THE COPYKAT

A Liverpool man has pleaded guilty to illegally distributing chart hits online, potentially costing the music industry millions of pounds and depriving the creators of the content fair remuneration for use of their work. Wayne Evans was arrested at his home in Everton last year following a joint investigation between PRS for Music and the City of London’s Police Intellectual Property Crime Unit (PIPCU). Evans pleaded guilty on Friday, 7th October at Liverpool Crown Court to illegally uploading the UK’s Top 40 singles to various torrent sites as they were announced each week by the Official Charts Company. The 39-year-old, known online as OldSkoolScouse, was also distributing tracks through his own website, including ‘acappella’ music to be used for DJ-ing and remixing. The conviction results from a case that began with a joint investigation between UK performance right collection society PRS for Music and PIPCU. Sentencing will take place next month (on November 11th).

And more music! The Music Managers Forum has published 'Dissecting the Digital Dollar Part 2' saying "While recognising that record companies continue to make significant investments in new music, many in the music community believe that there needs to be a frank conversation about how streaming income is shared" and "Many people felt that the share received by heritage artists, session musicians and songwriters needs particular consideration, and that a ‘performer equitable remuneration’ system like that that operates in the radio sector and the ‘contract adjustment mechanism’ proposed in the draft European copyright directive might be ways to address some of these concerns" and "Artists and songwriters would generally prefer more digital services to be licensed through the collective licensing system, though managers recognise that there can be issues with that approach. CMOs should seek to address those issues" amongst many other interesting things! You can download a copy of the report yourself here. 

The US Copyright Office is asking for comment on that thorny issue of copyright and 'fixing things'. Back in 2015 The US Register of Copyrights Maria A Ms. Pallante noted that the anticircumvention provisions of Section 1201 of the DMCA prevent consumers from “engaging in activities, such as the repair of their automobiles and farm equipment, which previously had no implications under copyright law”. That issue had been in the news, not least as at the end of 2015 Senators Grassley and Leahy, the Chairman and Ranking Member of the Committee on the Judiciary, published a letter to the Copyright Office asking it to analyse the impact of copyright law on “software-enabled devices” (such as cars, phones, drones, appliances, and many more products with embedded computer systems). This issue they said was "crucial because technology and the law have evolved in a way that no one could have intended when Congress wrote the present copyright laws, and that evolution has restricted customers’ freedoms to repair, understand, and improve on the devices they buy". Car makers including General Motors and other vehicle manufacturers such as tractor maker Deere & Co had opposed a ruling from the Copyrght Office agreeing with this, saying vehicle owners could visit authorised repair shops for changes they may need to undertake - much to the annoyance of drivers and farmers! Now you can have your say! The EFF have already taken a lead saying "Let’s send a strong message to the U.S. Copyright Office and lawmakers: copyright law should not criminalize research and repair". More here and here. Request for Additional Comments here. 

And finally, Kanye West, Jay Z and Frank Ocean have prevailed in a $3 million copyright-infringement lawsuit filed against them in 2014 by singer songwriter Joel McDonald. A federal appeals court has now that the trio’s 2011 hit “Made in America,” from Kanye and Jay Z’s “Watch the Throne” album, did not copy a 2009 track by McDonald: McDonald claimed that the artists plagiarised his song after their “Watch the Throne” producer, Mike Dean, bought one of McDonald’s CDs. The appeals court upheld a September 2015 dismissal of the suit saying "“We have considered all of McDonald’s arguments and find them to be without merit.” 

Our two new intern bloggers, David Liao and Tibbie McIntyre, will be taking over the COPYKAT from next week  - we wish them well. We are sure they will be finding marvellous titbits and morsels of copyright news to keep everyone well fed with up to date copyright news.  

N-N-N-Nineteen and Sony spat

Thanks to a public stand by artists such as Taylor Swift, and the UK campaigning organisation The Featured Artists Coalition, the music buying public are becoming increasingly aware of the often poor deal most recording artists get when it comes to royalties from digital downloads of their works. Now, documents released by the US District Court of the Southern District of New York reveal just how cynical is the position of Sony when it comes to negotiating deals with the likes of Spotify. This will come as no surprise to regular readers of this blog, following Ben's story here about the leaked contract between Sony and Spotify. 

