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@musictechsolve: Defiance or Collaboration? The Role of the Presidential Signing Statement in MLC Board Appointments

November 20, 2019 Comments off

[This post first appeared on MusicTech.Solutions]

Even though they have a long history, Presidential Signing Statements are not exactly front and center in every civics class or constitutional public law class in America.  You may be hearing about them for the first time now.  But that doesn’t mean they have not been an important part of Constitutional law-making and jurisprudence.

Presidential Signing Statements were first used by President James Monroe in 1822 in the form of a “special message” to the Senate. Presidents Andrew Jackson, John Tyler and Ulysses Grant also issued signing statements, but they were used infrequently until the 20th Century.  Then their use picked up quite a bit starting with President Theodore Roosevelt and continuing to the present day.  So the use of Signing Statements is quite bipartisan.  While Signing Statements may not themselves have any actionable legal effect, they should not be ignored, either.  As the MMA’s Signing Statement relates directly to corporate governance and accountability (one of our pet topics on MTP as applied to what SEC Commissioner Robert Jackson called “corporate royalty” at Spotify, Google, WeWork, Facebook and others), this post may be of interest on an issue that has not been covered by the music press.

The MMA Presidential Signing Statement

Not surprisingly, there is a Presidential Signing Statement accompanying the Music Modernization Act (“MMA”) specifically relating to Title I and at that specifically relating to the MLC board appointments.  The relevant language is:

One provision, section 102, authorizes the board of directors of the designated mechanical licensing collective to adopt bylaws for the selection of new directors subsequent to the initial designation of the collective and its directors by the Register of Copyrights and with the approval of the Librarian of Congress (Librarian). Because the directors are inferior officers under the Appointments Clause of the Constitution, the Librarian must approve each subsequent selection of a new director. I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.

Let’s explore why we should care about this guidance.

According to Digital Music News, there have been changes at the Mechanical Licensing Collective, Inc. (“MLCI”) the private non-profit permitted under Title I of the MMA:

[I]t appears that two separate MLC board members are jumping ship.  The details are just emerging and remain unconfirmed, though it appears that two members — one representing indie songwriters and the other on the publishing side — are out of the organization.

Because the board composition of MLCI is preemptively set by the U.S. Copyright Act along with many other aspects of MLCI’s operating mandate, the question of replacing board members may be arising sooner than anyone expected.  As MLCI is a creature of statute, it should not be controversial that law-makers play an ongoing role in its governance.

The Copyright Office Weighs In

The Copyright Office addressed board appointments for MLCI in its first request for information for the designation of the Mechanical Licensing Collective (83 CFR 65747, 65750 (December 21, 2018) available at https://www.govinfo.gov/content/pkg/FR-2018-12-21/pdf/2018-27743.pdf):

The MLC board is authorized to adopt bylaws for the selection of new directors subsequent to the initial designation of the MLC. The Presidential Signing Statement accompanying enactment of the MMA states that directors of the MLC are inferior officers under the Appointments Clause of the Constitution, and that the Librarian of Congress must approve each subsequent selection of a new director. It also suggests that the Register work with the MLC, once designated, to address issues related to board succession.

When you consider that MLCI is, for all practical purposes, a kind of hybrid quasi-governmental organization (or what the Brits might call a “quango”), the stated position of the President, the Librarian of Congress and the Copyright Office should not be surprising.

Why the Controversy?

As the Songwriters Guild of America notes in comments to the Copyright Office in part relating to the Presidential Signing Statement (my emphasis):

Further, it seems of particular importance that the Executive Branch also regards the careful, post-designation oversight of the Mechanical Collective board and committee members by the Librarian of Congress and the Register as a crucial prerequisite to ensuring that conflicts of interest and bias among such members not poison the ability of the Collective to fulfill its statutory obligations for fairness, transparency and accountability.

The Presidential Signing Statement, in fact, asserts unequivocally that “I expect that the Register of Copyrights will work with the collective, once it has been designated, to ensure that the Librarian retains the ultimate authority, as required by the Constitution, to appoint and remove all directors.”

