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In a major development,  Chairman Lamar Smith (R-TX) and Rep. Howard Berman (D-CA) introduced H.R. 5553, the Section 115 Reform Act of 2006 (SIRA), on June 8 in the House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property. SIRA provides a streamlined blanket licensing system designed to enable digital music services to more efficiently access all copyrighted musical compositions.

Jonathan Potter, Executive Director of the Digital Media Association (DiMA), David Israelite, President and CEO of National Music Publishers’ Association (NMPA) and Mitch Bainwol, Chairman and CEO of the Recording Industry Association of America (RIAA) issued the following joint statement:

“Our member companies – digital music providers, music publishers and recording companies – stand much to gain from legislation that will bring music licensing into the digital era. We have been working hard over the past months to reach agreement about how to best approach this complicated and difficult task, and we are pleased that the bill introduced by Representatives Smith and Berman today reflects much of that work.

While we have not reached complete agreement on all aspects of this legislation, we are optimistic that in the coming weeks we will work together with Chairman Smith and Representative Berman to ultimately pass historic legislation that will promote greater innovation and competition among digital music providers, deliver fair compensation to music creators and most importantly, greatly expand music choice and enjoyment for music fans.”

In May, Israelite told the subcommittee that the future of songwriters and music publishers will increasingly depend on the royalties earned by digital distribution of their works — whether as full downloads, limited downloads or interactive stream.”

“Songwriters and music publishers are technology neutral – they want their works distributed in the way the public wants to receive them.  If the world moves to an all-streaming model rather than a download model because that’s what consumers want, copyright law should accommodate this,” Israelite said.

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The National Music Publishers’ Association (NMPA) is preparing for several critically important battles in the nation’s capital. Our top priority, the rate-setting proceeding before the newly formed Copyright Royalty Board (CRB), affects every NMPA member. The NMPA anticipates negotiations this spring and possibly a hearing before the CRB by next year. The NMPA is committed to fighting for music publishers and promoting the vitality of their businesses by securing fair royalty rates.

As important as rate-setting is, it is not the only threat to the viability of the music publishing industry. Congress is considering legislation affecting music licensing, digital radio, anti-piracy, and orphan works, just to name a few. The NMPA continues to work with members of Congress, as well as others in the music industry, to ensure that music publishers’ intellectual property rights are not diminished.

The next year is shaping up to be a critical time for the music publishing industry in Washington. Now more than ever music publishers and their songwriting partners must unite to protect their rights.


COPYRIGHT ROYALTY BOARD SECTION 115 RATE PROCEEDING

The upcoming Copyright Royalty Board (CRB) proceeding will prove vitally important to music publishers and songwriters. During this time, the CRB will set the royalty rates for physical and digital products, including subscription services.

Since the CRB announced its intention to determine these rates, the NMPA has been preparing for the battle over the value of the musical composition. The Nashville Songwriters’ Association International (NSAI) and the Songwriters’ Guild of America (SGA) have joined the NMPA as partners in this fight.

The NMPA has hired an experienced advocate from the well-regarded law firm Paul Weiss. A partner in the litigation department, Jay Cohen is recognized for his extensive trial experience, particularly in antitrust and intellectual property disputes. He regularly represents the various sectors of the music industry in a diversity of sophisticated and precedent-setting matters, including mechanical rights, synchronization rights, and rights of public performance.

The CRB has announced that the Voluntary Negotiation Period begins April 1, 2006, and will last three months, until June 30, 2006. During this time, the NMPA will negotiate with the other parties in the proceeding with the goal of setting rates. If the parties do not settle during those three months, then they will present their cases before the CRB, possibly as early as Spring 2007.

The other participants in the rate proceeding are Royalty Logic, Apple Computer, America Online, RealNetworks, Napster, Sony Connect, Digital Media Association, Yahoo!, MusicNet, MTV Networks, and the Recording Industry Association of America.

MUSIC LICENSING REFORM

Congress is reviewing the current law on music licensing in the digital arena and is contemplating reform. The focus has been on Section 115 of the Copyright Act, which governs the compulsory mechanical license.

The compulsory mechanical license allows for the reproduction and distribution of any commercially-released non-dramatic musical work. Section 115 governs the terms and conditions for this distribution, including the royalty payments. However, many in the music industry and Congress recognize that the U.S. Copyright Office’s antiquated system of collecting royalties does not work well in the digital world. Over the last five years, music publishers have taken great strides in helping digital media companies launch new services to compete with illegal file sharing companies. The NMPA is committed to continuing this tradition of working with the digital companies, provided that publishers are paid for their property. It is crucial that any reform legislation Congress considers is consistent with free market principles and respects creators’ property rights.

Twice in the last two years, the NMPA has testified before the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property about music licensing reform. The most recent House hearing on digital music licensing was held on March 8, 2005.  NMPA President and CEO David Israelite urged the country’s legislators to work with the NMPA to establish a “level playing field” so that music publishers will receive fair rates for their creative works.

In July, the Senate Judiciary Subcommittee on Intellectual Property held its first hearing on music licensing reform.  Israelite again pushed for just compensation of music publishers and songwriters, emphasizing that NMPA members “are excited about the emergence of digital technologies, but you must always remember that the purpose of a digital music company is to sell the private property of others.”

DIGITAL RADIO/SATELLITE RADIO

With the onset of high-quality digital radio signals transmitted through satellite, cable or the Internet, it is vital that Congress pass legislation to protect the songs that are being transmitted. Without reasonable content protection, consumers could easily become the owners of perfect copies of any song they choose and which they could distribute. The result would be devastating for music publishers and songwriters. Online sales would drop even more dramatically, and music publishers would not receive the royalties they are entitled to for the songs being distributed.