Sony is being sued by 19 Recordings Ltd (which represents a number of artists from the American Idol series, including Kelly Clarkson and Carrie Underwood) over claims that Sony has acted in bad faith in taking a financial stake in Spotify and benefiting from general advertising revenue without passing on a share to the artists. Sony defends its activities by saying it is not required to share its general profits with its artists. While this may in principle be true, 19 are alleging that Sony have arranged their affairs to deliberately minimise the amount they have to pass on to the artists, often in contradiction to the 'best endeavours' clauses in the recording contracts signed with their artists. They say that Sony and other major record labels "have significant power to exert control over Spotify in order to not only dictate how revenue will be paid, but wrongfully and in bad faith divert money from royalties that must be shared to other forms of revenue that they can keep for themselves."

Sony rely upon the clauses within the contracts agreed between Sony Music and 19 Recordings Ltd which explicitly set out that Sony is not required to pass on general income or profits unrelated to individual tracks or albums. They also point to the SDNY Court's earlier ruling that proceeds from successful infringement and pirating lawsuits brought by Sony are to be treated as general income to record label and do not need to be passed on to the recording artists.

The current skirmish is about 19's attempt to amend the particulars of its claim, and Sony's motion for summary dismissal of the amended claim. We may have to wait some time before knowing if the actual issues will be heard at a full trial, but in the meantime, the public airing of disputes like this does nothing to improve the perception of the majors being out of touch and only interested in their own profits. Here is The Featured Artists Coalition's take on the situation:

"Whatever the legal rights or wrongs in Sony’s case, the breach of moral trust that has long been felt amongst artists is now in the public domain and on the record. If the labels won’t come together with artists to fix the problem, perhaps legislators will. Without solutions, the future of the music industry hangs in the balance as artists cannot make a living out of scotch mist, lining the coffers of record labels who appear not to care about the very hand that feeds them."

More details of Sony's response to 19's Amended Claim here (pdf)

Article on BBC News about Apple Music and streaming here

Pandora opens up a box of fun

Pandora, the American streaming music service, has issued legal proceedings in the USA on the basis that the rates currently being offered by ASCAP, the US collecting society are unfair, because they are not as favourable as those offered to traditional broadcasters like Clear Channel, which have recently moved into the online music space. Arguing that Clear Channel have an advantage as it can negotiate the royalties they pay for their online services at the same time as negotiating music publisher fees for their FM networks, via the Radio Music Licensing Committee, the move comes after direct negotiations had failed. 

However, in the world of sound recordings, the collection societies are fighting back with the news that SoundExchange, the non-profit organisation that represents record labels and recording musicians, has launched its opposition to the Internet Radio Fairness Act, highlighting a letter signed by 125 artists who oppose Pandora's plan to "cut artists' pay" when music is played over Internet radio. The open letter, which has over 40 Grammy winners' signatories and the backers includes Kiss, the Dead Kennedys, Missy Elliot, Pink Floyd, Megadeath, Robert Plant, Don Henley, Billy Joel, Maroon 5, Martha Reeves, David Sanborn, Ne-Yo, Common and Roger Waters, praises Pandora saying "We are big fans" - and celebrates the company's commercial success, but asks why Pandora, with massive growth in revenues and a successful IPO under its belt, is pushing Congress to "slash musicians" pay saying "That's not fair and that's not how partners work together" telling Pandora it's time to go back to the drawing board.

“We all want Internet radio to succeed, but it won't if it tries to do so on the backs of hard working musicians and singers," said MusicFIRST Executive Director Ted Kalo, and SoundExchange President Michael Huppe added "This issue is critical to the tens-of-thousands of recording artists we represent - all of whom rely on this digital performance revenue stream to make a living,". "It is important that we protect artists and the long-term value of their music, which is, after all, the foundation of Internet radio." 

Pandora claims the internet service has paid considerably more in performance royalties than satellite radio provider SiriusXM and the legislation is needed to level the playing field. 

The proposed law, the Internet Radio Fairness Act, (H.R. 6480/S 3609) was introduced in the US Senate by Oregon Democrat Ron Wyden. The House version has bi-partisan support and is backed by Republicans Jason Chaffetz (Utah) and Darrell Issa (California) and Democrats Jared Polis (Colorado) and Zoe Lofgren (also California) The legislators claim the Internet Radio Fairness Act would modernise the music copyright royalty system by setting a more equitable standard for the calculation of royalty rates for Internet radio. Interestingly, the EFF also support the legislation saying on their website that now the 2012 presidential campaign is over, “Congress may soon be able to get back to business. One of the things it should prioritize is fixing a longstanding tax on innovation that most folks don’t know about, but they should:the unfair legal treatment of Internet radio”.