SGA regards it as a significant red flag that the NMPA-MLC submission to the Copyright Office devotes the equivalent of ten full pages of text principally in attempting to refute this governmental oversight authority, and regards the expression of such a position by NMPA/MLC as arguably indicative of an organization more inclined towards opaque, insider management control than one devoted to fairness, transparency and accountability.

So the Presidential Signing Statement to the MMA is obviously of great import given the amount of ink that has been spilled on the subject.  Let’s spill some more.

How might this oversight be given effect and will it be in the public record or an informal process behind closed doors?  Presumably it should be done in the normal course by a cooperative and voluntary collaboration between the MLC and ultimately the Librarian.  Minutes of such collaboration could easily be placed in the Federal Register or some other public record on the Copyright Office website.  Failing that collaboration, it could be done by either the Department of Justice (unlikely) or by individuals (more likely) asking an Article III court to rule on the issue.

Of course, the issue should not delay the Copyright Royalty Judges from proceeding with their assessment determination to fund the MLC pursuant to the controversial voluntary settlement or otherwise.  One could imagine an oversight role for the CRJs given that Congress charged them with watching the purse strings and the quantitative implies the qualitative.  The CRJs have until until July 2020 to rule on the initial administrative assessment and appeal seems less likely today given the voluntary settlement and the elimination of any potential objectors.

Since the Title I proponents drafted the bill to require a certain number of board seats to be filled by certain categories of persons approved by Congress in a Madisonian balance of power, the Presidential Signing Statement seems well grounded and furthers the Congressional mandate.

Yet there is this conflict over the Presidential Signing Statement.  What are the implications?

A Page of History is Worth A Volume of Logic

The President’s relationship to legislation is binary—sign it or veto it.  Presidential Signing Statements are historically used as an alternative to the exercise of the President’s veto power and there’s the rub.

Signing Statements effectively give the President the last word on legislation as the President signs a bill into law.   Two competing policies are at work in Presidential Signing Statements—the veto power (set forth in the presentment clause, Article I, Sec. 7, clause 2), and the separation of powers. 

Unlike some governors, the President does not enjoy the “line item veto” which permits an executive to blue pencil the bits she doesn’t like in legislation presented for signature.  (But they tried–Line Item Veto Act ruled unconstitutional violation of presentment clause in Clinton v. City of New York, 524 U.S. 417 (1998).) The President can’t rewrite the laws passed by Congress, but must veto the bill altogether.  Attempting to both reject a provision of a new law as unconstitutional, announce the President’s intention not to enforce that provision AND sign the bill without vetoing it is where presidents typically run into trouble.

Broadly speaking, Presidential Signing Statements can either be a President’s controversial objection to a bill or prospective interpretive guidance.  Signing Statements that create controversy are usually a refusal by the President to enforce the law the President just signed because the President doesn’t like it but doesn’t want to veto it.  Or to declare that the President thinks the law is unconstitutional and will not enforce it for that reason—but signed it anyway.

The President can also use the Signing Statement to define or interpret a key term in legislation in a particular way that benefits the President’s policy goals or political allies.  President Truman, for example, interpreted a statutory definition in a way that benefited organized labor which was later enforced by courts in line with the Signing Statement.  President Carter used funds for the benefit of Vietnam resisters in defiance of Congress, but courts later upheld the practice—in cases defended by the Carter Justice Department.  The practice of using Presidential Signing Statements is now routine and has been criticized to no avail for every administration in the 21st Century including Bush II, Obama and now Trump.

Since the 1980s, it has become common for Presidents to issue dozens if not hundreds of Presidential Signing Statements during their Administration.  So it should come as no surprise if the Department of Justice drafted up the statement for the MMA prior to it being presented to the President to be signed into law.  (See the American Presidency Project archives https://www.presidency.ucsb.edu/documents/presidential-documents-archive-guidebook/presidential-signing-statements-hoover-1929-obama)

Defiance or Collaboration?