The music industry has joined together to ask Congress to authorize the Federal Communications Commission (FCC) to impose licensing conditions on digital radio to stop the unauthorized distribution of transmitted music by using an audio broadcast flag.

The NMPA applauds Congressman Mike Ferguson (R-NJ), along with original cosponsors Representatives Ed Towns, Mary Bono, Bart Gordon and Marsha Blackburn, for introducing the Audio Broadcast Flag Licensing Act of 2006 (H.R. 4861) in the House of Representatives. If passed, this legislation, would force digital radio device manufacturers and broadcasters to protect music that is transmitted digitally. The legislation has been referred to the House Energy and Commerce Committee. The NMPA is lobbying the committee to act on this important legislation.

Meanwhile, Senators Gordon Smith (R-OR) and Barbara Boxer (D-CA) also have circulated a draft bill that would grant the FCC the authority to issue rules for digital radio to protect content, if the industry does not reach an agreement.

Additionally, Senators Diane Feinstein (D-CA), Lindsey Graham (R-SC), and Bill Frist (R-TN) have introduced the Platform Equality and Remedies for Rights Holders in Music Act of 2006, or the “PERFORM Act (S. 2644), which will protect music as it is transmited over digital radio.  NMPA supports this important legislation.  Platforms like High Definition and Satellite radio should be able to thrive and expand, but not at the expense of those who worked so hard to create the music that fans crave. Ultimately, this bill will allow the consumer more ways than ever to get high-quality digital music, while fostering an environment that ensures that songwriters, music publishers and other members of the music community are compensated for their intellectual property.

ANTI-PIRACY ENFORCEMENT

The NMPA, concerned about the theft of intellectual property, is working with members of Congress and others in the entertainment industry to pass a comprehensive piece of anti-piracy legislation based on the legislative suggestions of the Department of Justice Intellectual Property Task Force. This proposed legislation would mandate increasing the number of FBI agents dedicated to anti-piracy investigations and providing federal funds to several key local police departments for the purpose of hiring additional anti-piracy investigators.  

ORPHAN WORKS

Orphan works are copyrighted works whose owners cannot be identified or located. On January 31, 2006, the Copyright Office issued a report outlining the problems surrounding orphan works and recommending a legislative fix.

On May 23, 2006, Chairman Lamar Smith (R-TX) introduced the "Orphan Works Act of 2006" (H.R. 5439), which creates new guidelines for use of copyrighted material when the original owner cannot be located.  The Orphan Works Act is the product of over 20 hours of negotiations among various interested parties and the Subcommittee on Courts, the Internet, and Intellectual Property, chaired by Smith. As you know, NMPA has worked closely with the subcommittee staff to ensure that music publishers and songwriters are protected under this bill.  

Most importantly, the bill contains language that requires users of copyrighted material to perform and document a reasonably diligent search for the copyright owner before enjoying the benefit of limitations on the remedies that a copyright owner could obtain against him if the owner sues for infringement at a later date.  The bill lists several steps that constitute a reasonably diligent search, including the use of expert assistance and reasonably available technology, as well as industry guidelines and best practices that will be available through contacting the Copyright Office or by going to the Copyright Office website.  The reasonably diligent search for musical works includes searching all important databases, including the HFA, ASCAP, BMI, and the Copyright Office databases.

Additionally, the bill preserves the efficacy of current provisions in the Copyright Act that provide for payment of a compulsory license fee where the copyright owner cannot be located for purposes of obtaining permission for the specific use and will therefore supercede this new orphan works provision. This will ensure that in cases where the intended use of a work is covered by the section 115 compulsory license, the would-be user must first avail herself of 115(b) before seeking to rely upon the more general orphan works provision.
H.R. 5439 is attached.  On Thursday, May 25, the subcommittee passed HR 5439.  The full Judiciary Committee will consider it next.

Overall, the bill does the following:

-Provides for payment of attorney's fees and costs when an infringer refuses to pay a reasonable royalty;
-Directs the Copyright Office to conduct an inquiry on remedies for small copyright claims;
-Provides explicit description of steps a potential user must undertake before using a work;
-Requires that paid search tools be used when reasonable;
-Limits the monetary relief safe harbor to uses that are for a "primarily charitable, religious, scholarly, or educational purpose;"
-Includes joint and several liability for those working with or on behalf of users;
-Makes clear that a lack of visible copyright ownership information on a work is not sufficient to determine that a work is an orphan work;
-Requires the Copyright Office to host a list of search tools and best practices guides on how to conduct a reasonably diligent search;
-Establishes a definition of reasonable compensation;
-Ensures that an orphan works system does not trump existing statutory licenses;
-Recognizes the state sovereign immunity issue; and
-Delays the effective date of the bill until June 1, 2008, to ensure copyright owners have time to develop best practices guides for searchers.

FAIR USE

The NMPA strongly opposes legislation introduced in the House of Representatives by Congressman Rick Boucher (D-VA) that would do away with the technological protections for intellectual property in the guise of expanding the "fair use" doctrine.  If passed, this legislation (H.R. 1201) would inevitably harm the customers of the music industry's goods and services as well as music copyright holders. Legislation promoting the hacking of technology-protected copyrights ultimately would damage the economic incentives for new online works, and would thereby reduce the new creative products available to consumers.

H.R. 1201 has been referred to the House Commerce Committee, and the NMPA has joined several other creators’ groups to form the Music Creators’ Coalition in an effort to unify the music industry and oppose this bill.