In case of sound recordings, just like with musical compositions we covered in the previous module, there are several different licenses used today stemming from the copyright contained in sound recordings, some compulsory, and some non-compulsory in nature. Remember that “compulsory” in this context does not mean that some licenses are required by the users and some not, but that some can be refused and are freely negotiated, and some can not be refused and are statutory. All of these licenses are required by law in order to use the copyrighted sound recordings in ways that we will talk about. We’ll start with the digital transmission license. Digital Transmission License is a compulsory type of a performance rights license, limited to the digital transmission of sound recordings (satellite radio, Internet broadcasting, etc.). Meaning, it is only required for the digital broadcasts of the sound recordings, and not for the regular terrestrial broadcasts. Regular radio stations, broadcasting terrestrially, are not required to obtain this license. Satellite radio and internet streaming services are. The terms and the rates for this license are determined and periodically adjusted by the Royalty Copyright Board, and paid by the digital broadcasters, generally to SoundExchange, which distributes the funds to the recording artists and record labels. SoundExchange is a non-profit organization that operates since 2003 as a performing rights organization for the sound recording copyright owners, collecting the digital transmission royalties, and the ephemeral recording royalties, which we will talk about next, and distributing them to its members. SoundExchange is the only legally designated and authorized organization to perform such task in the United States, and as such, it distributes over 500 million dollars of statutory royalties to the record labels and recording artists annually. It should be noted that the digital transmission license comes in two varieties, covering two different types of digital transmission services – those that are interactive, like Spotify, and those are non-interactive in nature, like Pandora. Meaning, those that users can control in terms of what songs they want to hear, and those where that choice is not offered. The digital transmission license we described earlier concerns non-interactive services. The license for interactive digital transmission services is non-compulsory, and is payable by the interactive services directly to the sound recording copyright holders, usually the record labels, not to SoundExchange. The next two licenses are also related to the digital transmission of sound recordings. Ephemeral Recording Reproduction License is a compulsory license required to make a copy of the original sound recording for the use in digital broadcasting. That copy is referred to as an ephemeral copy, and the license it’s a form of a reproduction license, since it includes copying of the copyrighted work. The terms and the rates for this license are determined and periodically adjusted by the Royalty Copyright Board, and the royalties are paid by the digital broadcasters to SoundExchange and distributed by that organization to the recording artists and record labels. Ephemeral Recording Performance License is also a compulsory license, required in order to transmit (to broadcast) an ephemeral copy of the original sound recording in digital broadcasts. So it is a form of a performance rights license, as it concerns broadcasting of the copyrighted work. The terms and the rates for this license are determined and periodically adjusted by the Royalty Copyright Board, as well, and the royalties are paid by the digital broadcasters to SoundExchange, which distributes the payments to the recording artists and record labels. Moving on from digital broadcasting to the recording production and industry, the sound recording license relevant there is the Sound Recording Sampling License. Sound Recording Sampling License is a non-compulsory type of a derivative license, because it concerns the creation of a derivative of an original sound recording. It is required in order to use a sound recording, or any portion of it however small, as the basis for a sound sample of any kind, utilized in another sound recording. This includes looping, filtering, tempo stretching, one shots, and any other type of sampling work for which one might use the preexisting copyrighted sound recording. This license is payable by the recording producers directly to labels. Being that this license is not compulsory, the granting of it, and the rates, are freely negotiable between the parties. And lastly, there is a license that covers the use of the sound recordings in audiovisual works. Master Use License is a non-compulsory license, required in order to use a sound recording in a motion picture, a video, a video game, or in a television based work. It is payable by the audiovisual works producers seeking the license, directly to the labels. The license is not mandatory, and the rates are freely negotiated. It should be noted that a “Sound Recording Sampling License”, which we just spoke about, is often also referred to as a “Master Use License”, in order to distinguish it from the “Musical Works Sampling License” which covers the use of musical compositions in sampling. Both licenses, as we have seen, are not mandatory, and their granting and rates are freely negotiated. In our discussion about music copyright, in the previous module, we mentioned some special considerations that apply to sound recordings and its copyright coverage. Since any relevant type of sound recording licensing is only applicable to the recordings under the copyright protection, we need to briefly revisit the issue of the copyright of the sound recordings here and make sure that we