What does this mean for the MMA?  The President certainly did not call out the statutorily required board membership of the MLC as an unconstitutional overreach that he would not enforce.  To the contrary, the MMA Signing Statement expresses the President’s desire that the legislation comply with the requirements of the Constitution.

Moreover,  the MMA Presidential Signing Statement is not a declaration about what the President will or won’t enforce but rather interprets a particular section of a long and winding piece of legislation.  (Title I principally amended Section 115 of the Copyright Act—now longer than the entire 1909 Copyright Act.)  This kind of interpretation seems to be consistent with the practices of prior Presidents of both parties, not an end-run around either the veto power or separation of powers.

Failing to acknowledge the admonition of the signing statement would seem an unnecessary collision both with long-standing jurisprudence and with a sensible recommendation from the President of how the Librarian, the Copyright Office and the Justice Department expect to approach the issue in collaboration with the MLCI.  That’s possibly why the Copyright Office restated the Signing Statement in the RFP.

Title I of the MMA is a highly technical amendment to a highly technical statute.  A little interpretive guidance is probably a good thing.  Collaboration certainly makes more sense than defiance.

Irving Azoff and Other Top Managers and Artists form the Music Artists Coalition

August 2, 2019 Comments off

We have entered an era where Big Tech controls the purse strings for the Mechanical Licensing Collective.  Despite that oddity, it’s refreshing to see the leaders of the music industry come together to form the Music Artists Coalition as a counterbalance to Big Tech and its counterpart, the MIC Coalition.  The MIC Coalition included Google directly at one point, but then stopped using the Google logo in their membership after Google became a lighting rod of opposition to the group.

The MIC Coalition is the face of opposition on a terrestrial royalty for artist pay for radio play, and they make no bones about it.  Irving Azoff has demonstrated that he’s one of the only managers in the music business who is willing to take on these people in court and we applaud him for it.  Along with MusicFirst and SoundExchange CEO Mike Huppe, those willing to stand up and be counted are few and far between.

mic coalition logo

There are, unfortunately, the inside-the-beltway Cassandras who have counseled a limp reaction to the MIC Coalition in recent years.  These may find some backbone now that the artists and managers who together account for approximately  80% of global turnover (just my guess) in both publishing and recordings say not so fast.  Because what political types are really good at is finding a parade then elbowing their way to the front of the line to pretend they were there all along–and if there’s anyone who can spot such people a mile off it’s the artists who are in this new group.

I’d say that the MIC Coalition is not as strong as they might appear.  Instead of cowering before them, let’s see how they hold up after a couple really hard round-house kicks and a little asymmetrical soft shoe.  Maybe they’ll still be standing.  But you won’t know if you don’t try.

Read more about it in Bloomberg.

I’m also really, really pleased to see Susan Genco taking a leading role in the management of the new organization.  Susan had the best quote in Bloomberg:

Neither of these groups speaks for the songwriters that must be compensated, according to Susan Genco, an industry veteran and board member for the Music Artists Coalition.
“We want state and national legislatures to know that if you want a true artist’s perspective, not one that may be compromised, this is the organization you call,” Genco said. “This is for artists, by artists and from artists.”

Susan has been at this for a long time in a variety of jobs that gives her that valuable 360 degree viewpoint.  She has earned the kind of hands-on experience working with the people who actually make the business run.  I have every confidence that she will bring the kind of well-adjusted creator-centered practical knowledge and trust that has been sorely lacking.  It’s not surprising that a quiet professional like Susan has the confidence of these top managers.

This new effort deserves your support.

[A version of this post appeared in MusicTechPolicy Monthly.]

The Countdown to Modernity: Copyright Royalty Board Posts Notices and Rules for MLC Assessment Proceeding — Artist Rights Watch

July 7, 2019 Comments off

Since there was no advance commitment or agreement on the budget for the Mechanical Licensing Collective (MLC) under Title I  of the Music Modernization Act, it appears that the clock is ticking on an agreement before the parties have to go before the Copyright Royalty Judges to be told what the budget (or the “assessment”) is to be.  The Copyright Royalty Board has beat the July 8 deadline for noticing the proceeding and has posted the notice and the rules for the hearing.

