a UK perspective), also provides a useful review of the decision in "Internet rates, rights (and wrongs)".  As Barry notes,

[t]he decision highlights a significant difference between US and Canadian law on whether copyright owners of the performance rights in musical works are entitled to royalties when a copy of a music file is transmitted over a network

I'd like to explore how that "significant difference" arises, because I think it's worth highlighting the fact that it stems from fundamental differences in how our respective copyright legislation conceptualizes the "bundle of rights" which comprise copyright, and not from divergence about how to interpret the same right.  In short, the same activities (selling a song for download over the internet) are treated differently on either side of the border because our copyright legislation characterizes the rights which are engaged in completely different ways.

In the United States, as has now been confirmed by the 2nd Circuit Court of Appeals, the downloading of a song does not constitute a "public performance" - an exclusive right of the copyright owner accorded by Section 106(4) of the US Copyright Act - and so no royalty is payable to ASCAP (or, presumably, BMI or SESAC, the other public performance collectives).

In Canada, by contrast, the federal appeals courts appear to have determined that SOCAN (the Canadian equivalent of ASCAP, BMI and SESAC) is entitled to a royalty when a song is downloaded - but not because the song has been "publicly performed".  Instead, under Canadian law, a royalty is payable because the composition has been "communicated to the public by telecommunication", a right which is exclusively controlled by SOCAN (see the Tariff 24 Ringtones Decision (2008 FCA 6) and the SOCAN v Bell Canada decision (released September 2, 2010)).

Compare the wording of the relevant pieces of legislation:

• in the US Copyright Act: "the owner of copyright under this title has the exclusive rights to do and to authorize ... in the case of ... musical ... works ... to perform the copyrighted work publicly" (Section 106(4))
  
• in the Canadian Copyright Act: "“copyright”, in relation to a work, means the sole right to ... perform the work or any substantial part thereof in public ... and includes the sole right ... in the case of any ... musical ... work, to communicate the work to the public by telecommunication" (Section 3(1))

ASCAP is not entitled to a royalty when a song is downloaded because that song has not been "publicly performed".  Under Canadian law, however, whether the song has been "performed" or not (whether publicly or otherwise) is largely irrelevant  - SOCAN is entitled to receive a royalty when a song is downloaded because the song has been "communicated to the public by telecommunication".  Canadian courts are not relying on an expansive concept of "performance" (whether public or not) when affirming the right of SOCAN to collect a royalty for downloads - they are recognizing the existence of a distinct, separate (even if logically subordinate) right.

The foregoing isn't to say that the decision which the Canadian courts have reached about downloads and communications to the public is unimpeachable.  While it's difficult to find fault with the US 2nd Circuit's ruminations on the nature of a "performance" and its conclusion that downloading a song doesn't resemble anything we would normally think of as a performance (as the court rather drily noted, "a download plainly is neither a 'dance' nor an 'act'"), the conclusion of the Canadian Federal Court that a download constitutes a communication to the public seems somewhat less secure.  The Federal Court in the SOCAN v Bell decision notes that there is a distinction between the concepts of a "performance in public" and a "communication to the public", but focuses its analysis only on the latter - and ends with the conclusion that one can communicate to the public "by means of a series of private communications" (supplemented by the notion that it is mostly the intention to communicate to the public which is conclusive, even if you only succeed in being "heard" (or downloaded) by one person).  The Court used an apt metaphor to describe its reasoning: a store sells goods "to the public" even if it only sells items one at a time.  That being said, the stability of that analysis, being heavily dependent on context, is open to question, and, as Sookman alludes, a Supreme Court confirmation would be welcome.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Toronto Star has been publishing an excellent series of articles by Kate Taylor on Canadian culture in a digital age - the series is a great demonstration of the potential power of long-form journalism.  A couple of particular highlights for me were the discussion about the need for "Canadian content" radio regulations in light of the sense that the Canadian music industry has matured to the point where such content mandates may no longer be required, and "The downloading debate: when it comes to copyright, it’s impossible to satisfy everyone", whose title pretty much speaks for itself.  With respect to the latter article, Chris Castle has posted a response to the proposal raised by Eddie Schwartz for an internet-wide music licensing scheme.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

CBC News reported earlier this week about the lack of availability in Canada of online/mobile streaming services in Canada such as Pandora and Spotify: "Mobile music service rejects Canada, blames fees".  As noted in the CBC story:

...in Canada, the idea is barely getting off the ground, and one of the biggest players in the industry is blaming royalties sought by major record labels.

"These rates … are astronomical," Tim Westergren, founder of California-based Pandora wrote in an email to The Canadian Press.

 "As long as rights societies take this approach, they will prevent Pandora from launching to Canadian users."

The story lit up Canadian websites and Twitter feeds, cited as evidence that Canadian music industry copyright owners were seeking excessive royalties, thereby keeping out desired services (and, for the record, I personally loved using Pandora during the brief period of time it was available in Canada and would welcome its speedy return).

It strikes me, however, that the story is somewhat more nuanced than that: it should be understood as a story about the collective administration of copyright in Canada, the effects of government intervention in the marketplace and how those two factors impact business negotiating strategies.  The words of Tim Westergren are probably best seen as a snapshot of a moment in time in the back-and-forth negotiations between a licensor and licensee - and in this post I'll try to describe what it is about the Canadian copyright licensing milieu which explains the narrative set out in that CBC story.

Before going further, it should be noted that Canada is hardly unique when it comes to Pandora: as the FAQ on the Pandora website notes, Pandora only offers its music streaming service in the United States - so Pandora hasn't been able to obtain the licenses it needs on terms it finds agreeable in any country except <strike>Canada</strike> the United States [CORRECTED: 9.26.10].  Additionally, as the CBC story notes, "other [similar] services are willing to pay the fees" - MOG has plans to enter the market soon (and hasn't to date because of Canada's "relatively small population", and Rdio is already here, having entered into agreements with the relevant rights collectives.  In other words, read the story long enough and it starts to look like the problem lies less with Canada's copyright licensing scheme than with Pandora's willingness to accede to the rates which are being put on the table in front of it.

