Monday, November 9, 2015

US copyright gridlock

By Emmanuel Legrand

[This story was originally published in Music Week]

For the music community, the past few months have been full of promises in Washington, DC but also full of frustration. A lot of hope was put in the comprehensive reviews of copyright law initiated by the Copyright Office and by the House of Representative's Judiciary Committee, but with little progress so far.

US Register of Copyrights Maria Pallante
Despite hours of hearings, testimonies and action behind the scenes, not one single piece of copyright legislation has passed Congress, let alone being endorsed by any of the houses' committees. The "hollistic" review of the copyright system, in particular music licensing, launched by the US Register of Copyrights Maria Pallante at the Copyright Office, has so far led to nowhere. 

And the two specific pieces of legislation -- the Songwriters' Equity Act, which aims at addressing the way rates are set for the public use of music, and the 'Fair Play, Fair Pay Act', which plans to introduce performance rights for sound recordings for terrestrial media -- have yet pass the floor. Meanwhile, the Department of Justice, which has started to review the Consent Decrees ruling performance rights societies ASCAP and BMI, has yet to render its verdict (see sidebar). 

This is nothing out of the ordinary, explain experienced Washingtonians, who are versed in the shenanigans of the political process in the United States capital and used to navigating around Capitol Hill, where members of Congress are back this week from the summer recess. The politics of Congress are subject to their own dynamics, explains Jonathan Lamy, spokesperson for the Recording Industry Association of America.

"Our sense is that," says Lamy, "at least with regards to Capitol Hill, there is a wait and see approach because there's going to be two significant developments that will influence what Congress may try to do: One is the decision of the DoJ on the consent decrees, and when they will publish their decision; and the other is the Copyright Royalty Board's decision on rates applied to Pandora and similar services due by end of this year. Both are administrative procedures that will happen no matter what, but if they do not involve directly the Hill, they will affect Congress and influence Congress if it decides to move ahead [on copyright issues]."

Central to copyright issues are the House Judiciary Committee and its Chairman Bob Goodlatte. On July 21, Goodlatte and Ranking Member John Conyers announced the next step in the House Judiciary Committee’s ongoing review of U.S. copyright law and issued joint invitations "to all prior witnesses of the Committee’s copyright review hearings to meet with Committee staff and provide additional input on copyright policy issues."

The Recording Academy's Daryl Friedman
This new round of hearing was interpreted with different perspectives by DC observers. "I think it is a good sign," says Daryl P. Friedman, Chief Industry, Government & Member Relations Officer for The Recording Academy. "It is good that they focus back on copyright and keep the issue moving. We like the fact that the Chairman keeps shedding the light on these issues."

But others are less positive. A lobbyist called it "a slow walk and not a process designed to drive things towards a conclusion," adding that the people who have been invited to meet with the Committee are lobbyist and people from the copyright community who they meet every day. "It is not as if we were hearing, 'I am Chairman Goodlatte and I want to move things.' This is relaxed, slow, and not a regimented plan to move forward."

Another source, familiar with the Judiciary Committee's process, says the new round of discussions is more about one-on-one meetings with stakeholders "to get a sense of what their priorities are, and what are the issues that are covered. They have open mind to see where the process takes them. They are not shooting with an end product in mind and want to see where process would take them."

The slow pace of the Judiciary Committee reflects in fact a wider problem facing the music industry on the Hill. As one lobbyist explains: "There are some people who'd want to move things, but the broader copyright world, like movie studios or software companies, doesn't care about the music stuff, and their mindset is, 'In today's world post-SOPA, anything that Congress moves is bad, so we'd like to see nothing happen, because other guys are in order of march'."