The “Notice announcing commencement of Initial Administrative Assessment proceeding and requesting Petitions to Participate” can be found here:

The regulations require the participation of the MLC and the Digital Licensee Coordinator (DLC) in the proceeding and permit the participation of copyright owners, digital music providers, and significant nonblanket licensees. 37 CFR 355.2(c)–(d).

The Judges hereby announce commencement of the proceeding, direct the MLC and the DLC to file Petitions to Participate, and request Petitions to Participate from any other eligible participant with a significant interest in the determination of the Initial Administrative Assessment…

Any participant that is an individual may represent herself or himself. All other participants must be represented by counsel….

Petitions to Participate and the filing fee are due on or before July 23, 2019.

The CRJ’s rules relating to the proceeding can be found here and have some relevant language relating to who can participate in addition to the MLC and DLC:

[T]he Judges believe that the views of other participants may be helpful, and perhaps essential, for the Judges to determine whether good cause exists to exercise their discretion to reject a settlement. The Judges, therefore, have modified [the regulations for the settlement negotiations and proceeding] to clarify that participants other than the MLC and DLC may participate in settlement negotiations and may comment on any resulting settlement.

via The Countdown to Modernity: Copyright Royalty Board Posts Notices and Rules for MLC Assessment Proceeding — Artist Rights Watch

Copyright Office Issues Interim Rule for MLC Applications Including Oversight of MLC Board by Librarian of Congress

December 21, 2018 Comments off

The U.S. Copyright Office issued an interim rule for comment that lays out an intricate and well thought out approach to the Register’s role in designating the Mechanical Licensing Collective and the Digital Licensee Coordinator under Title I of the Music Modernization Act.

Consistent with the MLC’s role as a quasi-governmental organization (or quasi-private, depending on how you look at it), the interim rule confirms that “directors of the MLC are inferior officers under the Appointments Clause of the Constitution [,] that the Librarian of Congress must approve each subsequent selection of a new director….[and] that the Register work with the MLC, once it has been designated to ensure that the Librarian retains the ultimate authority to appoint and remove all directors.”  Presumably, state corporate laws governing the formation of the MLC will give way to this requirement.

The Librarian’s ability to can directors should help assuage some of the concerns about the powers of the MLC and is, of course, entirely consistent with the powers of the MLC as a quasi-governmental organization.

Another requirement that caught my eye relates to the “Hoffa Clause” that allows the MLC to invade the black box to pay operating expenses not covered by the services in the administrative assessment.  The Copyright Office seems quite aware of the moral hazard present, and asks the prospective MLC candidates to provide:

Information regarding whether and how the proposed MLC may apply unclaimed accrued royalties on an interim basis to defray operating costs, as well as any accompanying plans for future reimbursement of such royalties from future collections of the administrative assessment, including relevant legal considerations and guidelines in the event the proposed MLC does intend to apply unclaimed accrued royalties.

All in all, the Copyright Office should be commended for putting together a comprehensive and even-handed “job description” for the MLC and the DLC in keeping with the Office’s statutory role in getting this quasi-governmental organization up and running.

Weekly Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act (11/30) by Artist Rights Watch (The “Countdown to Modernity”)

December 2, 2018 Comments off

As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act.  We have called the chart the “Countdown to Modernity.”  Obviously, this chart is not intended as legal advice, and you should consult your own attorney about any of these dates or events.  Note:  After 1/9/19, this chart, updates and analysis will be available to premium subscribers of MusicTechPolicy.

Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. The Tennessean reported that the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”.  (AMLC’s website is songrights.net.)  Within days, Digital Music News also reported that two AMLC board members have left the organization for reasons that their source says were “directly tied to threats”.  Digital Music News continues to report on these alleged “threats.”

The appearance of multiple candidates for the yet to be designated MLC raises another question–what about any existing black box?  MTP and ARW readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs that exceed the “administrative assessment” to be paid by the blanket licensees:

INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.