And therein lies the crux of this story: Pandora and Re:Sound, one of the copyright collectives from which Pandora needs to obtain a license to stream music in Canada, are still in the midst of negotiations about the royalties which Pandora would be obliged to pay.  But, because of the structure of the Canadian copyright licensing regime, the dynamic at work is not simply two commercial entities negotiating in an open market - it involves two entities negotiating in a situation where one of them has the ability to resort to the enforceable decision of a state entity (the Copyright Board of Canada) if it thinks it can get a higher rate than what the party across the table is willing to <strike>give</strike> agree to [CORRECTED: 9.26.10].

In Canada, there are three sets of rights-holders whose interests are engaged when a service like Pandora proposes to stream music online: rights in the compositions (owned by composers and music publishers), rights in the sound recordings (usually owned by record companies) and rights in the performances contained on the sound recordings (often owned by record companies, though the performers usually retain a right to receive royalties).  In order to obtain those rights, Pandora need not track down each individual owner, but rather can obtain a license from a collective which acts on behalf of its members - in the case of online streaming, Pandora would need to deal with SOCAN (for public performance rights in the compositions), CMRRA/SODRAC Inc. (CSI) (for reproduction of the compositions) and Re:Sound (formerly the Neighbouring Rights Collective of Canada) (for public performance of the sound recording and performers' performances) (and potentially AVLA/SOPROQ for reproduction of the sound recording in the event that AVLA/SOPROQ elect to file a tariff).  Thus, at least three sets of negotiations are required - while seemingly straight-forward, they are complicated by the fact that collectives in Canada have the ability to have tariffs certified by the Copyright Board of Canada.  The certification of a tariff means that the applicable collective no longer needs to enter into individual negotiations with an end-user - they can simply offer the license on the terms set out in the tariff.

Making matters even more complicated is the fact that there are no currently certified tariffs applicable to the online streaming of music in the current year. SOCAN's Tariff 22.A, which covered "online music services" which "deliver[] streams to subscribers", only covered the years 1996-2006.  SOCAN's proposed tariffs for subsequent years await certification by the Board.  Similarly, the CSI certified tariff for online music services covered only the years 2005-2007 - they also have filed various proposed tariffs for subsequent years (for further details on their most recent tariff proposal applicable to online music services, see here).  Re:Sound, however, has never had a certified tariff for online music services - they have recently (July 2010) filed a proposed tariff with the Copyright Board which would cover what the proposed tariff describes as "semi-interactive webcasting" (a term, it should be noted, which does not appear in either the SOCAN or CSI tariffs) - and it is that Re:Sound proposed tariff which raised the eyebrows of the CBC reporter who wrote the Pandora story under discussion.  As noted in the CBC story:

[Re:Sound] wants to charge web-based music sites that stream to mobile devices the greater of two figures: 45 per cent of the site's gross revenues in Canada or 7.5-tenths of a cent for every song streamed. While that 45% number certainly seems high on first glance, to understand its significance it has to be put into context: the number is just Re:Sound's "opening bid", so to speak, in a process taking place before the Copyright Board.  Re:Sound will almost certainly not get a number in the final tariff which is anywhere near what they've requested - but they have every incentive to ask for the highest plausible amount, knowing full well that the number will be countered with a much lower number by interested parties who object to it, and that the Board will in all likelihood end up at a number somewhere between the opening numbers offered by the participants.  It's a bit like a segment on Pawn Stars: if you're looking to sell something, go in asking for an outrageous amount in the expectation that Rick is going to come back with a low-ball counter and you'll end up somewhere in the middle.  But obtaining a license in Canada is like a really strange version of a negotiation, because if you can't come to a mutually agreeable price, one party gets to go to (what is in effect) a government agency and have them set the price. And that's where Pandora seems to find itself: at a guess, they opened negotiations with Re:Sound, couldn't come to an agreement on what the royalty rate should be, and Re:Sound said something along the lines of "Fine, then we'll have the Copyright Board set the royalty" and started the process by asking for a massive (and likely unsustainable) amount.  The CBC story, however, glosses over that entire process. But this isn't a uniquely Canadian problem, and none of this will be a surprise for anyone who has followed Pandora: it was only fairly recently that they were able to come to terms in the United States for the exact same rights as those controlled by Re:Sound:

The long, strange saga surrounding webcaster royalty payments is (mercifully) over after a multiyear fight.

Back in 2007, the US government's Copyright Royalty Board set royalty rates for the online streaming of music that many in the business felt were unrealistically high for a nascent market, leading at least one prominent streaming service, Pandora, to threaten to pull the plug. Negotiations over an alternate pricing scheme broke down earlier this year, leaving things looking grim. With a slight nudge, however, the parties returned to the table and today announced an agreement that provides webcasters with a new royalty structure.

The fact that negotiations were even happening took Congressional action. In 2008, Congress passed the Webcaster Settlement Act, which gave the webcasters roughly a year to come to terms with SoundExchange, the entity that collects royalties on behalf of the rightsholders. But the deadline set in that act expired earlier this year, an event that triggered the breakdown of the negotiations.

Pandora founder Tim Westergren tells Ars that the parties were reasonably close to an agreement at that point, but backed away once the deadline passed. Westergren credited a number of factors for getting things back on track, including pressure from the webcasters' audience and some innovative ideas from A2IM, a trade group which represents independent musicians; he also praised Representative Howard Berman (D-CA) for getting the parties an extension on the deadline.

