C in a Circle - Three Copyright Firsts

This year has seen the conclusion of some pending industry and legislative initiatives that have resulted in changes in the copyright arena. For those of you who have not been following the press reports, here’s a report on what they are.

By Gary Roth

The most contentious dispute that recently was resolved was over what the mechanical royalty rate should be for interactive music streams and downloads of music available by subscription or supported by advertising. Although these are subject to compulsory licensing, the government’s rate-setting body, the Copyright Royalty Board, had yet to establish a statutory rate, given the fact that this kind of digital delivery of music was so new.

The RIAA, representing record labels, DiMA, representing digital music services, the NMPA, representing music publishers, the Nashville Songwriters Association International and the Songwriters Guild of America negotiated rates for these uses and agreed to submit them to the CRB for adoption. The CRB gave its approval last month and accepted the industry agreement as the established rates.

This new interactive stream/on-demand download mechanical rate will be retroactive to 2002-2007 and is 8.5% of the revenue of the paying service for those six years, increasing to 10.5% of revenue in 2008 and later, in both cases less any royalties that are payable for performances of the songs. A late fee of 1.5 % per month for the publishers was also agreed to as part of the approved settlement.

The existing mechanical rate for physical recordings (such as CDs) and permanent downloads (such as from iTunes) was up for renewal by the CRB as well, and after a lengthy trial, it decided to retain it for the next five years at the greater of 9.1 cents per song of five minutes or less or 1.75 cents per minute or fraction of a minute of playing time for longer works. New, however, was a mechanical rate for ringtones, which only recently became the subject of a compulsory license. That was set at 24 cents. Thus, when your song is downloaded to a consumer by a wireless phone company as a ringtone, the publisher now is entitled to get that much of the purchase price from the ringtone seller. In most cases, you, as the songwriter, would get half (in accordance with your songwriter-publisher agreement). These were all retroactive to January 1, 2008.

The agreement among the parties that was adopted by the CRB also allows free use of some streams used to promote the sale of music files, in an attempt to encourage payment for the full song. The agreement confirmed, too, that there is no mechanical right in non-interactive, audio-only streaming of music. That is licensed by the performing right organizations, as it is an exercise of the public performance right.

Also this year, a little noticed but controversial act that was introduced by Michigan Congressman John Conyers and Vermont Senator Patrick Leahy was signed into law by President Bush. Enacted as Public Law 110-403, it is called the Prioritizing Resources and Organization of Intellectual Property Act, or PRO-IP Act, for short. Its goal is to increase protection for copyrights and trademarks by establishing new enforcement tools and a coordinated federal approach to fighting counterfeiting and piracy. Its main proponents were the RIAA and the MPAA, the record and motion picture industry trade groups, whose members are the primary victims of those activities.

Among the changes to copyright enforcement the PRO-IP Act makes are these:

A harmless inaccuracy that appears on a copyright registration certificate (which is needed to sue for infringement) won’t defeat such a lawsuit as long as the mistake wasn’t intentional and wouldn’t have caused the Register of Copyrights to refuse to register the work. This amendment to the Copyright Act allows copyright owners who otherwise might have lost their day in court to preserve it due to unintentional errors in their paperwork.

Conversely, the Copyright Act now allows criminal copyright cases to be prosecuted against alleged infringers without the copyright owner having to have met the requirement that exists for civil cases of having first registered the work with the Copyright Office. Moreover, in addition to the seizure and impounding of allegedly infringing material permitted to be taken into court in civil copyright cases, the Act adds the right of the court to order that all records documenting the manufacture, sale, or receipt of things involved in any such violation be taken into court custody as well.

The PRO-IP Act creates an Office of the United States Intellectual Property Enforcement Representative within the Executive branch and requires the President, with the advice and approval of the Senate, to appoint an Intellectual Property Enforcement Representative, reporting to both Congress and the President. This person, who has been dubbed the “IP Czar, will be the principal advisor to and spokesperson for the President on domestic and international intellectual property enforcement policy. He or she also will be the chairperson of an advisory committee dedicated to working with various U.S. governmental departments and agencies in enforcing intellectual property rights and also will coordinate and aid in implementing a Joint Strategic Plan against counterfeiting and piracy. It is expected that President Obama will make the first appointment to this new position.

The Joint Strategic Plan of the Act is intended to bring together many different areas of the federal government (such as the OMB, FDA, FBI, Customs, Immigration, the Copyright and Patent & Trademark Offices, and more) to share information and work together to reduce and eliminate counterfeit and pirated goods in the international marketplace, as well as to help strengthen intellectual property laws around the world. The first JSP is to be created within a year and then updated every three. Also, the Plan is to bring affected industry groups into the mix to work with the Office to accomplish its goals.

The United States has taken a huge step to assure that all of its relevant parts participate in a coordinated effort to stamp out counterfeiting and piracy worldwide. Why are such significant and far-reaching measures warranted to be undertaken by the federal government?

The “Sense of Congress” stated in the original legislation gives perhaps the best answer:

(1) the United States intellectual property industries have created millions of high-skilled, high-paying United States jobs and pay billions of dollars in annual United States tax revenues;

(2) the United States intellectual property industries continue to represent a major source of creativity and innovation, business start-ups, skilled job creation, exports, economic growth, and competitiveness;

(3) counterfeiting and infringement results in billions of dollars in lost revenue for United States companies each year and even greater losses to the United States economy in terms of reduced job growth, exports, and competitiveness;

(4) the growing number of willful violations of existing Federal criminal laws involving counterfeiting and infringement by actors in the United States and, increasingly, by foreign-based individuals and entities is a serious threat to the long-term vitality of the United States economy and the future competitiveness of United States industry;

(5) terrorists and organized crime utilize piracy, counterfeiting, and infringement to fund some of their activities?..

Therefore, you, as creators and copyright owners, are vital to the economy of the United States and, especially in these uncertain times, constitute an integral part of the future resurgence and growth of the nation as we move into 2009 and beyond.

Posted Dec 09, 2008

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