Digital Music News also focuses on this issue:

According to the MMA’s language, mechanical licenses [presumably meaning royalties] that remain unclaimed after just one year will be largely mopped up by major publishers according to marketshare, an arrangement that has drawn protest.  The value of the initial unclaimed tranche of funds has been estimated to be as high as $1.5 billion, at least according to a report by Variety.

We’re not big believers in this $1.5 billion number and it’s not exactly right that Variety reported that number–the Variety story has changed several times and is still a bit murky.   Due to a later update to the article concerned it’s a bit unclear exactly what Variety meant in the original unsourced reporting.  The original story as reported in Artist Rights Watch stated the industry-wide black box was $1.5 billion:

The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Variety subsequently changed that language in the story at least twice that we know of, but never actually retracted the $1.5 billion number as far as we can tell, although they may have depending on your point of view of what constitutes a “retraction”.  In any event, the story now reads:

The DSPs are holding millions in unmatched mechanical royalties — the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, while unknown, is climbing. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Note–there’s still no source for either the “$1.5 billion” or the “millions” or for the “update”.  Remember that in the MMA Senate Judiciary Committee hearing, Senator Feinstein said that the black box could be hundreds of millions.

Remember that the “initial administrative assessment shall be effective as of the license availability date” which is 1/1/21.  It is not clear whether the initial administrative assessment will cover the MLC’s prospective costs, its startup costs, or both.  One fair interpretation of the MMA is that the initial assessment shall be prospective and shall not cover startup costs, although the parties can, of course, agree to pay more than they are obligated to incur by statute.  It is unclear if those additional costs would be passed down to all blanket licensees (who may object to paying more than the statute requires).  You would think that this important issue would be clearly stated in the statute, but it is not.

The following chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know.  It should be considered a draft, but we hope that it will solidify over the next few weeks.  We expect activity to pick up once the MLC filing deadline arrives.

Due to the formation of the AMLC, there are now two candidates for the MLC, there may be more coming.  The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know.  Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.

The main takeaway from this chart should be the clock is ticking and time is going by.  Our prediction?  Time will become the MLC’s biggest enemy, if there isn’t already a time bomb in the drafting of the Music Modernization Act.  What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.

But mark your calendars–we see the first key date as January 9, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI.  That’s 38 days from now and holidays count.  The countdown to the License Availability Date: 761 days from now.

ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 7

KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)

TO LICENSE AVAILABILITY DATE (1/1/21)

EVENT ACCOMPLISH WHO OWNS? TIME EXPIRED   BEFORE LAD TIME REMAINS TO LAD
REQUEST FILING TO BE MLC STATUS UNKNOWN—Deadline  1/9/2019 COPYRIGHT OFFICE 90 DAYS AFTER ENACTMENT 723 DAYS FROM DEADLINE
DESIGNATION OF MLC STATUS UNKNOWN—Deadline  7/8/2019 COPYRIGHT OFFICE 270 DAYS AFTER ENACTMENT 543 DAYS FROM DEADLINE
FORMATION OF MLC NONPROFIT AMLC nonprofit formed

NMPA/NSAI STATUS UNKNOWN

MLC STATUS UNKNOWN 543 DAYS FROM LAD
SUBSTITUTION OF BLANKET LICENSE FOR ALL VALID EXISTING COMPULSORY LICENSES AUTOMATIC 10/11/2018

 

COPYRIGHT OFFICE 761 days
MLC BUDGET STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/DLC/CRJ 45 days 770 days
INITIATE ASSESSMENT PROCEEDING w/CRJs [MUST COMMENCE NO LATER THAN 7/8/2019]

STATUS UNKNOWN

MLC/DLC/CRJ 219 days 545 days
ASSESSMENT RULING [PUBLISHED IN FR NO LATER THAN 7/8/2020] MLC/DLC/
CRJs
585 days 179 days
APPEAL OF ASSESSMENT RULING 30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING MLC/DLC/
CRJ/ DCCOA
616 days 149 days
MLC BUSINESS PLAN STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/CO 39 DAYS 723 days
ANNOUNCED BOARD NOMINEES AMLC board announced (see DMN and above)

NMPA/NSAI called for nominations.