If there were no government presence in the marketplace, it's possible these negotiations would be resolved more quickly - the ability to resort to the binding decision of the Copyright Board means that the parties aren't fully incentivized to conclude negotiations between themselves.  Compare the lengthy saga, described above, that Pandora endured in the US with SoundExchange (which levies royalties which are subject to the oversight of the US Copyright Royalty Board, and so is broadly similar to the situation in Canada) with the apparent lack of drama that SoundExchange faced with ASCAP, BMI and SESAC (whose royalties are not subject to the oversight of a government agency).  The problem isn't so much that collectives are seeking to maximize the fees they receive (that's not only rational, but what we would expect any actor in a marketplace to do), the problem is the distorting effect of having a government-sanctioned decision imposed on the parties and the agonizing slowness of those decisions being made.  By having negotiations over the royalty rate for Canadian music licenses modulated by the Copyright Board (which, because it is, broadly speaking, a government actor is obliged to observe various due process requirements which end up slowing down the process), we end up with a cumbersome, expensive system which may not be well-placed to respond to the pace of change in a digital world.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

When you're one of the biggest rap stars in the world, it shouldn't be surprising to find news of one of your recent court victories splashed all over the mainstream news; when that court victory prompts reactions like "staggering", no one should be shocked to see major news stories about the court decision being carried by major outlets all over the world (a sampling of coverage: the Toronto Star; the Los Angeles Times; the Wall Street Journal).  And so it is with the US Ninth Circuit Court of Appeals decision in the case of F.B.T. Productions et al v Aftermath Records et al (full text of the decision is available here), a court case relating to the works of Marshal B. Mathers III, otherwise known as Eminem.  (For ease of reference in the following discussion I'm going to use the term "artist" and "label" to refer to the plaintiffs (FBT et al) and the defendants (Aftermath, et al), respectively, even though, technically, the plaintiffs in this case weren't necessarily limited to the artist and the defendants weren't limited to the record labels.)

The background to the dispute between the parties is fairly simple.  Most recording contracts between an artist and a record label provide that the artist is entitled to received royalties in at least two different situations: first, where there is a "sale" of a "record" (ie the physical object on which the music is embodied); second, where there is a "license" of the rights to duplicate or make another use of the record.  A "sale" is pretty straightforward: someone goes into a record store and buys a CD (the "sale" which a record contract is usually concerned with is not that sale, but the sale by the record label to a wholesaler or distributor, but set that aside for now).  A "license" is little more esoteric: historically it was limited to licensing the master recording for use in a compilation or for use in a film, television show or commercial.  The distinction was important because two different royalty rates are applied: for a "sale", the artist received either a percentage of the sale price or the revenues received by the label (the percentage itself generally ranged from 10-25%, the upper end being rarely accorded and reserved largely for "superstar" acts); for a "license", convention was to provide a 50% royalty.  All other things being equal, then, the artist would prefer to encounter many more licenses than sales.

Enter the internet and the downloading of digital versions of songs.  Is that a "sale" or a "license"?  Where a track came laden with digital rights management (DRM) protections, the issue was even fuzzier: if I give you something but make it subject to a bunch of restrictions on how you can make use of it, does that seem more like I've sold something to you or more like I've licensed something to you?  In this case, with reference to the Eminen tracks, the label entered into contracts enabling providers like Apple's iTunes service to make the digital tracks available for download.  The label took the position that such a contract involved a "sale" (and hence was subject to the lower royalty rate) - presumably their argument was something along the lines of "Consumers are purchasing a track which they can download to their computer and in meaningful sense they then 'own' that track - that looks like selling a single LP or CD, and so should be characterized as a 'sale'".  The artist took a contrary position, arguing that the iTunes contract should be treated as a license - their argument presumably went something like this: "There hasn't been a 'sale' of anything, because there hasn't been a physical object to which ownership has been transferred; all you've done is given iTunes the right to make digital copies of the song and to, in turn, authorize others, upon payment of a $0.99 fee, make their own digital copies - which looks an awful lot like a 'license'".

The US Ninth Circuit Court of Appeals has come down on the side of the plaintiffs:

[9] When the facts of this case are viewed through the lens of federal copyright law, it is all the more clear that Aftermath’s agreements with the third-party download vendors are “licenses” to use the Eminem master recordings for specific purposes authorized thereby—i.e., to create and distribute permanent downloads and mastertones—in exchange for periodic payments based on the volume of downloads, without any transfer in title of Aftermath’s copyrights to the recordings. Thus, federal copyright law supports and reinforces our conclusion that Aftermath’s agreements permitting third parties to use its sound recordings to produce and sell permanent downloads and mastertones are licenses.

One of the reasons the decision is noteworthy is that it provides further evidence that seemingly novel issues arising at the interface of copyright and technology can be, in the forum of a litigation matter, be resolved with reference to relatively simple legal principles:

[7] There is no dispute that Aftermath was at all relevant times the owner of the copyrights to the Eminem recordings at issue in this case, having obtained those rights through the recording contracts in exchange for specified royalty payments. Pursuant to its agreements with Apple and other third parties, however, Aftermath did not “sell” anything to the download distributors. The download distributors did not obtain title to the digital files. The ownership of those files remained with Aftermath, Aftermath reserved the right to regain possession of the files at any time, and Aftermath obtained recurring benefits in the form of payments based on the volume of downloads. ...

[8] Under our case law interpreting and applying the Copyright Act, too, it is well settled that where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license. See, e.g., Wall Data Inc. 13410 F.B.T. PRODUCTIONS v. AFTERMATH RECORDS Case: 09-56069 09/03/2010 Page: 11 of 15 ID: 7462343 DktEntry: 42-1
v. Los Angeles County Sheriff’s Dep’t, 447 F.3d 769, 785 (9th Cir. 2006); MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); United States v. Wise, 550 F.2d 1180, 1190-91 (9th Cir. 1977); Hampton v. Paramount Pictures Corp., 279 F.2d 100, 103 (9th Cir. 1960). [emphasis added]

(As a side note, it strikes me that the Ninth Circuit's analysis of the distinction between a sale and a license of copyright is broadly consistent with how a Canadian court would approach the matter.)

What's the impact of this decision (noting that the defendants have indicated they will appeal)?  As the news report indicate, views on that question range from an artist's manager who calls the decision "staggering" and says "it affects everyone" (as recounted in the Toronto Star), to much more circumspect and conservative.  Ethan Smith, writing the in the WSJ, probably has it correct when he says:

while Friday’s ruling may be philosophically intriguing, in most cases, the song is likely to remain the same

In short, this decision is highly unlikely to result in a windfall for many artists.  I think that's because of a few different factors: First, the decision enunciates not a principle of copyright law but a finding of contract interpretation - the contract under consideration in the Eminem case was particularly unclear as to whether, as between the parties, digital downloads should be treated as sales or licenses; such ambiguities are, for the most part, and particularly in the case of major label contracts, a thing of the past.  Certainly any major label recording contract signed in the last five to eight years, which, to be clear, accounts for an awful lot of the songs which are being digitally downloaded on major commercial sites, will specifically set out that digital downloads are to be treated as sales and thus subject to the lower royalty rate.

