The Creative Edge

DIGITAL PERFORMANCE OF SOUND RECORDINGS: LICENSE REQUIRED?

Historically, unlike copyright owners of musical compositions, copyright owners of sound recordings did not enjoyed a public performance right. With the development of the internet, and all of its applications, this has changed. In 1995, Congress passed the Digital Performance Right in Sound Recordings Act of 1995 ("DPRA") to create a limited digital performance right and a compulsory licensing scheme for "digital phonorecord delivery." The DPRA created a right to perform a sound recording publicly by means of a "digital audio transmission."

The Digital Millennium Copyright Act Of 1998 ("DMCA") expanded the scope of the compulsory license and imposed a statutory royalty obligation on digital audio music providers. Nearly all music-based webcasting is subject to compulsory license under the DMCA. A 2009 Second Circuit Court of Appeals decision, Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2009), clarified the scope of the DMCA. The Court held the degree of predictability that a consumer experiences when utilizing a digital audio transmission service dictates whether the service falls under the compulsory licensing scheme of the DMCA, or requires individual licensing of sound recording copyrights. In other words, the more control the user has over the music they are listening to over a digital music service, the more likely the service will not qualify for a compulsory blanket license. The compulsory licensing system is cheaper and far less cumbersome on digital music providers.

A compulsory licensing system means copyright owners cannot withhold a license for the performance of sound recordings. Compulsory license fees/royalties are regulated. Establishing the statutory royalty rate applicable to digital audio transmissions that are subject to the compulsory licensing scheme has been a controversial exercise. A federal administrative body called the Copyright Royalty Board (CRB), formerly called the Copyright Arbitration Review Panel (CARP), establishes default royalty rates for Internet transmissions of sound recordings. A non-profit corporation called "SoundExchange" governed by major record companies and recording artists was created and appointed by CRB to be the exclusive "receiving agent" or "clearinghouse" for digital sound recording licenses. Thus, with respect to digital licensure of sound recordings, SoundExchange plays nearly an identical role to that which ASCAP, BMI, and SESAC play with respect to musical compositions.

Federal law provides an "opt-in" provision for webcasters who do not have the resources to negotiate their own individual license agreements with SoundExchange. Thus, a new webcaster can now review agreements previously negotiated between Sound Exchange and other webcasters. If the webcaster seeking to opt-in to an existing agreement meets the eligibility criteria set forth in such an agreement, such a webcaster, after completing a few procedural steps, can opt-in to that existing agreement. If a new webcaster does not opt-in to an agreement, then it must either negotiate or arbitrate its own agreement, or pay the default compulsory licensing rates set by the CRB.

If you need assistance with respect to artistic licensing issues, contact the Mendoza Law Office at 651-340-8884.