Copyright Issues for Internet
Music
By Dean L. Surkin, Esq.
© 1997 Dean L. Surkin
The copyright law is the basis for compensating artists for their work. About 15 years ago, I had written an article, Copyright Primer for Musicians, that appeared in Keyboard Magazine. At the time I wrote that article, I could not even conceive of dissemination of music via the Internet, even though I had a few years of experience with legal research over dial-up services.
Nor did the copyright law conceive of on-line music. Historically, the copyright law has had to deal with technological changes in a catch-up fashion. With remarkable speed, however, Congress enacted the Digital Performance Right in Sound Recordings Act of 1995. The 1995 law took effect February 2, 1996.
To best understand how the copyright law applies to the Internet, you must understand how copyright owners are compensated for various kinds of sales and performances
Live performance
When an artist performs a song before a live audience, the owner of the venue must compensate the owner of the performance copyright. Usually, performing rights associations such as ASCAP or BMI negotiate blanket licenses with various venues. In turn, the performing rights association pays the royalty received 50% to the publisher of the composition and 50% to the composer.
Broadcast over radio or
television
When a radio or television station broadcasts a performance, the radio station must compensate the performing rights association. As above, the performing rights association then pays the publisher and the composer. Even if the broadcast is a broadcast of a sound recording, the owner of the copyright in the recording receives no payment. The recording company historically has benefited from broadcasts through increased sales of the recordings.
Sale of a tape, CD or
other copy
The recording company, as owner of the copyright in the sound recording, receives payment for each copy sold. Under contract with the artist, the recording company pays a royalty to the artist. The recording company also pays a royalty to the owner of the copyright in the composition—usually the publishing company. The publishing company then pays a royalty, pursuant to contract, to the composer.
When the artist is the composer of the song, the recording company often demands that the artist/composer sign over the publishing rights to record company. The artist typically agrees, because the recording company has the clout. The Artist needs the recording company to get exposure, to generate interest in live performances. But with a deal like this, the artist no longer has control of the publishing rights, and the recording company-controlled publisher can administer the rights any way they want.
Because musicians are reluctant to give up their rights, there has been a long history of independent, self-financed recordings. The earliest example in the rock era that I am aware of is Dave Clark. Dave Clark was the drummer/leader of a British band in the early 1960’s called the Dave Clark 5. He financed all the recordings the group made. He leased the masters to the record company, and retained all rights himself. This maximized his income, because he bore all the financial risk. It also means that he has full rights to all re-issues. I am currently familiar with many singer-songwriters, particularly in the folk music scene, who finance their recordings and pay for the expense of copying tapes and pressing CDs. They sell the copies at their concerts. Surprisingly, many of these musicians have been able to earn reasonable incomes without hit records, radio play or national distribution.
The similarity between this and Internet distribution is obvious. For Internet distribution, while the artist must still pay for recording studio, and production of master tape, the artist does not have to pay for making copies if the digitized recording is simply uploaded to an Internet server
Internet music
Music on the Internet has some of the qualities of a broadcast or live performance and some of the qualities of the distribution of a copy. For example, if you access an Internet page and hear a brief .wav file every time the file opens, your perception of the .wav file is similar to hearing a radio broadcast. If, on the other hand, you download a file, save it to your hard disk, and later play back the file, your perception of the .wav file is similar to buying a recording that you can play back at your leisure. Not only that, but you have the technological means to make copies of the file, just as you have the technological means to copy tapes or CDs.
As noted above, a broadcast invokes performance rights, with royalty payment to the composer but not to the recording company. A sale of a copy of a recording invokes the copyright in the sound recording itself, with payment to the recording company (and license fees by the recording company to the artist and publisher).
The 1995 Act addresses these issues by creating a new right under the Copyright Act that relates to digital audio transmission. The right inures to the benefit of the owner of the copyright in the sound recording (i.e., the recording company), and is defined as the right to perform a work publicly by means of a digital audio transmission.
In general, a digital audio transmission without the permission of the copyright holder (remember: the recording company, not the composer) is an infringement. The transmitter (such as the owner of an Internet web site) must secure permission by an individually negotiated license or, in certain circumstances, by a statutory license (also called the compulsory license). The transmitter must, of course, make royalty payments under whichever license it has.
The compulsory license derives from the government’s desire to prevent the Aeolian Piano Roll Company from having an unshakable monopoly in the piano roll business. The 1902 Copyright Act provided that a copyright owner could decide whether or not to license a composition to a piano roll company. However, once the copyright owner licensed the composition to one piano roll company, any other piano roll company had the right—the compulsory license—to make their own piano roll upon paying the statutory fee.
In the field of sound recordings, the Harry Fox Agency typically handles negotiations for the recording companies and publishers. If no initial recording made, the compulsory license rule doesn’t apply and the composer can say no to any request for a recording. To those of you who remember the late 1950s when white musicians often made watered-down cover versions of r&b hits, the compulsory license is the answer to the question, why did the artists permit some of those recordings to be made?
Limitations on the
digital audio transmission right
Certain transmissions are exempt from infringement, i.e., the transmitter does not have to obtain a license or pay a royalty. The exempt transmissions include transmissions that are not a part of an interactive service, part of a nonsubscription transmission, or a nonsubscription broadcast transmission. In other words, transmissions similar to radio broadcasts.
A subscription transmission is subject to statutory licensing provided that the transmission is not part of an interactive service, the transmission does not exceed the sound recording performance complement, no advance program schedule announced to public and the transmitter does not automatically and intentionally cause the receiver to switch program channels. A transmission to a business establishment, i.e., Muzak or piped-in background music, may automatically and intentionally switch program channels.
There are certain restrictions on licenses granted to interactive services (an interactive service is one where the recipient chooses the recording to listen to). There can be no exclusive license in excess of 12 months, with 24 months permitted for licensors who hold fewer than 1,000 copyrights in sound recordings (but they cannot renew the exclusive license until 13 months after the expiration of the prior license).
All other digital audio transmissions require a separately negotiated license.
Depending upon whether the transmissions are subscription or nonsubscription transmissions, the license fee is treated differently. A subscription transmission is controlled and limited to particular recipients who pay for it (almost like a magazine subscription).
For non-subscription transmissions, the featured artist and non-featured artist receive payments pursuant to contract. The featured artist is the one whose name appears in on the recording. Non-featured artists are the session players.
For subscription transmissions, the license fee is distributed 2.5% to nonfeatured musicians, 2.5% to nonfeatured vocalists, and 45% to the featured artists. Note: this leaves 50% for the recording company.
The license fees shall not diminish copyright royalties otherwise payable.
Finally, the copyright notice encoded in the digital audio transmission must be delivered as encoded. This is similar to the provision in publishing that the book must be sold with the copyright notice intact.
Acknowledgement
I would like to thank attorney Anthony R. Berman, who at the time I originally wrote this article, maintained an Internet site devoted to Internet legal issues, and who was helpful in guiding some of my research for this article.