Second, while the decision may have some bearing on older contracts, it appears (at least according to the WSJ report) that even in those cases many of the artists and record labels have amended or re-negotiated the terms of the contracts to more clearly address the treatment of digital downloads.

Finally, for contracts which don't fall into either of the foregoing categories (ie contracts which are so old that they are unclear on what royalty rate applies to digital downloads and which have not been amended or otherwise updated), those contracts are in many cases going to be for artists whose tracks don't see much activity on legitimate commercial download sites and, hence, won't have an obvious economic incentive to bring a court action seeking redress (if your song has been downloaded 300 times in the last five years, it's going to cost you a lot more just to describe the situation to your lawyer than you could possibly recover in a claim).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A further development (see our earlier posts on the topic: Previews of Music as Fair Dealing and Previews of Music as Fair Dealing (Redux)) in the SOCAN v Bell Canada, et al case - where the Federal Court of Appeal recently held that "previews" of songs offered by online music services constituted "fair dealing" for the purposes of research.  SOCAN has filed a motion for leave to appeal the Federal Court's decision to the Supreme Court of Canada.  SOCAN's motion can be found here (hat tip: Sookman).  The Memorandum of Argument begins on page 104 of 133.

SOCAN's primary argument is subtle, one which trades on the enriching of the fair dealing defence prompted by the Supreme Court of Canada's decision in CCH v LSUC (2004 SCC 13).  In essence, the argument is premised on the notion that a purposive approach to interpreting fair dealing necessarily involves a taking a highly fragmented approach to that interpretive exercise; in short, the argument seems to be, if you want to understand whether a particular activity constitutes "fair dealing" you must investigate that activity with full immersion in its factual circumstances - and if you do that, then the notion that an online preview constitutes "research" in the sense that the Copyright Act is intended to facilitate falls apart.  Put a different way, the argument is that the finding in CCH arose in very particular circumstances, which don't translate to the online exploitation of music.   From paragraphs 7-9 of the Memorandum of Argument:

The Applicant submits that in finding that the actions of the Respondents constitute fair dealing, the Court below has created a very significant and unwarranted expansion in the scope of the defence. This expansion disrupts the balance between creators and users that the Act was intended to strike and results in the complete removal of the Applicant’s rights over a significant use of its music repertoire on the Internet in a manner that is incompatible with the object, spirit and purpose of the Act.

The defence of fair dealing is intended to further the central purpose of copyright law, that is, to strike a balance between the public interest in the creation and dissemination of creative works and the interest of creators in obtaining a just reward for their efforts. The Act imposes two conditions on the availability of the fair dealing defence: the dealing must be for an allowable purpose as enumerated by the Act and the dealing must be, in fact, fair. The allowable purposes listed in section 29 of the Act are “research and private study.” In light of the purpose of the Act, the use of music previews by the Respondents cannot be considered either research or private study and the volume of previews transmitted by the Respondents is too large to be considered fair.

The decisions below imperil the balance between protecting the interest of creators and promoting the development of creative works by expanding the definition of the term “research” to include activities that do not encourage the creation and dissemination of new works and by failing to consider the amount of the dealing in the aggregate.

Because any eventual Supreme Court decision in this case would be one of the first opportunities for the Court to authoritatively describe the contours of fair dealing following CCH v LSUC, whether Court agrees to hear the appeal, almost as much as the decision itself, will be important.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The New York Times had an excellent article last week ("The Music-Copyright Enforcers" by John Bowe) (hat tip: Miri Frankel at The 1709 Blog) which explores the task and challenges facing performing rights organizations (the entities, such as SOCAN (in Canada), ASCAP and BMI (in the US)) which license the public performance of musical compositions.

During her five years with BMI — on trips to Texas, Ohio, Florida, Washington — Baker has learned a lot: managers of adult clubs tend to be polite. People who run coffee shops tend to be difficult. Skating rinks are a pain – they have the longest outgoing messages in the world. Casinos owned by Indian tribes are tough. Every decision goes to the tribal council, and it can take forever. Arts and crafts festivals, forget it; creative types never have any money. (“You’d think they’d get it,” Baker said, “But . . . .” She waved her hand.) The most important rule of the road, however, is never — Baker looked me in the eye — eat in the venue, even if they invite you. Because God only knows what they might put in your food.

... Once contacted by BMI, owners are given a worksheet. Does their venue use a radio, CD players, karaoke machine? Do they feature live music? If so, how often? How many people can the venue legally hold? For smaller businesses with low capacity that don’t make much use of music, a license may be as little as $300 a year. For really big operators, the cost might be as much as $9,000 per location per year, the maximum BMI is permitted to charge a single customer. (The fees are distributed to artists based on what BMI calls “an appropriate surrogate” — local radio or TV — that reflects a sampling of bars and restaurants in the area.)

... The excuses fell like rain. On the road, Baker’s client-management software offers her a list of common excuses — 24 in all — to keep track of what she’s told. But in the end, she knows it’s a game, a game she’s going to win. Because after all the phone calls, letters and visits, she possesses a secret weapon: the law. Whether or not a music user believes copyright infringement is a big deal, violators face fines of anywhere from $750 to $150,000 per song. If after several years, a violator refuses to back down, Baker ups the ante and sends what is known in-house as “the Larry Stevens letter,” named after one of Baker’s bosses, informing them that their case is being referred to BMI’s lawyers. Most but not all cases are settled out of court. That’s because in 51 years, BMI has never lost a single case it has tried.

The article is rich in that same sort of revealing background information and on-the-ground reporting, and is a treasure for anyone who's interested in how this area of the music industry functions.

As MIri Frankel's post on the article describes, PROs face (and have always faced) a reluctance on the part of some commercial music users to pay license fees for such uses - but that's nothing particularly unique, since many people would, in most cases, prefer to get something for nothing, as aptly illustrated by James Gannon in his post Independent PC Game Developers Experiment With TPM-Free Releases:

Some independent game producers have taken a different path. In order to provide their customers with a hassle-free experience, the independent makers of the World of Goo and Machinarium games each (separately) released their game free of any TPM – whether devices controlling access to the game or controlling the ability of the game to be copied. Unfortunately, these developers found very little success with thier “respect the consumer” strategies.