The deadline for NMPA nominations passed on November 15  see NMPA.  NSAI are accepting nominations for songwriter board member seats with a December 15 deadline.  (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP)

(Assume final deadline of 1/8/19)

MLC 39 DAYS 723 days
APPOINTED BOARD AMLC Board Announced (DMN reports Howard and Mestel depart):

John Barker (founder, president & CEO of ClearBox Rights, LLC).

Brownlee Ferguson (founder, Bluewater Music).

George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing).

Lisa Klein Moberly (founder and president of Optic Noise).

Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media)

Jeff Price (founder of Audiam and co-founder of TuneCore)

Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)

Larry Mestel (founder, Primary Wave)

Ricardo Ordoñez (founder and president of Union Music Group)

NMPA/NSAI: STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/CO 39 DAYS 723 days
APPOINTED DLC STATUS UNKNOWN—Deadline  7/8/2019 COPYRIGHT OFFICE 270 days AFTER ENACTMENT 545 days
ENGAGED  MLC VENDORS AMLC:  Clearbox Rights, Audiam (others?)

NMPA/NSAI: STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC 39 DAYS 723 days
PAID MLC VENDORS AMLC: See board members above

NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/8/2020 IF NO APPEAL OF ASSESSMENT)

MLC 270 days 545 days
ANNOUNCE MLC DATA STANDARDS STATUS UNKNOWN MLC/DLC
REGULATIONS* STATUS UNKNOWN COPYRIGHT OFFICE
COMMENTS AND REPLY COMMENTS ON REGULATIONS STATUS UNKNOWN ALL
EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/CO 39 DAYS 726 days
REGISTRATION START DATE STATUS UNKNOWN

 

MLC=Mechanical Licensing Collective

DLC=Digital Licensee Coordinator

CRJ=Copyright Royalty Judges

DCCOA=District of Columbia Circuit Court of Appeals

CO=Copyright Office

LAD=License Availability Date

*Topic areas to be updated as announced

Artist Rights Watch COUNTDOWN TO MODERNITY (11/23): Key Dates and Accomplishments for the Mechanical Licensing Collective Under the Music Modernization Act

November 23, 2018 Comments off

As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act.  We have called the chart the “Countdown to Modernity.”

Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. The Tennessean reported last week that the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”.  (AMLC’s website is songrights.net.)  Digital Music New reports AMLC’s public statements about its organization:

“We believe all song owners, from the kid in their bedroom, to the major music publishers, should be paid what they have earned,” the group declares in its manifesto.

“We are songwriters, artists, music publishers, musicians, composers and technologists.  We get song owners paid.”

So who’s behind the American Music Licensing Collective, exactly?

We’ll start with one of the founders: Stewart Copeland, best known as the drummer for The Police.  Also on the creative side is hit songwriter Rick Carnes, whose songs have propelled more than 40 platinum albums from the likes of Garth Brooks, Reba McEntire, Alabama, Pam Tillis, and Dean Martin.

Other founding members include:

  • John Barker (founder, president & CEO of ClearBox Rights, LLC).
  • Brownlee Ferguson (founder, Bluewater Music).
  • George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing).
  • Lisa Klein Moberly (founder and president of Optic Noise).
  • Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media)
  • Jeff Price (founder of Audiam and co-founder of TuneCore)
  • Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)
  • Larry Mestel (founder, Primary Wave)
  • Ricardo Ordoñez (founder and president of Union Music Group)

Listed as ‘observers’ are Grammy-nominated songwriter and producer Phil Galdston, and Grammy- and Emmy-nominated songwriter and producer David Wolfert.

“The board of directors of the AMLC have a profound and extensive knowledge of music publishing, mechanical license administration, big data, mapping and matching technology, payment processing, copyright ownership identification, conflict resolution, education, law, songwriting, architecture of technology systems and more,” the group notes.

