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Thank You @RepGoodlatte for Getting the “Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA)” Passed in the House

February 27, 2018 Comments off

As the Google Transparency Project reports, Digital Media Association heaveyweight Google and its incumbent cronies like the Electronic Frontier Foundation, Engine Advocacy, the Center for Democracy and Technology, NetChoice and the Consumer Technology Association are out for blood to keep the legacy Communications Decency Act from being dragged into the 21st Century.

FOSTA

Miraculously, Google’s lobbying millions were no match for strong grassroots support behind Chairman Bob Goodlatte that got the much needed reform legislation over the goal line.

Remember this tense exchange between ex-Executive Chairman Eric “Uncle Sugar” Schmidt, Google’s head lawyer Kent “Loophole” Walker and a whistleblower at the Google shareholder meeting regarding Google’s opposition to the campaign to deny sex traffickers the safe harbor in the ancient Communications Decency Act:

Here’s the press release from the House Judiciary Committee:

The House of Representatives today passed the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA), a product of the House Judiciary Committee. This legislation provides restitution for sex trafficking victims and enhances criminal penalties for websites that facilitate illegal prostitution or sex trafficking.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) has issued the following statement:

Chairman Goodlatte: “Over the past year, the House Judiciary Committee has worked directly with prosecutors to understand how new legislation could help them enforce existing laws and hold bad actors accountable for sex trafficking online. We have also explored changes to the criminal code that would disincentivize websites from knowingly promoting or facilitating illegal prostitution. The summation of the Committee’s investigative work is FOSTA, a bill that gives restitution to victims and creates harsher penalties for bad actor websites that facilitate horrendous criminal acts. I believe the provisions in this legislation will make the internet safer and give victims the criminal and civil means to punish wrongdoers and move forward with their lives.”

Background: 
What FOSTA does:

  • Holds Bad Actors Accountable: clarifies that section 230 of the CDA does NOT grant immunity to websites that facilitate sex trafficking.
  • Creates a New Federal Crime: websites that have the intent to promote or facilitate illegal prostitution can be prosecuted under the new 18 U.S.C 2421A created by the bill.
  • Increases Criminal Penalties:  prosecutors can seek higher penalties for websites who promote the illegal prostitution of 5 or more persons or act with reckless disregard for the fact that sex trafficking occurs on their website.
  • Enforces Existing Laws: allows state and local prosecutors to enforce sex trafficking statutes and the new 2421A.
  • Provides Restitution for Victims: gives victims of sex trafficking a pathway to sue bad actor websites for conduct violating the new criminal law, 2421A.

The House Judiciary Committee last year held a hearing to review the impact of the Communications Decency Act on sex trafficking online. In December 2017, the Committee approved FOSTA by voice vote.

“Out of Balance”: @beggarsgroup Martin Mills’ Rallying Cry on DMCA Abuse at Canadian Music Week

May 10, 2014 1 comment

Martin Mills is Chairman of the Beggars Group, home to some of the best known brands in the music business–4AD, XL, Matador, and Rough Trade, as well as the Beggars Banquet catalog.  In addition to his companies, Martin is a leading advocate for independent record companies around the world.  He’s also a fine example of what used to be called a “records man”, a term you won’t find in Wikipedia.

Martin’s companies have a long history of finding and developing some of the most compelling artists in our business including Adele, Friendly Fires, Jack White, Radiohead, Thom Yorke, Atoms for Peace, Sigur Rós, The National, Interpol and Iron and Wine to name a few in no particular order.

I attended Martin’s keynote at Canadian Music Week on Thursday, and he gave me permission to reprint his speech.  Given the current attention devoted to copyright issues in the U.S. thanks to Chairman Bob Goodlatte and Register of Copyrights Maria Pallante, I’m going to post it in two parts.  Today’s post is actually the second part of Martin’s speech concerning the DMCA safe harbors, a topic that was the subject of a recent IP Subcommittee hearing in the House of Representatives.

We’ll post the first part about commercial balance in a coming discussion of commercial negotiations with online retailers.

This part will address the problems that Martin has with interpretations of the DMCA and notice and takedown-type statutes in various countries.  These interpretations, particularly by Google, go to the lack of respect for music and creators demonstrated by Google and in particular by YouTube.

Out of Balance: DMCA Abuse

I’d like to take a little time to say a few things.

I’m often asked what I actually do day to day, now that I have a company of 150 people taking care of things, and it’s not an easy question to answer.

But the answer is – balance.

I maintain many different balances, and that can be a subtle and delicate process.

Balance in personal relationships in the business.

Balance between the four labels in my family.