After the great World of Goo had been released for a few months, the developers reported that the piracy rate for the title was somewhere near 90%...

I still think that one of the best (and most concise) pieces on the challenges arising at the interface of, among other things, digital technology, "free" culture and basic economics is Andrew Potter's February 2008 article "No one likes to pay for music—or much else"; as Potter observes:

If you’re trying to square the notion of free culture with how the economy works, a handy rule of thumb is this: in the end, the consumer pays for everything. So when it comes to seemingly free media like radio and television, they are funded for the most part by commercial advertising, which is in turn paid for at the cash register by consumers. ... In the end, you get the culture you pay for, which is why the motto that everyone involved should be rallying around is “Free Lunch.” As in, there’s no such thing as a.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On July 6, an Australian Federal Court Justice ruled that Australian band, Men at Work, had copied their signature flute riff on the 80's hit "Down Under" from a children's campfire song. The Australian children's song known as "Kookaburra Sits in the Old Gum Tree" was written more than 70 years ago by Australian teacher Marion Sinclair.

The judge in the case ruled that Men at Work's recording company, EMI Songs Australia, and songwriters Colin Hay and Ron Strykert, must pay 5 percent of royalties earned from "Down Under" since 2002 and from its future earnings to Larrikin Music, the publishing company which holds the copyright in "Kookaburra". Larrikin Music was originally asking for 60 percent of royalties earned.

A musical comparison between the flute riff from 'Down Under' and the melody to "Kookaburra" can be heard here.

Expect the dollar amount of 5 percent of such royalties to be in area of several hundred thousand dollars as Larrikin can only collect royalties since 2002. 

For an excellent comparison of various "sound-alike" songs, check out this page from "JamsBio Magazine". 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Further to this earlier post about the Federal Court of Appeal's decision in Society of Composers, Authors and Music Publishers of Canada v Bell Canada, et al., 2010 FCA 123, which held that an online "preview" of a music track constitute "fair dealing" for purposes of research, Emir Aly Crowne-Mohammed and Yonatan Rozenszajn have written a nice little summary of the decision over at the charmingly-named JIPLP (otherwise known as the "weblog of the Journal of Intellectual Property Law and Practice").  As Crowne-Mohammed and Rozanszajn note,

Given the nature of the ‘research’ involved in users listening to the 30-second clips or previews of songs online, the court felt that research be given its primary and ordinary meaning, this being the use of previews to help consumers in their search for a particular song as to ensure its authenticity and quality before purchasing it. In this context, ‘research’ included consumer research.

The court then examined whether a 30-second preview, or less, was fair. The Federal Court of Appeal agreed with the Copyright Board in holding that the amount of the dealing is presumptively fair, given the length of the complete work.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

UPDATED BELOW

The Copyright Board of Canada has issued its decision and reasons on the commercial radio tariffs of SOCAN, Re:Sound, CSI, AVLA/SOPROQ and ArtistI.  (See Decision of the Copyright Board, July 9, 2010, the Board's news release, a useful fact sheet from the Board which summarizes various aspects of the decision and provides some useful information about the radio broadcasting industry as a whole, and, finally, the tariff itself).  In short, the decision spells out how much money commercial radio stations will be paying to the various collectives as a license fee for the years 2008-2012 (with some qualifications, since not all of the tariffs cover the entire four year period) for the right to reproduce and communicate to the public the musical works which form the bulk of a commercial radio station's programming.  

The decision is notable for a number of reasons.  Howard Knopf points out the financial implications of the decision (quoting from the Board's fact sheet):

How much will the new rates generate in royalty payments, compared to the old rates?

The Board estimates that commercial radio stations will pay a total of $85 million in royalties. This is based on total station revenues of slightly over $1.5 billion in 2009. Using the previously certified rates, radio stations would have paid about $72 million. The new rates thus increase the amount of royalties by $13 million. Of this amount, $10.2 million represent royalties resulting from the introduction of two new rates, for AVLA/SOPROQ and ArtistI.

How much will each collective society receive?

Of the total amount of royalties of $85 million paid by radio stations, the Board estimates that $51 million will go to SOCAN, $13 million to Re:Sound, $11 million to CSI, $10 million to AVLA/SOPROQ and $200,000 to ArtistI.

Of particular worth from the decision itself is that it provides a useful summary of all of the rights which are engaged when a song is played on the radio and the collectives responsible for administering those rights (see paras. 8-13 of the decision):

These proceedings involve six rights or sets of rights. They are reviewed in the order in which the Board was asked to set a tariff.

The first set of rights is the exclusive right of the owner of the copyright in a musical work to communicate it to the public by telecommunication and to authorize such a communication. SOCAN administers these rights in Canada for virtually all copyright owners. SOCAN is subject to sections 67 to 68.2 of the Act (the “SOCAN regime”) and if it does not file a proposed tariff, it cannot, in practice, collect royalties.

The second and third rights are the remuneration rights that performers and makers each enjoy when a published sound recording of a musical work is communicated to the public by telecommunication. These two rights are treated together because they always trigger a single payment; in the case of sound recordings of musical works, that payment is always made to a collective society authorized by the Board to collect it. Re:Sound administers these rights for the vast majority of eligible performers and makers. It too is subject to the SOCAN regime. The remuneration rights are subject to a number of conditions.

The fourth set of rights is the exclusive right of the owner of the copyright in a musical work to reproduce it and to authorize such a reproduction. Together, SODRAC and CMRRA administer most, but not all, of this repertoire in Canada. SODRAC represents the vast majority of rightsholders in Québec and most works written in French by Canadians as well as many of its foreign counterparts. CMRRA represents a large number of Canadian and foreign Englishlanguage music publishers. Both collectives are subject to sections 70.1 to 70.6 of the Act (the “general regime”) and as such, they can negotiate licensing agreements directly with users or ask the Board to certify tariffs. Where both collectives opt to use a tariff, CSI acts for them.

The fifth set of rights is the exclusive right of the owner of the copyright in a sound recording to reproduce it and to authorize such a reproduction. SOPROQ represents mostly Francophone record producers from Québec. AVLA acts for the major record companies and for many independent labels, artists and producers. Together, they represent the vast majority of the repertoire. These collectives are subject to the general regime.