Within days, Digital Music News also reported that two AMLC board members have left the organization for reasons that their source says were “directly tied to threats”:

Separately, a source close to the AMLC claimed that the departures were directly tied to threats by major publishers, with the National Music Publishers’ Association (NMPA) and at least one highly-influential publishing executive cited….AMLC cofounder Jeff Price confirmed to DMN that threats had been issued, but declined to name names.  Price, who cofounded TuneCore and more recently founded Audiam, remains a board member of the AMLC but noted that he has “received threats that I recuse myself from the board or suffer repercussions to my career.”

Beyond that, Price was uncertain if other board members had received similar threats, but strongly suggested the possibility.  “If there is a coordinated effort, and a colluded [sic] or orchestrated effort occurring to remove people from the AMLC, the question is why?”

“Is there something with the core mission statement they want to change? Otherwise what could it possibly be?”

The appearance of multiple candidates for the yet to be designated MLC raises another question–what about any existing black box?  MTP and ARW readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs:

INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.

Digital Music News also focuses on this issue:

According to the MMA’s language, mechanical licenses that remain unclaimed after just one year will be largely mopped up by major publishers according to marketshare, an arrangement that has drawn protest.  The value of the initial unclaimed tranche of funds has been estimated to be as high as $1.5 billion, at least according to a report by Variety.

We’re not big believers in this $1.5 billion number and it’s not exactly right that Variety reported that number–the Variety story has changed several times and is still a bit murky.   Due to a later update to the article concerned it’s a bit unclear exactly what Variety meant in the original unsourced reporting.  The original story as reported in Artist Rights Watch stated the industry-wide black box was $1.5 billion:

The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Variety subsequently changed that language in the story at least twice that we know of, but never actually retracted the $1.5 billion number as far as we can tell, although they may have depending on your point of view of what constitutes a “retraction”.  In any event, the story now reads:

The DSPs are holding millions in unmatched mechanical royalties — the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, while unknown, is climbing. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Note–there’s still no source for either the “$1.5 billion” or the “millions” or for the “update”.

Soooo…

If there’s only one MLC when the deadline passes to file papers for Copyright Office designation, then any accrued but unpaid black box–whatever the number–could be paid through to the MLC, even before it’s really up and running with a completely stood up database for matching.  It’s also theoretically possible–although very unlikely and not proven by any means–that the black box could have been paid through already in anticipation of there being only one MLC candidate.

Of course, if there’s more than one candidate, then any payment of black box for the past should be put on hold until the candidate is actually designated, particularly since the government took away copyright owners’ rights to statutory damages and attorneys fees if the copyright owner hasn’t filed their lawsuit as of January 1, 2018.  (Black box accrual = unlicensed infringing use = admission of infringement.)

Soooo….you just gotta love you some MMA.

The following chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know.  It should be considered a draft, but we hope that it will solidify over the next few weeks.  We expect activity to pick up once the MLC filing deadline arrives.

Due to the formation of the AMLC, there are now two candidates for the MLC, there may be more coming.  The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know.  Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.

The main takeaway from this chart should be the clock is ticking and time is going by.  Our prediction?  Time will become the MLC’s biggest enemy, if there isn’t already a time bomb in the drafting of the Music Modernization Act.  What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.

But mark your calendars–we see the first key date as January 7, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI.  That’s 45 days from now and holidays count.  The countdown to the License Availability Date: 770 days from now.

ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 6

KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)

TO LICENSE AVAILABILITY DATE (1/1/21)

EVENT ACCCOMPLISHED WHO OWNS? TIME EXPIRED   BEFORE LAD TIME REMAINS TO LAD
REQUEST FILING TO BE MLC STATUS UNKNOWN—Deadline  1/9/2019 COPYRIGHT OFFICE 90 DAYS AFTER ENACTMENT 726 DAYS FROM DEADLINE
DESIGNATION OF MLC STATUS UNKNOWN—Deadline  7/8/2019 COPYRIGHT OFFICE 270 DAYS AFTER ENACTMENT 545 DAYS FROM DEADLINE
FORMATION OF MLC NONPROFIT AMLC nonprofit formed