Balance between commercial needs and artistic integrity.

Balance between promotional opportunity and the need to maintain the value of our artists rights.

But we operate in an industry today that is out of balance. And we need a balanced industry like we need a balanced diet.

Imbalance in the Safe Harbors:  YouTube and Grooveshark Rely on Distorting the DMCA

[An] imbalance I want to talk about is the safe harbour provisions, and similar terms in other countries. They were introduced, with some foresight, by the legislators in the USA framing the DMCA, to provide a notice and take down procedure for unlicensed content. But the legislation has been distorted into a protective wall behind which cyberlockers and torrent sites, and companies such as YouTube and Grooveshark, operate.

The original intent was to protect reasonable people acting reasonably from falling foul of the law, to enable the digital economy to grow without “ gotcha “ law suits against ISP’s who had no idea that their networks were being used for infringement. They were not intended to provide fortress walls behind which companies could build billion dollar businesses on content that had not been cleared. They were never intended to become a de facto “ licence “.

To draw an offline analogy, these provisions would allow someone to burgle your house and remove its contents, with their only risk being that if you caught them, they’d have to return them – and maybe apologise. And then do it again. And again. And again.

Copyright is meant to allow you to control your own work. That is totally undermined when another law says that people in effect can ignore it with impunity. Would we consider a safe harbour law allowing small restaurants to ignore food hygiene laws ? Or a safe harbour for personal data being inappropriately used ? Of course not.

YouTube’s Distortion of Safe Harbors Harms the Indies Most

As you might imagine, policing the YouTubes of this world for infringing content is a herculean task, one beyond all but the largest of companies. For my community, the independents, it’s a game of whack-a-mole they can only lose.

These provisions are being abused. Many of the companies taking advantage of them are not start-ups that need a break, they dwarf everyone in this room. They’ve been in business long enough to now be able to identify that content. They know what it is.

They should not need that protection any more. Those provisions hobble creators, and they give those that use them an unfair competitive advantage over companies such as iTunes, Spotify, Amazon and Rdio who DO pre-licence content. Google says that safe harbours have been crucial not only to them but also to every other internet company. That’s not true. And Youtube says it’s paid out a billion dollars to music rights owners – but so has Spotify, from one thirtieth as many users. That economic discrepancy is because of the unreasonable economic advantage Youtube has over its digital service competitors because of its use of the safe harbour provisions.

Notice and Staydown:  US Copyright Reform Should Address DMCA Abuse and Restore Balance

The American government is increasingly looking at reforming copyright laws. As long as that reform creates a balance between strengthening copyright and allowing investment in the creative world, and adapting it to a world never envisaged, I support that intention. But I believe part of that change must be to remove the safe harbour loophole.

We are at the point at which notice and take down must become notice and stay down.

To conclude, whilst thanking you all again, I would like to quote from one company’s evidence to Australia’s Communication Ministry a few months ago.

 “ We believe there is significant, credible evidence emerging that online piracy is primarily an availability and pricing problem “

Whereas that might have been true ten years ago, today, in an era with myriad licensed services (and Australia has more than most ), and with streaming services with free tiers, I think that’s, frankly, rubbish.

Who was it from ? Google, the parent of YouTube, one of the companies that have made billions on the back of a statutory provision intended to protect ordinary people acting innocently.

Thank you.

Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime Part 3: Create an Audit Right for Songwriters

September 3, 2013 3 comments

[This post originally appeared in the Huffington Post]

Once a song is distributed to the public with the permission of the owner of the copyright in the song, the U.S. Copyright Act requires songwriters to license songs for reproduction and distribution under a “compulsory license.” This license is typically called a “mechanical license” because it only covers the “mechanical reproduction” of the song and does not, for example, include the right to use the song in a YouTube video or a motion picture, create a mashup or reprint the lyrics of the song.

When the Congress first developed the compulsory mechanical license in 1909, the concern was that “the right to make mechanical reproductions of musical works might become a monopoly controlled by a single company.” This monopoly never came to pass, and given the fragmentation in music licensing in the current environment, is unlikely to ever come about.

The user of the compulsory license (or “licensee”) has to comply with the rules for these licenses — including an obligation to account and pay royalties. If the licensee fails to comply, then the songwriter can in theory terminate the license, although making that termination stick usually requires an expensive copyright infringement lawsuit.

The bare compulsory license was not widely used before the advent of Internet music services — and then became something of a weapon of its own — music services bought into the “long tail” theory and tried to clear millions of songs overnight by massive mailings of notices of their intention to use the work. Given that songs are frequently co-written, this required sending huge numbers of notices. Behind each notice — supposedly — is a royalty account and statement of usage as required by law.