The sixth set of rights is the exclusive right of the owner of the copyright in a performer’s performance to reproduce any reproduction of an authorized fixation of the performance for a purpose other than that for which the authorization was given and to authorize such a reproduction. Three collective societies administer these rights: ArtistI, ACTRA PRS and AFM Canada. Only ArtistI, which acts predominantly but not exclusively for Frenchspeaking performers from Québec, has filed a tariff. ACTRA PRS represents professional cinema, television, radio and recording artists who work in English. Its mandate includes the collection and distribution of fees, royalties, residual fees and all other forms of compensation or remuneration to which members and permit holders of the Alliance of Canadian Cinema Television and Radio Artists (ACTRA) may be entitled. AFM Canada, acting for musicians in the United States, Canada and other countries, collects and distributes government mandated or other compulsory royalties or remuneration that are subject to collective administration. These collectives are subject to the general regime.

There are two is one additional points worth noting in relation to the decision.  First, if Bill C-32 (the Copyright Modernization Act) is passed in its current form, it will eliminate the tariffs for "ephemeral reproductions" payable to CSI, AVLA/SOPROQ and ArtistI (for an explanation of how and why the tariffs will be eliminated, see my post "Bill C-32 - An Anticipatory Requiem for What We'll Lose" at IPilogue). ; Finally, as noted in the last quoted paragraph, above, with respect to the right to reproduce a performer's performance, only one collective (out of the three collectives who administer that right) has elected to file a tariff - meaning that there could be yet further monies payable by radio broadcasters for making use of musical works.

UPDATED (July 14, 2010): Thanks to the insight of my colleague Stephen Zolf, I need to correct the record with respect to the language struck out in the last paragraph, above.  Bill C-32, which contains a provision which repeals the "exception to the exception" found in Section 30.9(6), even if passed, will actually not eliminate the tariff for "ephemeral reproductions" (more accurately, "pre-recorded recordings").  That is because, as the Copyright Board found in their reasons of March 28, 2003 respecting the initial CSI tariff, as a practical matter, the activities of commercial radio broadcasters simply do not fall within the ambit of Section 30.9 because they generally do not abide by the requirement to delete their pre-recorded recordings within 30 days - so, the elimination of the "exception to the exception" won't actually impact in any meaningful sense the obligation to make payments under the tariffs.  Indeed, the factors which prompted the Board to make its findings in 2003 (ie the comprehensive reproduction by radio stations of works and sound recordings onto servers and hard drives in order to facilitate broadcasting activities) are even more pronounced today.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Ben Sheffner (who's creating his own niche in covering political campaigns being accused of infringing copyright) does a nice bit of analysis of claims by Canadian rock band Rush that American libertarian politician Rand Paul made unauthorized and infringing use of Rush songs in his campaign materials.  The CBC coverage of the story notes:

Paul's campaign used Rush's The Spirit of Radio to energize a rally and another song, Tom Sawyer, in a fundraising video.

Paul also has used a line from The Spirit of Radio in speeches: "Glittering prizes and endless compromises shatter the illusion of integrity."

As Sheffner notes, a distinction needs to be drawn between playing songs at a campaign event (which would be a public performance requiring a license from the collecting society which administers those rights, such as ASCAP, BMI or, in Canada, SOCAN - the license could be held by the venue in which the event takes place or by the campaign itself) and incorporating the songs into an advertisement or online video (which would require master use and synchronization licenses from the owners of the master recording and the publishing rights in the composition).

Here at the Signal we previously discussed the use of copyrighted materials in political campaigns in the unimaginatively titled "Copyrights and Campaigns".

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The CBC reports that "Arcade Fire music sparks Ottawa school play":

Students at an Ottawa high school have transformed the music of Montreal indie rock band Arcade Fire into a stage play.

The Neon Bible Project, by students at Canterbury High School, is a performance of movement and dance based on Arcade Fire songs.

The band has given its blessing to the Neon Bible Project, developed by ardent fans.

(The Neon Bible Project maintains its own blog, which provides information on the project and performances.)  Many people will be aware that playing music for an audience in a public place (including in a facility which charges an admission fee, such as a concert hall) triggers the payment of a royalty for the "public performance" of the composition (for which a license from SOCAN is required).  Likely to be less familiar is the need to license so-called "grand rights" when music is used in the fashion contemplated by The Neon Bible Project (ie as an integral part of a dramatic presentation involving such elements as narration, storyline or scenery).

"Grand rights" are the "dramatic performing rights" which are held by the owner of copyright in a composition (other public performance rights are referred to as "small rights", though actually hearing that term used is relatively rare).  Grand rights are administered separately from other public performance right - thus SOCAN is not able to grant a license for the grand performing rights in a composition.  Generally, the rights are administered directly by the publisher (or the composer).  The Canadian League of Composers offers a helpful guide to grand rights and a checklist of elements which should be present in a grand rights license.  Gordon P. Firemark has also written a short post (from a US perspective) outlining considerations for producers who wish to make use of existing songs in their stage plays.

On a somewhat related note, Brent Giles Davis has written an excellent paper exploring whether and when "tribute bands" need to license grand rights: "Identity Theft: Tribute Bands, Grand Rights and Dramatico-Musical Performances" (24 Cardozo Arts and Entertainment Law Journal 845).  The paper provides a detailed consideration of grand rights and the US caselaw surrounding them.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On May 12, a US Federal Court ruled that popular peer-to-peer (P2P) file sharing site, LimeWire,  and its founder/chairman, Mark Gorton, were liable for copyright infringement. The Recording Industry Association of America (RIAA) brought the suit in 2006 and was seeking damages and an injunction against the site. RIAA's chairman and CEO, Mitch Bainwol, called the ruling "extraordinary". 
 

This ruling only goes to strengthen the 2005 U.S. Supreme Court's decision in MGM v. Grokster, which held the following:

One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, is liable for the resulting acts of infringement by third parties using the device, regardless of the device’s lawful uses.

Meanwhile, the International Anti-Piracy Caucus, a group of lawmakers that work closely with the RIAA, released a list of the six most "notorious" file sharing web-sites.

