Home > Uncategorized > Compulsory License Rules For Music Services Finding Songwriters

Compulsory License Rules For Music Services Finding Songwriters

January 3, 2016

Once a phonorecord of a work has been distributed to the public in the United States under authority of the copyright owner, anyone can obtain a compulsory license to make and distribute reproductions of that song if the compulsory licensee (like a Spotify, for example) otherwise complies with the very straightforward statutory requirements to enjoy this tremendously valuable compulsory license.

And there are great benefits and reductions in transaction costs to the licensee.  Qualifying for the compulsory license allows a Spotify to plug into an entire system of predetermined royalty payments and accounting rules, a huge saving.  Through a bizarre and controversial quirk in the law, a compulsory licensee cannot be audited by songwriters.  Pretty good stuff for the licensee.

A threshold requirement of a licensee enjoying the benefits of the compulsory license is the licensee sending a simple notice to the copyright owner letting her know that the licensee intends to use the song in reliance on the compulsory license.  It’s pretty simple stuff, really.

This assumes, of course, that you know who wrote the song and you know where to find them.

Finding songwriters is one of the most common and foreseeable events in the workflow for obtaining compulsory mechanical licenses for songs under U.S. law (17 U.S.C. Sec. 115 and accompanying regulations at 37 C.F.R. 210, etc., for those reading along).  Given that the compulsory license for mechanicals first appeared in the 1909 revision of the U.S. Copyright Act (Section 1(e) for you “old Act” buffs), it should shock no one that the drafters figured this out.  The same essential concepts were continued in the 1976 revision of the Copyright Act, so that’s right–the U.S. Government had over 100 years to figure out what to do if you can’t find the songwriter.  And surprise, surprise–they did figure that out.

In the case of a Spotify, don’t forget that streaming services also must obtain a performance license in addition to the mechanical.  These performance licenses are issued by ASCAP, BMI and SESAC, each of which maintain searchable databases for their repertoire.

What is the workflow for finding a songwriter (or publisher)?  The first thing most people would do is search the PRO databases, particularly since  the service will be reporting to them anyway.  If you are really stuck and neither the licensee nor the PRO know the name of the songwriter, there are many ways to puzzle that out–as Stephen Carlisle points out in his excellent post, if the song ever appeared on a Billboard singles chart, you can almost invariably find the writer’s name there.

But here’s a piece of great news–the U.S. Copyright Office actually has a circular on this very subject.  (Because the Internet, let’s say that a Copyright Office circular is kind of like an FAQ or a Wikipedia entry–except with some prima facie authority.)  If you’re going to be doing anything with compulsory licensing, it’s a good idea to get smart about Copyright Office circulars, especially Circular 73–subsidized by the taxpayers, i.e., free of charge, by the way.

So what does Circular 73 have to say about songwriters who cannot be found to send a notice to?  First, there is an assumption that the potential compulsory licensee will have tried to find the songwriter through the usual sources, including the Copyright Office’s own database of copyright registrations and other recordations, which is pretty complete.

And here’s a practice tip:  If someone sends you a letter complaining that your use is unlicensed and they include copyright registration numbers with that complaint, that should tip you off that somebody in your organization may have screwed up.  How could there be a copyright registration that would be revealed by a simple search but you failed to send the notice required by Section 115?

This is important–a music user’s right to rely on Section 115 depends on that user complying with the relatively minimal requirements of U.S. law in return for the government taking away valuable property rights from songwriters.  So if you fail to comply, then you have no license.  Such people are also known as infringers.

But not to worry–for those beings who are sentient and capable of sequential thought, there is a well trodden path to the safety of the compulsory license.  Circular 73 tells you exactly what to do:

If the Name and Address of the Copyright Owner Are Not Known

  1. File a Notice of Intention to Obtain a Compulsory License in the Licensing Division of the Copyright Office (see the address at the end of this section).
  2. Submit the statutory filing fee for each title listed in the notice in a single payment. (See sl 4l, Copyright Office Licensing Division Service Fees, available on the Copyright Office website.) The Licensing Division will acknowledge receipt of the filing. However, if certification of a docu­ment is required, see Circular 6, Obtaining Access to and Copies of Copyright Office Records and Deposits, for infor­mation and associated fees.
  3. Make checks payable to Register of Copyrights or authorize deduction from a deposit account for the filing fee. (See Circular 5, How to Open and Maintain a Copyright Office Deposit Account.)

Let’s pause there for a moment and review paragraph 2:  “Submit the statutory filing fee”.  Aha! The payment of money!  You don’t suppose that might be the reason that a music user like Spotify wouldn’t take advantage of this excellent insurance policy against infringement claims provided to them by the awesome power of the U.S. Government, do ya?  How much is that filing fee?