So if you’re following, songwriters suddenly were required to license to services they did not ask to be included in (unlike artists recording “cuts” the songwriter solicited), and only a limited paper trail to confirm the accuracy of royalty payments.

Trust, But Don’t Verify

Intuitively, you are probably thinking that songwriters would have the right to make the licensee provide evidence to demonstrate if this morass actually resulted in correct payments, right? Checking the evidence is called a “royalty compliance examination” or an “audit”. Since there is no “auditor general” of compulsory licenses appointed by the Congress, it would seem strange to believe that the intent of Congress was to codify the moral hazard of allowing the person doing the paying to examine their own books.

And yet, in the current practice, the fox is squarely among the chickens. This is because the government requires that the licensee merely “certifies” their own statements (i.e., promises the statements are true). This certification is done on a monthly basis by an officer of the licensee and annually by the licensee’s CPA. And songwriters are told “trust me.”

The Industry Standard

It’s safe to say that this certification process is drastically different than any industry-standard mechanical license. There is a long history of audits in the music business — the State of California even passed legislation in 2004 protecting the artist’s right to audit record companies. But when it comes to songwriters, the federal government forces songwriters to take the compulsory license, tells them the royalty rate they are to be paid, but does not permit songwriters to audit the licensee.

Instead, the government permits the licensee to “certify” their own statements (i.e., promises the statements are true). This certification is done on a monthly basis by an officer of the licensee and annually by the licensee’s CPA. And songwriters are told “trust me.”

The Blanche Dubois Approach to Royalty Accounting

As Blanche Dubois said in A Streetcar Named Desire, “I have always depended on the kindness of strangers” and until the Congress updates this certification business model, that’s exactly what songwriters are expected to do, too.

The compulsory license requires certification by the licensee on a monthly basis and by a CPA on an annual basis.

An officer of the licensee is to include this certification oath with the songwriter’s monthly statement:

“I certify that I have examined this Monthly Statement of Account and that all statements of fact contained herein are true, complete, and correct to the best of my knowledge, information, and belief, and are made in good faith.”

The Annual Statement of Account requires this certification by a Certified Public Accountant for the licensee:

“We have examined the attached “Annual Statement of Account Under Compulsory License For Making and Distributing Phonorecords” for the fiscal year ended (date) of (name of the compulsory licensee) applicable to phonorecords embodying (title or titles of nondramatic musical works embodied in phonorecords made under the compulsory license) made under the provisions of section 115 of title 17 of the United States Code, as amended by Pub. L. 94-553, and applicable regulations of the United States Copyright Office. Our examination was made in accordance with generally accepted auditing standards and accordingly, included tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.”

Do you think that the CPA has in fact examined millions of annual statements? Does the CPA’s risk manager or insurance carrier know that the CPA is certifying to a multitude of songwriters that the CPA has actually “examined the attached “Annual Statement of Account…” when it is highly unlikely that the CPA has done any such thing?

Congress crafted this language in a much simpler time. Remember — there are now millions of these statements every month. Do you think that the certification oath could possibly be true every time? Some of the time? How would you find out?

Certification is a One-Way Street

This certification runs only one way — the government only offers licensees and CPAs the opportunity to certify that the books are correct, not that they are incorrect. Under current practice, if a company or CPA is squishy about how accurate their books and records are, songwriters typically get no certifications at all and just an uncertified royalty statement if they are lucky.

What conclusion should be drawn from a failure to certify? Why not provide an alternative certification — that the licensee’s books and records cannot be certified. While it may be unrealistic to think that companies would ever disqualify their own books, it is not unrealistic to think that a CPA might choose this option on the annual statement of account given the CPA’s licensing responsibilities.

And it is definitely not unrealistic to think that the company’s books would be more likely to be accurate if the company knew that this disqualification option were available to the CPA. But the simplest thing Congress could do is to create an audit right for the compulsory license.

Let’s Keep it Simple

Chairman Goodlatte has said he intends to update the Copyright Act to bring it into line with the digital age. The Congress already allowed audits for the compulsory license for sound recordings and the webcasting royalty established under Section 114. This mechanism that Congress created in the recent past is working quite well.

Chairman Goodlatte could borrow heavily from the audit rights for the Section 114 compulsory license for sound recordings, and allow songwriters to conduct group audits under Section 115 to avoid a multiplicity of audits.

These changes would bring help bring song licensing into the 21st century and allow songwriters to enjoy greater confidence that they are being paid properly. Creating an audit right under Section 115 compulsory licenses would allow market forces to work to align the incentives toward better payments for songwriters.

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