The other guys are effectively active. Tech companies, broadcasters and digital services are using all their clout in DC to either block things from happening or trying to reverse some pending legislation. That's the whole point of a new coalition set up to fight the proposed bill on performance rights for sound recordings and any the changes to the copyright law that would give PROs greater bargaining powers with digital services. The MIC Coalition (Music. Innovation. Consumers.) regroups organisations such as the National Association of Broadcasters, Google and DiMA, which represents digital services such as Pandora. The MIC Coalition is "committed to a rational, sustainable and transparent [copyright] system." [Two original members -- Amazon and NPR, the National Public Radio -- have since left the coalition.

In a recent letter to the DoJ, the MIC Coalition called for stronger Consent Decrees applicable to ASCAP and BMI, but also restrictions to the music publishers, and even placing the third PRO, SESAC, which as a privately-owned organisation, under a Consent Decree. "The MIC Coalition's view is that no copyright owner should be able to say no [to license digital services]," analyses a DC lobbist from the creative community. "They have to let their works being used. Just one work and you can have anti competitive power. So every rights holder is a danger of acting in anti-competitive way."

For rights owners, groups like the MIC Coalition illustrates the new balance of power in DC, edging towards the tech community when it comes to the Hill or the White House. Many executives in the creative community believe that tech companies have an undue influence in DC. In a keynote session during the Cutting Edge conference on August 28, former NMPA General Counsel Jay Rosenthal, who joined this summer the Wsshington, DC firm Mitchell Silberberg & Knupp, said that he truly believed that "as content owners, we are losing the battle on the politics of copyright."

He elaborated: "When you look at politics in DC the biggest issue is always money, and in this context it is money that is losing the battle because Google and the rest of the [tech] companies have come to DC in a major major way. They are now more lobbyists on the ground in DC working for Google than for the whole content industry combined. And we are now seeing the end result of this with what's happening on Capitol Hill and with the administration. For many decades, copyright interests have done well. When you needed to have laws, you'd get them. Now, we are dealing with a completely new dynamic in DC [with] folks that want to push back copyright, who want to minimise copyright in all sorts of different ways having the upper hand."

But if all seasoned Washingtonians accept that the game has changed, with a pendulum swinging towards the tech industry, they also suggest that at no point that new found power could lead to anti-copyright or anti-creators' rights legislation. One DC observer explains that although the creative community does not have the financial clout and influence of tech or media companies, there are elected members in Congress who would not want to pass a bill that would go against the rights of the music community. If one side strikes, the other retaliates. "People [on the Hill] care about artist and music and if artists speak up, they can stop it from happening," says the executive. "The same will happen if the music community tries to push a bill that the tech community does not want to see. Not one party has the power to single-handily pass a legislation."

This situation explains in part the current gridlock. "Part of that is just the worry on each side that if you do open it up to get things done, you'll get something worse than what you want to achieve. So that might explain why they put the brakes," says an observer. To make matter seven more complicated, copyright issues are usually not partisan issues on the Hill. What legislators are looking for is some form of consensus between stakeholders, so it takes a long process to get there, says RIAA's Lamy. "Our issues need a consensus between the major parties and at the moment there isn't one," says Lamy.

Another executive is more blunt: "At this point, in this Congress, I don't think anything will pass, so we are building things towards the next Congress, where we will see some crystallisation of broader support for copyright. But not with this Congress."

Key issues awaiting action in DC 

Work in progress...

The Fair Play Fair Pay Act

Congressman Jerrold Nadler, Ranking Member of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, and Congresswoman Marsha Blackburn, Vice Chair of the Energy and Commerce Committee, introduced on April 13 this bipartisan legislation, to "harmonise and modernise the outdated rules that currently govern music licensing for digital and terrestrial radio broadcasts."

The legislation would, among other things, introduce a terrestrial performance right for sound recordings on AM/FM radio competes; ensure that all forms of radio pay fair market value for music performances; state that pre-1972 recordings have value and those who use them must pay appropriate royalties for their use.

If passed, this legislation would eventually put the United States on par with most countries around the world, and could result in extra revenues for performers and record labels worth several hundred million dollars. This legislation is opposed by the National Association of Broadcasters, which regroups the major radio and TV operators in the country.