NMPA/NSAI STATUS UNKNOWN

MLC 45 days 726 days
SUBSTITUTION OF BLANKET LICENSE FOR ALL EXISTING COMPULSORY LICENSES AUTOMATIC 10/11/2018

 

COPYRIGHT OFFICE 770 days
MLC BUDGET STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/DLC/CRJ 45 days 770 days
INITIATE ASSESSMENT PROCEEDING w/CRJs [MUST COMMENCE NO LATER THAN 7/8/2019]

STATUS UNKNOWN

MLC/DLC/CRJ 226 days 545 days
ASSESSMENT RULING [PUBLISHED IN FR NO LATER THAN 7/8/2020] MLC/DLC/CRJ 592 days 179 days
APPEAL OF ASSESSMENT RULING 30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING MLC/DLC/CRJ/ DCCOA 623 days 149 days
MLC BUSINESS PLAN STATUS UNKNOWN

(Assume deadline of 1/8/19)

MLC/CO 45 DAYS 726 days
ANNOUNCED BOARD NOMINEES AMLC board announced (see DMN and above)

NMPA/NSAI called for nominations.

The deadline for NMPA nominations passed on November 15  see NMPA.  NSAI are accepting nominations for songwriter board member seats with a December 15 deadline.  (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP)

(Assume final deadline of 1/8/19)

MLC 45 DAYS 726 days
APPOINTED BOARD AMLC Board Announced (DMN reports Howard and Mestel depart):

John Barker (founder, president & CEO of ClearBox Rights, LLC).

Brownlee Ferguson (founder, Bluewater Music).

George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing).

Lisa Klein Moberly (founder and president of Optic Noise).

Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media)

Jeff Price (founder of Audiam and co-founder of TuneCore)

Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.)

Larry Mestel (founder, Primary Wave)

Ricardo Ordoñez (founder and president of Union Music Group)

NMPA/NSAI: STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/CO 45 DAYS 726 days
APPOINTED DLC STATUS UNKNOWN—Deadline  7/8/2019 COPYRIGHT OFFICE 270 days AFTER ENACTMENT 545 days
ENGAGED  MLC VENDORS AMLC:  Clearbox Rights, Audiam (others?)

NMPA/NSAI: STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC 90 DAYS 726 days
PAID MLC VENDORS AMLC: See board members above

NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/8/2020 IF NO APPEAL OF ASSESSMENT)

MLC 270 days 545 days
ANNOUNCE MLC DATA STANDARDS STATUS UNKNOWN MLC/DLC
REGULATIONS* STATUS UNKNOWN COPYRIGHT OFFICE
COMMENTS AND REPLY COMMENTS ON REGULATIONS STATUS UNKNOWN ALL
EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION STATUS UNKNOWN

(Assume deadline of 1/9/19)

MLC/CO 90 DAYS 726 days
REGISTRATION START DATE STATUS UNKNOWN

 

MLC=Mechanical Licensing Collective

DLC=Digital Licensee Coordinator

CRJ=Copyright Royalty Judges

DCCOA=District of Columbia Circuit Court of Appeals

CO=Copyright Office

LAD=License Availability Date

*Topic areas to be updated as announced

Save the Date! NYC Music Business & Law Conference November 16

October 24, 2018 Comments off

I’m honored to be included in a panel at the New York State Bar Association’s annual Music Business & Law Conference on November 16 with truly awesome panelists.

11:50am-12:50 pm      Music Modernization Act (US) / International Developments

The Music Modernization Act could be the most consequential copyright legislation in a generation. This panel will describe what it does, what it doesn’t do, how it affects current business and legal practices, and its effect on domestic and international copyright holders.  Bring your questions.

Panelists:
Marc Jacobson, Esq. (Moderator)
Chris Castle, Esq. – CC Legal Firm and Music Tech Solutions Blog
Charlie Sanders, Esq. – Counsel-Songwriters Guild of America
Alexander Ross, Esq. – Wiggin LLP (UK)
Christine Pepe, Esq. (IP, Music, and Digital Law Consultant)

 

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