understand the regulations regarding which recordings are protected, under which conditions, for how long, in which commercial context, etc. The 1971 Sound Recording Amendment to the 1909 Copyright Act, which became effective on February 15, 1972, provided that the recordings published and copyrighted after February 15, 1972 be protected by the Federal Copyright Act and their copyright be regulated like the copyrighted musical works, with the exception of the performance rights, which were not granted to sound recordings at the time. Until then, the recordings were not covered by the Copyright Act and were thus not protected by the federal law, but by the state laws under the states’ common and criminal law. The amendment also provided that the state protection of all the pre-1972 recordings will end on February 15, 2067, 95 years after the 1972 Sound Recording Amendment became effective, and will not last indefinitely, as it would be the case under the state laws. So ever since 1972 we have a dual system of protection for the sound recordings – through the state laws, for the pre-1972 recordings, and through the federal law, the Copyright Act, for the post-1972 recordings. Since the state laws vary from state to state regarding the copyright, much confusion and litigation in the market resulted from this dual system of protection and its different legal standards. Especially when the Internet and digital technology entered into the picture, and music started to be distributed, shared, broadcasted, and sold in ways and forms not in existence before. Shortly after the Sound Recording Amendment, the Copyright Act was revisited and redone, in 1976, and the revised version, which included the Sound Recording Amendment, came into effect on January 1, 1978, and is still in effect today, modified by a number of amendments that followed in the past several decades. As the digital technology became relevant and widely used, the amendment was enacted, in 1995, which gave the copyright owners of sound recordings an exclusive right to digital transmission of their works, a type of a performance right. This act is referred to as the Digital Performance Right in Sound Recording Act or DPRA. As we have seen, the sound recording owners did not have any public performance rights until this point, and this act remedied that disparity, but only in the digital realm. The regular, so-called “terrestrial” broadcasting is still outside of the boundaries of the performance rights for the sound recordings. A few years later, the 1998 Digital Millennium Copyright Act, or DMCA, strengthened further the position of the sound recordings regarding new digital technologies and digital delivery issues, and together with the 1995 DPRA still serves as the backbone of the regulations and licensing of the sound recordings in the digital world. The compulsory Digital Transmission license, and the Ephemeral Recording licenses we discussed previously, stem from these new regulation regarding sound recordings. These regulations require all the operators of the digital transmission systems to pay the sound recording copyright owners for various uses of their works. That includes satellite radio, digital cable television, and Internet streaming. At the first glance that seems pretty straightforward. But remember the pre-1972 recordings’ exemption from the federal protection by the 1972 Sound Recording Amendment? Does the law requiring payments for the digital transmission of sound recordings apply to those pre-1972 recordings as well? Those recordings are not protected by the Federal Copyright Act, but are under state laws that do not include regulations of the digital transmission of sound recordings. So when Sirius XM digitally broadcasts Jimi Hendrix recording of “Power to Love” from the 1970 Capitol Records album “Band of Gypsys”, or when Pandora streams Aretha Franklin’s recording of “Ain’t No Way” from the 1968 Atlantic Records album “Lady Soul”, do they need to pay digital performance rights in sound recording royalties as required by the Copyright Act or not? The Copyright Royalty Board, in December 2012, decided that Sirius XM does not have to pay the royalties to the sound recording copyright owners for the pre-1972 recordings, as those are not protected by the Federal Copyright Act. And so by implication, neither does Pandora or other such services. OK. So that’s settled, right? Well, less than a year later, all three major record labels, and SoundExchange, which, as we mentioned earlier in this module, represents labels and recording artists in digital transmission licensing collection and administration, sued Sirius XM for not paying the royalties for the pre-1972 recordings it broadcasts. The labels also sued Pandora for the same thing. The cases are pending. But, regardless of the outcome of these litigations, the copyright issue of the pre-1972 recordings will remain a gray area, since it will depend on various state court decisions, case by case, until 2067, which, as we mentioned earlier, is when all the pre-1972 recordings, according to the current Copyright Act, will lose state protection and enter the public domain. Digital transmission licensing issues we described, are just some of the controversial issues caused by the dual regulatory treatment of the sound recordings. Other issues, such as the so-called “safe harbor” provision of the Digital Millennium Copyright Act, protecting the Online Service Providers from the responsibility for copyright infringements by its customers under certain conditions, also resulted in litigations stemming from the pre and post 1972 distinction. Unless Congress folds the pre-1972 recordings back under the federal copyright protection, so the Copyright Act regulations can clearly be applied, the situation will remain unresolved and unstable.