So - a tax on innovation?  or a tax on musicians and the music industry? The debate seems set to run .......

https://www.eff.org/Internet-Radio-Fairness-Act-ExplanationA musicians perspective on Pandora

http://www.musicfirstcoalition.org/sites/default/files/Artist%20Letter.pdf 

http://www.examiner.com/article/music-industry-protests-pandora-and-internet-radio-fairness-act

IFPI welcomes Russian ruling on unlicensed streaming platform

The IFPI has welcomed what it calls a “landmark ruling” by a Russian court that internet company vKontakte’s music service is liable for copyright infringement. The commercial (“Arbitrazh”) Court of Saint Petersburg ruled that the social networking site with an unlicensed music service is illegally offering unlicensed music to its users. vKontakte is Russia’s most popular online entertainment platform. It has over 110 million registered users and over 33 million users per day, and is one of the top 50 most visited sites in the world. The case against vKontakte was brought by SBA Publishing and SBA Production, members of the Gala Music Group in Russia. The cases were based on vKontakte making Gala’s music compositions and sound recordings available without licensing agreements. The unlicensed vKontakte music service allows streaming of music from an extensive catalogue of Russian and international sound recordings and encourages software developers to create apps for illegal downloading of content via vKontakte. The IFPI says that several further cases are pending.

Reacting to the judgment, IFPI CEO, Frances Moore, said: “This is a very important ruling for Russia. It shows that sites like vKontakte cannot build a business on making music available without licences from content owners. Such services are directly liable for the unlicensed music they make available. They cannot avoid liability by shifting responsibility on to their users.” Moore added that: “Russia is a market with the potential to develop a thriving legitimate music market, but this prospect is currently being undermined by unlicensed services such as vKontakte. Millions of unlicensed songs are freely available through vKontakte, competing unfairly with licensed services, and this must stop.” Russia is now one of Europe’s biggest online markets. vKontakte is a business valued at between US$2 and US$3.9 billion.

www.ifpi.org

Internet rights, rates (and wrongs)

I have always been suspicious that the only reason that songwriter and music publisher collection societies the Performing Right Society (PRS) and the Mechanical Copyright Collection Society (MCPS) in the UK ever evolved into 'PRS for Music' was because that at that time no-one quite knew what a stream or a download was in law and that the merger only way they could sensibly (and legitimately) explain their right(s) to collect royalties from the use of their member’s songs on the internet. There was (and still is) much debate about what constitutes a 'stream' and what constitutes a 'download' and whether these form a public performance (whether a broadcast or a 'communication to the public') or more like the sale of a copy of a copyrighted work - a 'per unit' sale. There again, some ask whether they both? Or are they the same thing? Or is copyright law so hopelessly out of tune with the modern world that none of these definitions are actually applicable? Well now a US Federal appeals court has had a go at casting some much needed light on these issues and indeed on how the US collection society should be levying royalties for the use of (here) collection society ASCAP (songwriter and music publisher) members' works.

Looking at royalty rates first, The US Second Circuit Court of Appeals has overturned a District Court's decision that applied collection society ASCAP's streaming music royalty to Yahoo and RealNetworks’s activities and ordered a lower court to re-examine its findings. The Court of Appeals said that "in setting the royalty rate, the District Court must follow an approach more tailored to the varying nature and scope of Yahoo's music use" saying that "The district court did not adequately support the reasonableness of the 2.5% royalty rate applied to the value of the Internet companies' music use". The lower court was also ordered to "conduct a more complete analysis of the various uses of ASCAP's musical works by RealNetworks."