The six sites are as follows: Baidu (China), IsoHunt (Canada), Mp3fiesta (Ukraine), RapidShare (Germany), RMX4U.com (Sweden), and the Al Capone of these BitTorrent and P2P forums...The Pirate Bay (Sweden).

These sites are now clearly the most wanted pirates sailing the digital seas. It will be interesting to see who sinks first.    

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I confess that back when buying an album on CD was a big part of my life, I was always offended when the booklet didn't contain the lyrics - really, they couldn't just throw in the words for my $14.99?  The internet abhors a vacuum, and so lyrics sites were created - many, many lyrics sites, many of which were completely unlicensed (and sometimes contained incorrect lyrics).  Lyrics enjoy copyright protection just as much as the notes which comprise the song (or, in what may be a more appropriate comparison, just as much as a poem).  Joseph Plambeck in the New York Times offers a look at the ongoing evolution of lyrics websites: Lyrics Sites at Center of Fight Over Royalties.

Music publishers have partnered with rights clearinghouses such as Gracenote and LyricFind to offer licenses to websites who wish to reproduce protected lyrics.  As the story notes, while revenue generation is modest at this point in time, it is anticipated to grow - particularly since successful lyrics sites, such as the Vancouver-based MetroLyrics, are evidently enjoying annual revenues of around $10 million.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

POST UPDATED

This post is somewhat curious to write - it is about a decision of the Canadian Federal Court of Appeal which, at the moment, appears not to be available online, thus limiting discussion of the appeal to what has been reported in other blogs and news outlets.  Here is what we know at this time (this post will be updated when the full decision is made publicly available - UPDATE May 25, 2010: the text of the decision is available here):

• Barry Sookman has reported that at some point last week the Federal Court of Appeal issued a decision in the ongoing judicial review of the Copyright Board of Canada's decision regarding SOCAN's Tariff 22.A - according to Sookman, the Court of Appeal has, confirming the decision of the Copyright Board, ruled that offering an online "preview" of a song in order to enable a consumer to decide whether to purchase that song constitutes an example of "fair dealing" for research purposes, and hence no public performance royalty is payable to SOCAN in connection with that preview
• The Copyright Board of Canada's original decision (released on October 18, 2007) which was the subject of the appeal to the Federal Court, is available here.  The Board's conclusion regarding "previews" begins at page 31 of the .pdf.
• Michael Geist, in his post discussing the FCA decision, evidently has access to a copy of the decision (where does he get those wonderful toys?), and reproduces a passage from the decision which indicates that the FCA has vigorously adopted the Supreme Court of Canada's guidance in the CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13 that the "fair dealing" provisions in the Copyright Act should be given a liberal and purposive interpretation

As Geist notes, the implications of the decision are "very significant".  In declining to accord the word "research" a restricted interpretation (as Sookman notes, "SOCAN had argued before the Court that the term “research” applied to activities involving investigation, systematic research, critical analysis, scientific inquiry and factual discoveries arising and being carried out in a formal setting"), the FCA has affirmed that, in Geist's words, "the door is open to creative uses of the fair dealing provision in Canada consistent with the Supreme Court of Canada's view of a copyright balance between user rights and creator rights".

What may be most significant about the decision is that it may work to undercut the arguments of those (including this writer) who have argued in the past that a "fair use" approach to user's rights may be more beneficial than the "fair dealing" mechanism currently found in Canadian copyright law.  ("Fair dealing" provides for a prescribed and limited set of acceptable uses (research, private study, criticism or review and news reporting) which fall outside the ambit of a copyright owner's exclusive rights, while "fair use" is an American concept which allows for an open-ended assessment of the purposes, and so is not limited to the five acceptable purposes found in Canadian law.)  

Counter-intuitively, with respect to online "previews" of music, "fair dealing" has proved to be more accommodating than "fair use" - as Sookman notes, in the US decisions on this matter (United States v. American Society of Composers, Authors and Publishers, (In re AT&T Wireless), 599 F.Supp. 2d 415 (S.D.N.Y. 2009) and Video Pipeline v. Buena Vista Home Entertainment Inc. 342 F.3d 191) the US courts have held that offering an online "preview" is not fair use, and that a public performance royalty is payable.  A reassessment of the purported limits of "fair dealing" may be in order.

Though the issue appears settled in Canada, it continues to be live in the United States (at least one of the aforementioned decisions is currently on appeal). Greg Sandoval wrote a detailed article canvassing the various arguments surrounding whether online previews should be considered fair use, which is well-worth reading.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Robert Andrews, writing at paidContent.org, provides a link-rich post on YouTube's ongoing negotiations with UK and European music collectives regarding royalties payable each time a composition is streamed on the site.  Particularly interesting is the breakdown of what the "standard" royalty rates are for online on-demand streaming (YouTube evidently manages to negotiate more favourable rates than the standard) and what they translate into in terms of actual revenue for publishers and artists.

As Andrews notes, PRS for Music (the UK performing and mechanical rights society) has an on-demand streaming rate of £0.00085 per track - which means that a track played one million times in the UK via on-demand streaming merits £850 in royalty payments (which would then presumably be split among the publisher and composer(s)).  GEMA, the German collecting society, has a standard royalty rate of €0.1278 (£0.11) - meaning that the same track streamed one million times in Germany results in £110,000 in royalty payments - or, as Andrews notes, approximately 130 times what is payable in the UK.

The Canadian approach is slightly different - and also much more confusing.  The approach used by SOCAN in its tariffs setting royalties for online music use, such as those set out in Tariff 22A and Tariff 22F (each applicable through 2006), set a "royalty" rate which is calculated as a portion of the service provider's revenues, rather than being a fixed amount per track.  That being said, none of the existing tariffs (B through G are currently under appeal in the federal courts) apply to social networking sites or user-generated content sharing sites (such as YouTube).  McCarthy Tetrault provides a useful overview of the tariffs in this short article by Barry Sookman and Daniel Glover.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

UPDATED BELOW

Music • Technology • Policy has posted excerpts from Chris Castle and Amy Mitchell's ongoing article series "20 Questions for New Artists", this particular excerpt addressing management agreements, covering such topics as commission rates and bases and "sunset" clauses.