On the Fair Pay Fair Play, RIAA's Jonathan Lamy remains optimistic that it has a chance to pass despite sever opposition. "We believe this is a right issue and we will continue to advocate for it as long as it is necessary," he explains. "Obviously, we are faced with the political clout of broadcasters and the fact that they are in each congressional district makes very challenging to pass a bill over their objections. But it is still the right issue to advocate."

According to Daryl Friedman, the Recording Academy, which organises the Grammy Awards, is in the process of "lighting a bit of fire" on the Fair Play Fair Pay Act by organising a major nation-wide advocacy event. On October 14, over 1600 of its members will visit local policy-makers and representatives around the country. Labelled " Grammys in my district", the initiative aims at informing policy-makers on the issues important to the music community. Taking place for the second consecutive year, the initiative will see 1600 Academy members visit 250 districts, against 100 visiting 77 districts last year. "This is the largest grassroots advocacy initiative of its kind," says Friedman. "The 'Fair Play' bill will be pushed for and [our members] will ask for Congress to deal with comprehensive music licensing reform, but speak in favour of any legislation that helps creators."

The Songwriters Equity Act

The Songwriter Equity Act was been reintroduced in both houses of Congress in March 2015, following a first attempt in 2014. The legislation is sponsored by Senator Orrin Hatch and Congressman Doug Collins. It proposes to amend sections 114 and 115 of the Copyright Act in order to require that Copyright Royalty Judges "establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and seller."

This very simple piece of legislation would effectively allow PROs and other rights holders to benefit from better rates than the current ones set by tribunals. It is supported by PROs like ASCAP and BMI as well as by the National Music Publishers Association.

The modernisation of the Copyright Office

Register of Copyrights Maria Pallante has on several occasion made a case for the Copyright Office to be removed from the tutelage of the Library of Congress. Pallante would like to see the CO set up as a stand-alone government agency serving at the pleasure of the US President, the Congress and other government agencies and with a Register of Copyright directly appointed by the White House. Some DC observers point out that the agenda of the Copyright Office has been somewhat derailed by the announcement before the summer of the retirement of the current Librarian of Congress James Billington, under whose jurisdiction the CO operates.

An observer of DC's political life points out that one of the few topics that have gathered momentum is the future of the Copyright Office. In her testimony at the end of April before the House Judiciary Committee, Register of Copyright Maria Pallante focused most of her time in explaining how she would envisage a modern CO. Explains the source, "One big issue that has emerged [of all these talks] was the need to modernise the Copyright Office, addressing its financial issues and how to deploy a better technology in order to have an IT system that is not outdated like the current system. Lot of opportunities could come from an updated system. It could be an incentive for more people to register they copyrights, it would open to new search possibilities if tied into other databases and incorporating data standards, like ISWC and other [identifiers]. All these ideas are floating around and the pending appointment of a new Librarian adds some complexity to the issues."

The Department of Justice's review of the Consent Decrees

The U.S. Department of Justice's Antitrust Division opened in 2014 a review of the Consent Decrees that have been governing the two leading American performance rights societies ASCAP and BMI since 1941. Both societies and music publishers have been asking for the terms of the Consent decrees to change in order to allow better negotiations with music users and allow music publishers to partially withdraw their repertoire from the PROs blanket licenses. The ASCAP Consent Decree was last amended in 2001 and BMI's in 1994.

A DC-based source believes that "before the end of the year and there will be a deal on the table [from the DoJ] and it will be a take it or leave it." The options considered are the following: Either it is a Consent Decree that works for the parties or does not. If the changes proposed by the DoJ are unacceptable to ASCAP, BMI and publishers, this will be open the door to a real crisis, says the source, leaving them "with the only option to go to the Hill and say, 'Congress you've got to save us.' That level of desperation will lead to more help asked to the Hill. But it could also be the other way around and the user community could very well not see positively changes to the consent decrees too favourable to the PROs, and try to have Hill override the DoJ project."

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