Judge John M. Walker, Chief Judge Dennis Jacobs and Judge Debra Ann Livingston said that the lower ("Rate") court’s establishment of benchmarks using the rates cable companies and broadcast stations pay for licensing music was inappropriate because the nature and scope of the online companies’ use of music differed significantly. The judges sided with Yahoo! and criticised the Rate court for relying on inconsistent sets of data sources when coming up with its music licensing formulae and said that the rate court’s attempt to come up with a simple 2.5% across-the-board license for the two online services was imprecise -and did not take into account the different kinds of services that both Yahoo! and RealNetworks offer. The three-judge panel also found that the Rate court did not give enough of a rationale for basing its licensing fee formula on the amount of time a piece of music is streamed, rather than on page views, which is the primary driver of advertising revenue. The appellate court also found that Yahoo can’t be compared to television stations because its business isn’t as reliant on music as the television industry with Judge Walker, giving the opinion of the Court, saying "Nearly every program on a television station somehow utilizes musical works,” adding “In contrast, only a fraction of the traffic on Yahoo!’s web site uses music — much of Yahoo!’s web site does not implicate any music whatsoever. Given that Yahoo!’s revenue base relies far less on ASCAP content than the television networks’ revenue base, we believe that comparing percentages of overall revenue bases is of little probative value in this benchmark analysis.” The judge also pointed to Yahoo!’s more specific licensing terms with BMI in the USA for the different kinds of uses of music as an example of how licensing agreements can be more reflective of the nature of the use of the music and noted that ASCAP’s own agreements with Turner Broadcasting for its various cable stations also accommodate different kinds of licenses depending on how each station uses music.

The appellate court did agree with the lower court on one separate, but key issue that ASCAP had appealed. The Court rejected the notion that a music download constitutes a "public performance" of a song. The Court held that downloads do not constitute a public performance of a work as defined under current US copyright law. The court said "In answering the question of whether a download is a public performance, we turn to Section 101 of the Copyright Act, which states that '[t]o ‘perform’ a work means to recite, render, play, dance, or act it, either directly or by means of any device or process'," ruling that "A download plainly is neither a 'dance' nor an 'act'. Thus, we must determine whether a download of a musical work falls within the meaning of the terms 'recite,' 'render,' or 'play'." Judge Walker then went on to say that the court would look at he ordinary sense of the words 'recite,' 'render,' and 'play' which refer to actions that can be perceived contemporaneously saying "Itzakh Perlman gives a 'recital' of Beethoven’s Violin Concerto in D Major when he performs it aloud before an audience .... Jimmy Hendrix memorably (or not, depending on one’s sensibility) offered a 'rendition' of the Star-Spangled Banner at Woodstock when he performed it aloud in 1969. Yo-Yo Ma 'plays' the Cello Suite No. 1 when he draws the bow across his cello strings to audibly reproduce the notes that Bach inscribed. Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener."

The court held that "The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener .... They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded."The ruling also made a clear distinction with the streaming of files which, like broadcasts, had to be licensed for their performance saying "[Yahoo! and Real's] stream transmissions, which all parties agree constitute public performances, illustrate why a download is not a public performance. A stream is an electronic transmission that renders the musical work audible as it is received by the client-computer’s temporary memory. This transmission, like a television or radio broadcast, is a performance because there is a playing of the song that is perceived simultaneously with the transmission".

The Court sent the case back to the lower court to reconsider the method of calculating the licence fees due to ASCAP.


http://www.dmwmedia.com/news/2010/09/28/appeals-court-music-downloads-not-039public-performances039

http://broadbandbreakfast.com/2010/09/ascap-music-licensing-fees-voided-for-yahoo-realnetworks/

http://www.out-law.com/page-11406

Are Recording Artists Being Excluded from Spotify Income?

Conflicting information flies about as to the price paid by 4 major record labels and label Merlin for shares in the streamed music service Spotify. The UK's industry weekly, Music Week, finally covered the conundrum this week.

The Washington Post had already published the respective holdings of Spotify shareholders on 7 August, including information drawn from Swedish news site Computer Sweden. This "unverified capitalization table information, reportedly based on a filing in Luxembourg where the company is headquartered" shows that the labels, Sony/BMG, Universal, Warners, EMI and Merlin collectively own 17.3% of Spotify and that they paid approximately 100,000 kroner (a little shy of ten thousand Euros), a fraction of the price paid by venture capital funds North Zone Ventures and Creandum.

Now why is this so interesting?

Record labels usually require hefty upfront licence fees from tech startups wishing to exploit the labels' catalogues of copyright recordings. These fees are often too steep for a start up. So, have the majors and their more modestly sized wizard chum, exchanged a licence to exploit their catalogues for shares in Spotify? And if so, will the artists be paid for their recordings streamed on the Spotify site?

Artists are paid royalties usually expressed by reference to monies "directly and identifiably" arising from the exploitation of the copyright sound recordings which are the subject of the record deal. If the shareholding information is correct and the labels are not receiving licence fees, all the labels earnings from Spotify will go straight to their bottom lines - with no participation in the money by the artists whose recordings are being streamed.