$75 Recordation of a notice of intention to make and distribute phonorecords (17 USC 115) for first title. $20 for additional titles (per group of 10)

Or said another way–a lot less than statutory damages, even for a company with highly sophisticated lawyers and an $8 billion valuation.

But wait, there’s more.  Here’s a section in Circular 73 marked “IMPORTANT”–maybe it’s marked that way because it’s important?

IMPORTANT: The name and address of the copyright owner may be known or appear in the records of the Copyright Office at a later time. Since royalty payments must be made after the copyright owner is identified, the licensee should periodically search these records to ascertain if the copyright owner has been identified. If and after the copyright owner is identified, the licensee should make royalty payments for phonorecords made and distributed directly to the copyright owner or authorized agent of the owner. Do not send royalty payments to the Copyright Office.

Although it’s not mentioned in Circular 73, the Copyright Office publishes a list of these notices that is updated frequently, so if you were a concerned songwriter you could look up your song by title and see if anyone had filed a notice because they couldn’t find you.  This notification is consistent with the underlying policy goal of Section 115 and is similar to a state unclaimed property office.

Let’s recap–just because the music user couldn’t find the songwriter the one time the user looked for the songwriter doesn’t mean the user has fully satisfied their obligations.  No–after filing the initial notice to obtain the protection of the statutory license, the compulsory licensee is advised to “periodically” search the Copyright Office records to see if the owner has turned up.  Why?  Because once “…the copyright owner has been identified, the licensee should…[pay up for all units made and distributed to date] directly to the copyright owner…”

And don’t forget–“Do not send royalty payments to the Copyright Office.”

So there’s no–repeat, no–escrow anywhere.

But see what they did there?  If you pay the filing fee, the worst that happens when the copyright owner turns up is that you promptly pay what you owe, probably with no interest.

What’s the important policy point at work in this well-established procedure?  Notice is required to enjoy the benefits of the compulsory license.  Effort must be expended by the music user to find the party who is entitled to a notice–yes, that’s right.  Entitled to a notice.

So why are there any unlicensed songs in services like Spotify?  I don’t know the answer, although I have a feeling we will find out one day.  My suspicion is that it has to do with the filing fees.

As I read it, music users wishing to take advantage of the compulsory license for unidentified songs would need to pay $255 per every 10 songs recorded with the Copyright Office, or an average of $25.50 per song.  My bet is that companies like Spotify don’t want to pay those fees.  (I’d also point out that it probably costs way more than $255 for the Copyright Office to process this filing, so not only are these guys too cheap to pay, they also want the taxpayer to subsidize them.)

The decision not to pay those fees and file the notices with the Copyright Office rests with the music user only.  Not a third party vendor and not their accountants.  And remember, this filing has to be done “before distributing any [reproductions] of the [song]”.

Deciding that you are going to take a chance on getting caught rather than spending $25.50 to make sure you have the rights is called “business risk.”  That’s what the swinging…guys…of Silicon Valley do every day.

There’s another name for “business risk,” and listen up because this is important.  Business risk injects moral agency into the workflow.  That means that someone makes a normative decision based on the threat environment filtered through their own values about what direction the organization should take regarding a particular issue.  However much a music user tries to suck up to songwriters (or artists for that matter), one thing we know is that executives whose moral agency allows them to decide to use songs without complying with the law do not share our values.

When a corporate executive decides to not follow the law for whatever reason, or as I might say when the executive decides to flaunt the law because they think they can get away with it, the corporate executive is substituting their own independent judgement and action, that is, their own moral agency.  In the case of songwriters, the government’s expectation is that music users will invest sufficient resources into complying with the burdens of the compulsory license in exchange for the great benefits of the compulsory license.

The government encourages the corporation to find the songwriter a couple ways.  First, by making it easy and relatively cheap to file a “we can’t find them” notice, and second by creating a case that anyone failing to file that notice is an intentional infringer subject to a potentially significant sum in statutory damages.  They make it easy, and if you don’t follow then it’s on you.

If the corporate executive creates an entire system that knowingly fails to comply with the law on a massive scale either through action or inaction, then the that executive’s stockholders should expect to reap the whirlwind.

Ah well.  Win some, lose some, right?  It’s only other people’s money.

  1. AudioNomics
    January 3, 2016 at 05:06

    Why wouldn’t the guy who founded BitTorrent think he couldn’t get away with ripping off songwriters? He’s been counting that money his entire working life… let him count the bricks of a prison cell- where he belongs.
    (Of course that will never happen: as we all know… in this country- – if you steal enough money, you’re held up as a hero and given even more riches for your troubles)

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