Various iterations of the article can be found around the web, including this .pdf version [link removed - see link in update], which covers topics ranging from tax returns and publishing companies to marital status and trade-marks. Castle and Mitchell write from a US perspective, but the general advice is well worth heeding regardless of location.

 UPDATE: Mr. Castle notes that the complete "20 Questions for New Artists" article is also available in an omnibus edition packaged with a couple of other interesting music-related articles penned by Mr. Castle.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Anti-piracy laws are gaining momentum across the Atlantic and beyond. The U.K. Digital Economy Act was given Royal Assent on April 8, 2010, and includes provisions in which copyright holders can send a “copyright infringement report” to ISPs with evidence of suspected infringement and the ISP must notify its subscriber within a month. More significantly, UK telecom regulator, OFCOM, will have the power to introduce various technical measures and suspensions of accounts if the ISPs do not make an impact on these potential infringers.

The U.K. Digital Economy Act was passed into law with growing criticism from various U.K. ISPs, who have already voiced their concerns about the new law.  U.K. ISP Talk Talk, recently stated that the company will "continue to battle against these oppressive proposals during the follow-up process in parliament". Still, other jurisdictions are quickly following the U.K.'s lead. On April 23, 2010, New Zealand's Copyright (Infringing File Sharing) Amendment Bill unanimously passed its first reading in parliament. Also, the Spanish government will soon be proposing legislation to block or shut down websites that offer links to unauthorized content.

Meanwhile, Canadian Heritage Minister James Moore, plans to introduce the government's latest version of its copyright legislation this spring. In the meantime, major music labels were busy responding to a motion by the three opposition parties calling for this country's blank cd/tape levy to be expanded to digital devices such as iPods. However, the governing Conservatives rejected the proposal as a "tax" on consumers.

One would think that with a growing number of foreign governments quickly putting pen to paper and implementing various anti-piracy laws, Canada would be set to follow suit. Then again, history has shown that Canada often fight digital pirates on their own time and at their own pace.   


      

• Email This
• Print
• Comments
• Trackbacks
• Share Link

News outlets such as the Toronto Star are reporting on the publication by The Smoking Gun of Mariah Carey's 2010 concert rider:

No more Cristal Champagne and bendy straws for singer Mariah Carey. She’s all grown up now.

The concert rider for the just-turned-40 superstar excises a lot of the wretched excess and control freak details of past year

Performers' contract riders (really just an attachment to the main contract which sets out certain items in a level of technical detail which is unsuitable for the "contractese" which permeates the main contract) can address matters ranging from stage construction to the brand of bottled water to be provided backstage.  The rider on one of Carey's previous tours included some amazingly detailed instructions regarding catering (a box of bendy straws, a director's chair and spinach with hot bacon dressing are just some of the highlights).  The rider for the current tour, while being touted as less frivolous, is, if anything even more detailed than the previous rider, and includes its own interesting elements (such as the need for "8 tall, leafy plants").

Helpfully, The Smoking Gun has compiled an astounding collection of dozens of contract riders for acts ranging from Guns N' Roses (1 box of assorted candy bars; 1 assortment of adult magazines) to Lil Wayne (2 bottles of Grey Goose vodka; police escort) to Kenny Rogers (4 wedged lemons; 2 pounds of M&Ms).

Snopes.com offers some thoughts on the motivations for complicated riders, using the legendary (but true) Van Halen requirement of "no brown M&Ms" as an example:

The M&Ms provision was included in Van Halen's contracts not as an act of caprice, but because it served a practical purpose: to provide an easy way of determining whether the technical specifications of the contract had been thoroughly read (and complied with).

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Fascinating article in the Wall Street Journal (hat tip: Tamera H. Bennett) about The Black-Eyed Peas (dubbed "The Most Corporate Band in America"), and the metrics of success in the contemporary music industry.  Pull-quotes:

"I consider us a brand. A brand always has stylized decks, from colors to fonts. Here's our demographic. Here's the reach. Here's the potential. Here's how the consumer will benefit from the collaboration."

... Selling records used to be the secret to success. The trajectory of the Black Eyed Peas has been about corporate connections.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Ben Sheffner notes that the Obama Administration, via the Department of Commerce, has expressed its support of the Performance Rights Act (Open Congress has a page dedicated to the House of Representatives version of the bill, HR 848).  According to Sheffner, the bill "has been approved by the House and Senate Judiciary Committees and is awaiting floor action in both bodies".  (Ars Technica has a good roundup of competing views.)

As the Department of Commerce's letter indicates, passing the Act would address "a long-standing omission in US copyright law that may have harmed American performers and record companies".  As the law currently stands, when a song is played on an "over the air" radio station, the owners of the publishing in the composition (normally the songwriter(s) and their publishing companies) receive a royalty (the "public performance" royalty) - however, the performer(s) of the song (ie the artist or band) and the owners of the sound recording itself (normally the record company) receives nothing.  (Oddly, under US law, if the song is transmitted by digital means (eg webcasters and satellite stations), a royalty is payable to the performers and sound recording owners.)  Thus, if a band records a cover version of a previously-released song which becomes a hit, the composers of the original song get a royalty, but the band and its record company (whose track is being played) receive nothing for radio broadcasts of the track.

In Canada, the "neighbouring rights" provisions of the Copyright Act, which were enacted in 1997, created a right on the part of performer's and sound recording "makers" to receive "equitable remuneration" for the use of their performances and recordings - meaning the right to collect the type of royalties now being contemplated by the Performance Rights Act (see Sections 15, 18, 19 and 20 of the Canadian Copyright Act).  Re:Sound (previously the Neighbouring Rights Collective of Canada), collects and administers the royalties owing to Canadian performers and owners on account of the playing of their tracks. 

How much are these royalties worth?  It's difficult to obtain definitive numbers, but according to the Copyright Board the commercial radio tariff (ie the royalty paid by commercial radio stations on account of their exploitation of neighbouring rights) resulted in $15.9 million worth of royalties being paid to Re:Sound (then the NRCC)  in 2005 (see para. 95 of this February 22, 2008 decision by the Board).  If one were to apply the 10:1 rule of thumb when translating US and Canadian numbers, you're looking at upwards of $150 million per year in royalties.

• Email This
• Print
• Comments
• Trackbacks
• Share Link